Research on the Practical Pathways of Transition Finance in the Context of Carbon Peaking

Zishan Liu

Simen Owen Academic Proceedings Series, 2026, vol. 5, 179-188

Abstract: Transition finance has emerged as a crucial policy and market mechanism for aligning carbon-intensive sectors with long-term climate goals while maintaining economic stability. Under the carbon peaking agenda, the primary challenge extends beyond expanding green finance; it requires constructing financing arrangements that support credible, phased, and sector-specific decarbonization for industries unable to transform immediately. This paper examines the practical pathways of transition finance to facilitate carbon peaking. It clarifies the conceptual distinction between green and transition finance and reviews the institutional conditions necessary for effective capital allocation. Subsequently, the study develops an analytical framework centered on standards, incentives, information, and governance. The practical advancement of transition finance relies on mutually reinforcing pathways: establishing taxonomy-based classification standards, designing differentiated financial products for hard-to-abate sectors, improving carbon data disclosure and verification, and creating coordinated policy-finance risk-sharing mechanisms. Furthermore, the paper addresses current constraints, including ambiguous eligibility boundaries, weak enterprise transition planning, insufficient performance assessment tools, and fragmented coordination between financial institutions and industrial regulators. By integrating policy analysis and institutional interpretation, this research provides a structured account of how transition finance can realistically support carbon peaking. The findings indicate that transition finance must be embedded within a broader governance architecture linking climate targets, industrial upgrading, financial innovation, and accountability mechanisms, thereby translating general financial logic into concrete implementation pathways.

Keywords: transition finance; carbon peaking; sustainable finance; climate governance; decarbonization (search for similar items in EconPapers)
Date: 2026
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