Scaling a Credible Transition Finance Market in China

The report argues that for China's power sector to meet its 2030 peak emissions and 2060 carbon neutrality targets, electrical utilities must develop credible, science-based transition plans. These plans serve as the foundation for transition finance instruments, such as Use of Proceeds (UoP) bonds and sustainability-linked bonds (SLBs). While China is a major global issuer of SLBs, the report notes a lack of alignment with rigorous standards, as many domestic issuers focus on renewable energy capacity rather than comprehensive greenhouse gas (GHG) emission reduction targets. The document provides a framework for utilities to develop transition plans and select appropriate financial tools to support low-carbon development, including the retirement of coal assets and grid optimisation.

• China's power sector is the primary source of greenhouse gas emissions in the country, with thermal power generation accounting for approximately 40% of total emissions in 2022, totaling about 4.85bn tCO2e.
• The low-carbon transformation of China's power industry relies on three main pathways: increasing the proportion of renewable energy, diversifying non-coal controllable power sources and energy storage, and shifting coal-fired plants from foundational supply to flexibility services.
• China ranks third globally in cumulative sustainability-linked bond (SLB) volume, following Italy and Chile, with a global cumulative volume of USD283bn by the end of 2023.
• There is a significant gap in the credibility of transition plans among global power companies; 84% of a sampled group did not set net-zero targets aligned with the 1.5°C pathway, and only five of 44 tracked SLB issuers had formulated transition plans including sustainable frameworks and financial plans.
• Chinese domestic electrical utility issuers predominantly use renewable energy installation as their key performance indicator (KPI) for SLBs, with 79% of chosen KPIs associated with these installations, often lacking the GHG targets required for alignment with Climate Bonds methodology.
• Case studies of China Huaneng Group Co., Ltd. show that while the company uses green bonds and SLBs to finance transition, its SLBs are recorded as 'Not Aligned' in the Climate Bonds database because the issuer has not stated GHG targets.

APA

Xu, X., MacGeocH, M., Xie, W., Zhou, X., & Chen, D. (2024). Scaling a Credible Transition Finance Market in China. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/cbi_chinaelectrical_24_02a.pdf

Chicago

Xu, Xiaoyun, Matthew MacGeocH, Wenhong Xie, Xiaozhu Zhou, and Dan Chen. Scaling a Credible Transition Finance Market in China. Climate Bonds Initiative, 2024. https://www.climatebonds.net/files/documents/publications/cbi_chinaelectrical_24_02a.pdf.

Wikipedia

{{cite report |last1=Xu |first1=Xiaoyun |last2=MacGeocH |first2=Matthew |last3=Xie |first3=Wenhong |last4=Zhou |first4=Xiaozhu |last5=Chen |first5=Dan |title=Scaling a Credible Transition Finance Market in China |publisher=Climate Bonds Initiative |date=July 2024 |url=https://www.climatebonds.net/files/documents/publications/cbi_chinaelectrical_24_02a.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{xu2024scaling, author = {Xu, Xiaoyun and MacGeocH, Matthew and Xie, Wenhong and Zhou, Xiaozhu and Chen, Dan}, title = {{Scaling a Credible Transition Finance Market in China}}, institution = {Climate Bonds Initiative}, year = {2024}, month = jul, url = {https://www.climatebonds.net/files/documents/publications/cbi_chinaelectrical_24_02a.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }