Climate for Business: Opportunities for Financial Institutions and Sustainable Development in the Chinese Carbon Market

Alex Lo and Xiang Yu

Sustainable Development, 2015, vol. 23, issue 6, 369-380

Abstract: Considerable efforts are being organized to build a functioning carbon market in China. This paper presents an overview of the development of the Chinese carbon market and offers an industry perspective on the domestic regulatory and investment environments. It is based on a review of relevant publications and interviews with Beijing‐based finance executives. We found that few financial institutions with the expertise required have been brought into the process of institutional development. Corporate demand for advanced financial services linked to emission trading is weak. Current regulations permit limited trading options, significantly reducing investment opportunities. The market scale is too small to attract investors and financial service providers. Consequently, the Chinese carbon market remains illiquid. Domestic financial institutions have not assumed a critical role in market development. It is suggested that policy‐makers minimize administrative intervention in the market, but a modest degree of direct administrative control is still considered to be instrumental. Copyright © 2015 John Wiley & Sons, Ltd and ERP Environment

Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:wly:sustdv:v:23:y:2015:i:6:p:369-380

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