Low-carbon transition fund a catalyst for green growth

China has long prioritized green development, guided by its dual carbon goals of peaking carbon emissions before 2030 and achieving carbon neutrality before 2060. This national strategy has proven effective in boosting economic growth, accelerating the green transition, and improving the quality of the environment.

But as this year's Government Work Report emphasized, coordinated efforts to cut emissions, reduce pollution and pursue green growth are still essential. In this context, the proposed establishment of a national fund to support the low-carbon transition marks a pivotal move.

This is not the first fund China has set up to accelerate green development. In 2011, the country launched the Renewable Energy Development Fund, financed through central budget allocations and a nationwide surcharge on electricity sales. The mechanism enabled feed-in tariffs that guaranteed renewable energy producers above-market prices for the power they generated.

The fund provided stable financial support to the nascent wind and solar industries. It lowered operational costs, catalyzed rapid industrial expansion, and incorporated a gradually phased-out subsidy structure that spurred technological innovation. After multiple adjustments to subsidies, grid parity with coal-fired power was achieved, and by January 2021, China officially ended feed-in tariffs for new solar and onshore wind projects. What remained was a robust, globally competitive renewable energy sector.

The transformation has been remarkable. At the end of 2010, solar power accounted for just 0.08 percent of China's total installed power capacity. By the end of 2025, that share had surged to nearly 31 percent. Moreover, according to the National Energy Administration, China has helped reduce the average cost of electricity for global wind power projects by 60 percent and solar photovoltaic projects by 80 percent over the past decade.

China will now set up a national low-carbon transition fund to foster new growth drivers such as hydrogen power and green fuels. Unlike wind and solar, which have begun their march toward commercialization, hydrogen power and green fuels remain in the early stages of development. These are capital-intensive, technology-heavy sectors with long return cycles, and are the areas where social capital hesitates to venture due to high risks and slow payback. Green hydrogen, green methanol and sustainable aviation fuels are prime examples: essential for deep decarbonization, yet struggling to attract private investment to be commercially viable.

Hydrogen is unique in that it is a clean alternative to fossil fuels in heavy industries where emissions are hardest to abate. Green hydrogen produced via electrolysis using renewable electricity can replace coking coal in steelmaking. The production of green hydrogen also helps solve the growing problem of wasted wind and solar power. By converting surplus renewable electricity into hydrogen through electrolysis, excess power can be stored and utilized later, effectively turning an inefficiency into an asset.

The proposed national fund will ensure that foundational but risky green technologies receive the sustained support they need to mature. It provides the long-term commitment that private investors cannot offer.

Furthermore, the establishment of such a national fund would send a clear message to the market that these sectors are strategically important and worthy of long-term commitment. It would improve the confidence of private investors, financial institutions, industrial capital and local governments to invest in the sectors.

In essence, the planned low-carbon transition fund will be more than just a financing tool. It will be a catalyst for systemic change. From the Renewable Energy Development Fund to the new low-carbon transition fund, China is demonstrating its capacity to adapt policy tools to meet the evolving demands of the green transition.

Such dynamic adjustment ensures that the country's environmental ambitions are backed by durable financial mechanisms that keep pace with the times, paving the way for a cleaner, more sustainable economic future.