For a third year running China was the dominant source of greenhouse gas emissions cuts under a UN-run offsetting scheme, the World Bank said on Wednesday.
China accounted for 73 percent of deals done under the Kyoto Protocol's Clean Development Mechanism in 2007.
The $13 billion CDM market allows rich nations to invest in clean energy projects in developing countries and in return receive offsets called CERs which they can sell for profit or use to meet emissions targets under the Kyoto Protocol.
Some 140 million tonnes of CERs have been issued by the U.N. since 2005.
Investors have historically pursued so-called 'low-hanging fruit', meaning large, CDM projects that yield millions of CERs over smaller projects, since the administration costs, often up to $200,000, tend to be unrelated to project size.
The lion's share of issued CERs have so far gone to projects in China and India, both receiving around 30 percent of the total each.
Most CER recipients in China sold on their credits before receiving them, the report said. This initial sale is considered to be the CER's primary market.
Primary market CER prices in China ranged between 8 euros ($12.25) and 11 euros in 2007, though the report's authors noted prices edged up above 13 euros in early 2008.
"China is still the destination of choice for buyers of credits, who cite its large size, economies of scale in origination, and its favourable investment climate," the report said.
To ensure price stability for project developers, the Chinese government has set a price floor of around nine euros on primary CERs.
The total value of the primary CDM market was $7.4 billion last year, up 28 percent from 2006.
Greenhouse gas emissions cuts, in tonnes of carbon dioxide equivalent, rose just 2.6 percent in 2007, said the report published on the sidelines of a carbon conference in Germany.
The secondary market, which encompasses all subsequent transactions following the primary sale, swelled by more than 11 times to $5.5 billion last year.
Secondary CERs closed at 16.78 euros a tonne on Tuesday.