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Paper short abstract

Using a political economy perspective, the research examines how enterprises navigate the intersection of state ownership, regulatory mandates, and capital mobilisation, deploying a mix of compliance-driven investment, industrial development finance, and selective use of market-based instruments.

Paper long abstract

China’s commitment to peak carbon emissions before 2030 and achieve carbon neutrality by 2060 has placed renewed emphasis on carbon offset initiatives as a complementary pathway to decarbonisation. State-owned enterprises (SOEs) are central to this effort, both as project developers and as financial actors with privileged access to capital. Yet the ways in which finance is mobilised, structured, and governed to support carbon offset projects in China remain poorly understood. Existing studies focus largely on policy design or market mechanisms, leaving a gap in understanding of how financing strategies are shaped by the political-economic logic of the Chinese shareholding state and its evolving model of state capitalism.

Using a political economy perspective, the research addresses this gap through qualitative case studies of three major SOEs engaged in carbon offset development, drawing on twenty in-depth interviews with corporate managers, regulators, and project intermediaries. It examines how these enterprises navigate the intersection of state ownership, regulatory mandates, and capital mobilisation, deploying a mix of compliance-driven investment, industrial development finance, and selective use of market-based instruments. In addition, the study explores the socio-geographical dimensions of these projects, including how financing priorities influence the spatial distribution of offsets and their local economic impacts.

The findings reveal that finance for carbon offsets in China is neither fully market-driven nor purely administrative. Instead, it operates through hybrid arrangements in which capital allocation, project selection, and risk management are shaped by both commercial considerations and state strategic objectives.