Leading State-owned Banks Obtain Approval from PBOC for Emissions Reductions Support Tools

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At least two of China’s leading state-owned lenders have obtained approval to use a new facility launched by the Chinese central bank towards the end of last year to support carbon emissions mitigation projects.

In November 2021 the People’s Bank of China (PBOC) launched the “Carbon Emissions Reduction Support Instrument” (碳减排支持工具), after stepping up efforts to drive the growth of Chinese green finance at the start of that year.

The Instrument is a “structured monetary policy tool,” which provides low cost funds to Chinese financial institutions to support loans for emissions mitigation projects.

PBOC requires that the rates for such loans be roughly on par with the benchmark loan prime rate (LPR) that is announced on a monthly basis based on a survey of leading Chinese lenders.

China’s financial authorities have since announced that two of China’s leading state-owned banks have obtained approval for use of the instrument, including Agricultural Bank of China (ABC), which has obtained approval for a sum of 11.368 billion yuan, and China Development Bank (CDB), which has obtained approval for a sum of 10.267 billion yuan.

Both state-owned lenders say they have already allocated funds to key carbon mitigation projects as part of China’s green fainting drive.

ABC has provided loans to 263 wind and solar power projects, which it says will drive carbon emissions reductions of 3.8256 million tonnes per year, while CBD says it provided 17.111 billion yuan in medium-and-long term loans to clean energy projects during the period from July to November 2021, which will drive annual carbon emissions reductions of 3.43 million tonnes.

China CITIC Bank, Ping An Bank and China Minsheng Bank have also announced plans to make use of the instruments.

CITIC Bank said that it has provided 270 million yuan in carbon mitigation loans for 2 projects, with a weighted average interest rate of 4.06%.