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Harnessing market mechanisms to promote sustainable development: lessons from China

The Clean Development Mechanism (CDM) was created under the Kyoto Protocol to enable developing countries to sell carbon credits to developed countries. According to this ‘Inside story on climate compatible development’ by the Climate and Development Knowledge Network, China’s extraordinary embrace of the market opportunities afforded by the CDM has provided the country with valuable experience in carbon markets, allowing it to develop and test appropriate systems. This brief notes that China was initially considered ‘slow off the mark’ in engaging with the CDM, although the country now dominates the CDM market with almost half of all CDM projects hosted in China. Moreover, climate change action is becoming mainstream; carbon intensity reduction goals have been included in the most recent 5-year plan and a nationwide emissions trading scheme is also due to begin operating in 2015.