Strengthening Carbon Financing for Grassland Management in the People's Republic of China: Incentive Mechanisms and Implications

Publication | February 2014

This report reviews the current state of the People's Republic of China's national policy on climate change mitigation and carbon markets.

The People's Republic of China (PRC) is being impacted by climate change. The resulting degradation and desertification of grasslands are projected to lead to decreased productivity and severely affect livestock and ecosystems. Financial incentives are required to improve environmental management of grasslands and reduce greenhouse gas emissions in the grassland sector of the PRC.

This publication summarizes the legal and policy framework for incentive programs, assesses the impact of three main incentive programs on soil carbon stocks, and analyzes the implications of these existing incentive mechanisms for the development of grassland carbon finance projects for domestic carbon markets.


This report provides inputs necessary to setting up provincial and national carbon markets, and for pursuing external climate financing by the PRC government and relevant stakeholders. It is recommended that

  • the Ministry of Agriculture should organize training workshops and develop pilot carbon finance projects, documenting effective approaches and methods in the preparation for replication of successful pilot initiatives;
  • existing data collection systems should be used as the basis for monitoring of carbon projects to reduce costs; and
  • since carbon finance projects have higher requirements for monitoring data than existing data collection systems, implementing agencies should consider how improvements in monitoring data could better support existing incentive programs and community-based grassland management needs.


  • Executive Summary
  • Introduction
  • Overview of Grassland Management Laws and Policies
  • Programs and Incentive Mechanisms
  • Effects of Incentive Program Implementation
  • Implications of Incentive Mechanisms for Carbon Finance
  • Suitability of Existing Activity Monitoring Systems for Carbon Accounting in Voluntary Carbon Markets
  • Additionality in the Context of National Grassland Incentive Programs
  • Conclusions and Recommendations