Chinese Central Bank Launches New Monetary Policy Tool to Support Carbon Reduction

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The People’s Bank of China (PBOC) has launched a new monetary policy instrument to support efforts to reduce the country’s carbon emissions.

PBOC said that it would use carbon emissions mitigation support instruments to provide financial institutions with low cost funds to issue carbon mitigation loans to Chinese businesses, in a statement published on 8 November.

According to PBOC the rates for these loans must be roughly in line with the loan prime rate (LPR) for commensurate maturities, while the instrument will initially only be available to nationwide financial institutions.

The “Loan First Borrow Later” (ๅ…ˆ่ดทๅŽๅ€Ÿ) “direct-reach” mechanism will provide 60% of the funds of qualified carbon mitigations loans made by financial institutions to relevant enterprises in key areas, at an interest rate of 1.75%.

In order to ensure the targeted and direct nature of the instruments, PBOC is requiring that financial institutions publicly disclose key information on the carbon mitigation loans, including the expected volume of carbon reductions.

Specialist third party organisations will be also responsible for conducting inspection and verification of this information.

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