China revises its green taxonomy to enhance funding for energy transition
In a significant step towards its net-zero transition ambitions, the Chinese government has updated its green taxonomy, consolidating the catalogue of green finance endorsed projects. The updated catalogue, which comes into effect in October, was issued by the People's Bank of China (PBOC) and the Ministry of Finance, the same authorities responsible for the previous green lists for the bond and loan markets.
The updated catalogue expands the scope of green finance to include green trade and consumption. Green trade includes the import and export of energy-efficiency equipment and green technologies, while green consumption shifts focus from production to demand. This consolidation is expected to improve efficiency and market integrity, as suggested by Xie Wenhong, head of the China program at the Climate Bonds Initiative.
The updated catalogue defines which economic activities and investments qualify as green or environmentally sustainable across various industries. It expands on green economic activities, such as those related to climate resilience and methane abatement. The inclusion of green consumption could lead to the creation of green consumer loans and mortgages.
China has set clear goals for curbing emissions and aims to become a global leader on the energy transition. The consolidated catalogue will provide more support for decarbonisation in China. However, more clarity is needed for market participants on how to deal with the ambiguity to avoid double counting.
The creation of policy incentives based on the catalogue will play an important role in impetus the market in China. The new environmental tax catalog for green financial investments is not just a huge milestone, but also a crucial step in China's journey towards a greener and more sustainable economy.
In 2024, China joined a joint green taxonomy with Singapore and the EU to facilitate cross-border green loans and bonds. The updated catalogue includes passenger rail for the first time, a long-advocated green activity by the Climate Bonds Initiative due to its low-carbon impact.
This update was last made on August 5, 2025. The effectiveness of the inclusion of green trade and consumption remains to be seen, but it is clear that China is committed to leading the way in the global transition to a greener and more sustainable future.
