Exploring the financing and allocating schemes for the Chinese Green Climate Fund

Chinese Green Climate Fund (GCF) is expected to launch by the government in the foreseeable future to support local governments in climate change adaption and mitigation. Lessons from experiences of international financing and allocating mechanisms provide valuable references for establishing the Chinese GCF. This study aims to explore the feasibility of several well-recognized schemes for financing and allocating the Chinese GCF among China’s 30 provinces. These include: financing schemes of historical emission responsibility (HR), ability-to-pay (AP) and preference score compromises (PSC); as well as allocating schemes of carbon emissions intensity (CI), carbon emissions per capital (CC), GDP per capital (GC) and PSC. This study derives several important findings. Firstly, given different financing schemes, the coastal economically developed provinces including Shandong, Jiangsu, Guangdong, and Zhejiang would collectively shoulder most of the financing responsibility (almost 70% in total) and play central roles in climate financing. Shandong province presents high financing responsibilities mainly due to its export trades of primary products which rely on the development of high-polluted industries. Other three provinces show high financing responsibilities mainly due to the rapid growth of their industries (petrochemical, steel, building materials, electric power, etc.) for economic development. Secondly, the inland economically backward provinces including Shanxi, Ningxia, Guizhou, Xinjiang, and Gansu would be the top five largest recipients of the funds, obtaining more than 30% of total disbursements. The innovations and contributions of the present study are as follows: Firstly, this paper systematically explored the feasibility and alternative schemes for Chinese GCF for the first time. Further, it introduces PSC methods based on diversified approaches to explore suitable financing and allocating schemes. The schemes proposed would establish theoretical foundations for the Chinese GCF and would also promote the development of other kinds of financing for China and countries with similar economic features.