Harnessing market mechanisms to promote sustainable development - Lessons from China

This case study examines how China leveraged the Clean Development Mechanism (CDM) under the Kyoto Protocol to build expertise in carbon markets and prepare for a domestic emissions trading system. It highlights the role of powerful government ministries, coordinated capacity building, and specific regulatory controls used to ensure local sustainable development benefits and protect national economic interests.

• China transitioned from being 'slow off the mark' in the early years of the Clean Development Mechanism (CDM) to dominating the market, eventually hosting almost half of all CDM projects globally.
• The success of the CDM in China is attributed to the involvement of high-influence ministries rather than just the environment ministry. The National Development and Reform Commission (NDRC) chaired the Designated National Authority (DNA), ensuring political commitment that cascaded to provincial and local levels.
• China employed a coordinated approach to capacity building between 2002 and 2006, using the NDRC and the Ministry of Science and Technology (MOST) as gatekeepers to prevent overlap among donor-funded projects and ensure alignment with national needs.
• To protect domestic interests and promote sustainable development, China implemented unique restrictions on CDM projects, including a floor price for Certified Emission Reductions (CERs), which was 8 euros from 2008 until early 2012 when it was lowered to 7 euros.
• The Chinese government established a revenue-sharing system through a levy on CER revenues ranging from 2% to 65%. Lower levies are applied to priority sectors like renewable energy and energy efficiency, while higher levies apply to HFC destruction (65%) and adipic acid nitrous oxide destruction (30%).
• Climate and energy goals have been integrated into national 5-year plans, creating personal incentives for local officials. The Eleventh Five-Year Plan (2006–2010) set a 20% energy intensity reduction target, and the Twelfth Five-Year Plan (2011–2015) set a 17% carbon intensity reduction goal and a 2015 non-fossil fuel goal of 11.4% of the total energy mix.
• China is leveraging its CDM experience to launch a domestic emissions trading system, with pilot programs in cities such as Beijing and Shanghai starting in early 2013 and a goal for a nationwide scheme by 2015.

APA

Kinkead, B. (2012). Harnessing market mechanisms to promote sustainable development - Lessons from China. Climate and Development Knowledge Network. https://cdkn.org/resource/cdkn-inside-story-harnessing-market-mechanisms-to-promote-sustainable-development-lessons-from-china

Chicago

Kinkead, Belinda. Harnessing market mechanisms to promote sustainable development - Lessons from China. Climate and Development Knowledge Network, 2012. https://cdkn.org/resource/cdkn-inside-story-harnessing-market-mechanisms-to-promote-sustainable-development-lessons-from-china.

Wikipedia

{{cite report |last1=Kinkead |first1=Belinda |title=Harnessing market mechanisms to promote sustainable development - Lessons from China |publisher=Climate and Development Knowledge Network |date=20 September 2012 |url=https://cdkn.org/resource/cdkn-inside-story-harnessing-market-mechanisms-to-promote-sustainable-development-lessons-from-china |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{kinkead2012harnessing, author = {Kinkead, Belinda}, title = {{Harnessing market mechanisms to promote sustainable development - Lessons from China}}, institution = {Climate and Development Knowledge Network}, year = {2012}, month = sep, url = {https://cdkn.org/resource/cdkn-inside-story-harnessing-market-mechanisms-to-promote-sustainable-development-lessons-from-china}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }