This project explores how Chinese provinces can advance climate action while supporting communities navigating economic and environmental change. Through case studies in Shaanxi and Guangdong, informed by international transition experiences, ISC identifies practical, locally tailored policies and financing strategies that promote a just, inclusive shift to a low-carbon future.
As China works towards its national climate goals, a critical question remains: how can the clean energy transition also strengthen the communities long shaped by fossil fuel-based economies? The Case Studies for Subnational Climate Just Transition project explores how climate action can deliver tangible benefits for people and places navigating economic change. ISC will conduct in-depth case studies in the Chinese provinces of Guangdong, a manufacturing stronghold which already has advanced carbon market programs, and Shaanxi, an intensive coal mining area with a heavy industry base, to identify what policies can be used to improve public services in these climate-vulnerable communities over the next five to 10 years and beyond.
The project combines on-the-ground interviews with local stakeholders, as well as comparative studies with former coal-mining regions in Germany and carbon market-dependent areas in California. By examining what has worked across these contexts, ISC will identify policy instruments that can be tailored to the distinct economic and social realities in each Chinese province. The resulting case studies will also serve as practical models for how subnational governments can design locally responsive policies that support a just, people-centered transition away from fossil fuels.
In Shaanxi, the transition away from coal creates a cascading challenge. As coal production declines, resource-based fiscal revenues fall, limiting funding for public services and local investment. These pressures, in turn, drive job losses, strain local economies, and weaken community resilience, putting communities at risk during a period of rapid change.
In Guangdong, risks compound in a different way. More frequent and severe climate events disrupt industrial activity, sending cost increases through supply chains and across sectors. These economic shocks are ultimately felt by workers and households, deepening inequality and placing added pressure on communities already navigating industrial and climate transitions.
To translate climate ambition into real community benefits, the study recommends bold, long-term investment at the provincial level. In Shaanxi, this includes establishing a 10-year Coal Reduction and Green Transition Fund totaling RMB 30–50 billion (approximately USD 4–7 billion) to support energy restructuring in northern Shaanxi, low-carbon manufacturing central regions, and ecological compensation in the south. A unified provincial design would ease fiscal and employment pressures while promoting greater regional equity across the province. In Guangdong, the study calls for a RMB 5 billion (approximately USD 700 million) provincial Just Transition Fund during the 15th Five-Year Plan period (2026–2030). Financed through carbon market auction revenues, green electricity premiums, and carbon-inclusive credit mechanisms, the fund would leverage green bonds and ESG investment to support rural clean energy development, advancing the program to upgrade 100 counties, 1,000 towns, and 10,000 villages, all while ensuring that market-based gains contribute to social fairness in the province’s path to carbon neutrality.
“We should indeed take the just transition into account when designing the carbon market mechanism”
Grounded in the commitment to a just transition, this study focuses on two core questions that shape how communities experience economic and climate change:
Responding to China’s priorities in the dual-carbon era, this study uses an “international comparison, local application” approach to identify practical, people-centered pathways for a just transition. Comparative analysis between Shaanxi and Germany’s Ruhr region shows that resource-dependent regions need long-term strategies that align coal reduction with fiscal replacement, workforce transition, and ecological restoration. A parallel comparison between Guangdong and California demonstrates how carbon market tools can act as engines for more equitable distribution—channeling climate ambition into shared economic and social benefits. Across both domestic and international cases, the findings point to a clear conclusion: successful just transitions depend on stable, long-term financing paired with inclusive mechanisms that ensure communities share in the benefits of change. Our work focuses on
long-term transition strategies that align emissions reduction with fiscal stability, workforce transition, and ecological restoration
sustainable financing mechanisms, including provincial transition funds and carbon market–based revenues, that can support communities over time
equitable benefit-sharing, so investments in clean energy and industrial transformation strengthen public services, local economies, and community resilience
