China has set a carbon-neutrality target for 2060; carbon sinks are vital tools to meet this target. China is leading the effort in greening the world through the restoration of low-carbon density ecosystems (LCDEs). The potential carbon sinks of LCDEs provide opportunities for carbon trading projects that make cash benefits accessible to the owners, thereby incentivizing ecosystem restoration. Unfortunately, carbon trading in LCDEs has, to date, been unsuccessful in China. Therefore, it is important to identify the barriers in the development of carbon trading projects in LCDEs.

This study aimed at creating a feasible model for carbon trading in LCDEs in China. We first accounted for the carbon sink of LCDEs based on field sampling of 169 quadrants and 3,471 plants. Thereafter, we investigated the trade-off between the cost and efficiency of carbon projects in LCDEs. Finally, we explored the feasibility of the corresponding carbon sink potential by considering carbon price fluctuations and public–private partnership models.

The main findings were as follows: (i) Carbon trading in LCDEs is not economically feasible at the current market price of carbon. In the pilot case, the LCDE carbon trading could only recover 41.72% of the project cost. This partially explains the scarcity of carbon trading for LCDEs in the current emission trading scheme; (ii) A benefit transfer model is essential, wherein the costs of ecosystem restoration are paid by the central government, and the benefits of carbon trade are transferred to the owners of LCDEs, providing sufficient incentives for the owners to participate in carbon trading.

Policy implications. Given the scarcity of large-scale organisations and expertise, carbon trading in low-carbon density ecosystems (LCDEs) should not be treated as a purely commercial project. A public–private partnership network is a suitable model for engaging stakeholders to complete the carbon trading process in LCDEs. For the success of carbon trading in LCDEs, viable carbon prices and transfer of benefits from public investments are policy issues that need to be further explored. Our findings provide a policy basis for the Chinese government to mobilise more LCDE owners to enter the carbon market and achieve carbon-neutrality.

The Bureau of Forestry of local government provided restoration project documentation and official statistics on grassland restoration. Shrubs (Caragana) were planted as degraded grassland restoration. The area contained a total of 10,467.73 ha of Caragana, and shrubs were planted on 923 plots of land in Siziwang Banner from 2005 to 2013. Some interviews were conducted with the grassland owners. Some face-to-face interviews were conducted with local government officials about the current status of grassland, the role of local governments, degraded grassland restoration investments, and awareness of carbon trade.

A README file is provided to aid use of the dataset.