Financing China’s Low-Carbon Transition in Heavy Industry

China’s heavy industry sectors are large in scale, carbon-intensive in both feedstock and fuel use, asset-heavy, and have a long life cycle in nature. Ensuring a successful low-carbon transition is challenging and requires large amounts of capital investment. The rapidly evolving green financing mechanisms have successfully channeled capital to support a wide range of decarbonization activities. However, due to the misalignment between the high emitting nature of heavy industry and the original definitions of green finance, existing financial support is still insufficient to meet the heavy industry’s decarbonization needs. Therefore, there is an urgent need for innovative financing mechanisms.

This report, authored by RMI (founded as Rocky Mountain Institute) in collaboration with the Climate Bonds Initiative, focuses on financing the transition of three heavy industry sectors — steel, cement, petrochemicals and chemicals — to low carbon. By analyzing sector-level transition pathways and scale of investment, the report presents guidance on matching transition capital needed with available financial instruments. The report also offers a forward-looking perspective on market development, suggesting ways to further refine the financing mechanisms to better facilitate the transition of the heavy industry sectors.