Bridging the Methane Gap: Financing Abatement in China

When it comes to greenhouse gases, methane packs a punch: although it is short-lived, it is far more potent than carbon dioxide and can accelerate warming much faster. As the world’s largest methane emitter, China’s approach to methane abatement will be critical to global climate action.

A new report from the Climate Bonds Initiative examines where methane emissions arise across China’s energy, agriculture, and waste sectors, and how market-based mechanisms could help scale solutions that are already technically feasible but remain under-financed.

Why methane matters for China now

In September 2025, China updated its nationally determined contribution (NDC) to cover all greenhouse gases for the first time, signalling stronger policy momentum to address methane alongside carbon dioxide, building on the methane strategy released in 2023.

With a target to reduce overall GHG emissions by 7–10% from peak levels by 2035, China has a clear opportunity to step up methane action.

China’s methane emissions account for roughly 16% of the global total, originating from coal mining, oil and gas operations, livestock, rice, and waste. 

While these sectors are challenging, they also present clear investment opportunities. Measures such as capturing coal mine methane, improving water management in rice fields, optimising livestock systems, and expanding biogas use are technically feasible and economically viable; some can also generate additional revenue. In the energy sector alone, the IEA estimates that 30% of methane emissions could be avoided at no net cost.

Finance as the missing piece

Many methane abatement projects in China are small, dispersed, and not yet fully commercial, which makes them difficult to finance. Globally, investment in methane abatement reached only USD 137 billion in 2021–2022, far below the USD 1.19 trillion needed annually by 2050. In China, annual investment needs are estimated at around USD 7.7 billion, underscoring both the scale of the opportunity and the need for structured financial support.

China also has a structural advantage in mobilising finance. Over the past decade, its policy-led sustainable finance framework has helped scale renewable energy, electric vehicles, low-carbon infrastructure, and other green investment. GSS+ instruments have also expanded under clear national guidance and taxonomies. That experience offers a strong foundation for turning methane abatement from technical potential into bankable projects.

A cross-sector perspective on methane finance

The report looks across energy, agriculture, and waste through a finance lens, rather than treating them as separate issues. It maps common and sector-specific barriers, reviews the current policy and market landscape, and presents cases ranging from agriculture to oil and gas.

The analysis sets out detailed recommendations for policymakers and financial institutions:

For policymakers:

• Incorporate methane into future NDCs and sectoral policies.
• Embed technical criteria into green taxonomies.
• Enhance monitoring, reporting, and verification (MRV) systems.
• Offer fiscal, monetary, and administrative incentives, such as subsidies or tax relief.
• Expand China’s emissions trading scheme to include methane.
• Improve coa lmine closure procedures to mitigate emissions from abandoned facilities.

For investors:

• Integrate methane exposure into portfolio assessments.
• Set medium- and long-term methane reduction targets.
• Develop diverse debt and equity products for energy, agriculture, and waste projects.

Closing the methane finance gap will be essential not only for China’s domestic climate goals, but also for global efforts to slow warming this decade. China’s experience may also offer useful lessons for other emerging economies and countries in the Global South facing similar methane challenges.

Click here to read the full report in English and Chinese.