© Chris Lim
The People’s Bank of China (PBoC) is set to prolong its provision of cheap credit to commercial lenders to fund green loans until at least 2027, as part of broad new guidelines aimed at speeding up decarbonisation in the nation with the world’s highest emissions.
Under the Carbon Emissions Reduction Facility (Cerf) programme, commercial lenders offer loans for green investment projects close to the PBoC’s benchmark rate, with the central bank then providing up to 60% of funding for the loan for a year at a rate of 1.75%.
By mid-2023, at least 880bn yuan (US$123bn) had been disseminated to carbon reduction projects under the programme since its launch in 2021, according to the disclosures of 21 major banks in China, driving the reduction of an estimated 215mn tonnes of CO2.
The programme is open to non-Chinese lenders, with Singaporean bank DBS announcing on Wednesday that it had approved a 500mn yuan ($70mn) loan to develop a wind farm in north-eastern China’s Henan province with Cerf support. It is the first south-east Asian bank to be provided with PBoC credit under the scheme.
Chinese regulators have faced allegations of greenwashing in the past for including “clean coal” in the framework used to assess green finance projects, and experts have argued that the subsidies offered under the Cerf could be higher.
However, Su Ting, a sustainable investment research associate at the World Resources Institute (WRI) China, said the tool had ultimately proved effective in providing low-cost capital for carbon emission reduction projects.
“It has successfully incentivised renewable energy market development and led to the tremendous speed of solar and wind capacity installation in China in the past three years,” she told Green Central Banking.
“Going forward, there are both opportunities and challenges for the extension. The investment needed for energy transition and industrial decarbonisation is huge. However, more than 90% of investments supported by the tool went to the area of clean energy, instead of supporting transition projects,” she noted, suggesting that the scope of the initiative should be expanded to “include transition for hard-to-abate industries”.
This would, however, need to be guided by robust standards “to avoid transition-washing”, Su cautioned.
The announcement of the scheme’s extension came as China’s cabinet, the State Council, announced wider guidelines for efforts to green major sectors of the world’s second-largest economy, including industrial manufacturing and agriculture.
While light on specifics, they included a pledge to use fiscal policy to drive China’s transition, and restated a target of raising the non-fossil component of the country’s energy consumption to 25% by 2030.
China is responsible for some 35% of global carbon emissions and the guidelines acknowledge that the country’s energy structure currently remains heavily reliant on coal, oil and gas ahead of its pledged target of achieving net zero by 2060.
Under the updated plan announced on 11 August, China is aiming for declining carbon emissions by 2035 at the latest.
This page was last updated January 6, 2025
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Katy Lee has been a writer for Green Central Banking since early 2024, focused on our Asia coverage. A Paris-based journalist who has written for major international titles for more than a decade, she is the co-host of The Europeans, an award-winning podcast about Europe which often covers environmental issues.
