The transition to a green and low-carbon economy is a global socio-economic transformation and is a crucial pathway to achieving the goals of the Paris Agreement. However, the current global process of reducing carbon emissions far falls short of expectation, with the green and low-carbon transition facing multiple challenges, including still too much reliance on fossil fuels, geopolitical tensions, and significant funding gap. These challenges necessitate more proactive measures.
China’s energy structure is coal-dependent, and its industrial structure is heavy. Achieving the carbon peaking and carbon neutrality goals (abbreviated as dual carbon goals) will require long-term hard efforts, with the crucial continued support of transition finance.
Internationally, there is increasing attention to transition finance. Jurisdictions such as the European Union, the United Kingdom, Japan, Canada, Singapore and India have explicitly identified transition finance as a key financial development task for the near future. In 2022, G20 leaders endorsed the G20 Transition Finance Framework developed by the G20 Sustainable Finance Working Group (SFWG) at the Bali Summit. This framework established five pillars of transition finance, which are transition finance standards, information disclosure, financial products and instruments supporting the transition, incentive policies, and just transition. Effectively leveraging these pillars requires further improvement of relevant system and mechanisms.
This research focuses on systematically researching the system and mechanism to strengthen transition finance. Based on a thorough exploration of international advancement, it closely examines the pressing challenges in China's green and low-carbon transition. The research addresses critical issues such as the macroeconomic and financial effects of the green and low-carbon transition, standards and information disclosure in transition finance, related policy instruments, just transition and financial support for climate adaptation, transition planning, high-level coordination mechanisms for green and low-carbon development, the role of digital technology in enabling the transition, and capacity building.
Throughout the research process, the team has leveraged the strengths of its members, who have long been engaged in the theoretical and policy research, as well as practical work, in China's sustainable finance development and international exchanges. The study closely integrates transition finance with major financial issues, such as macroeconomic conditions, the development and improvement of domestic financial systems, and the reform and evolution of the international monetary system. The research aims to absorb and reflect international frontier discussions and practices, summarize and highlight major meaningful exploration at the national and local levels in China, and deepen the understanding of transition finance system and mechanism. The goal is to enhance the research of transition finance framework and inform policy discussion on related issues.
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(This document is an English summary version of the 2024 China Finance 40 Forum research report "Enhancing the System and Mechanism of Transition Finance". The research is led by Wang Xin. )
