China launches $31.36b relending facility for clean coal
Move to further trigger trillions of yuan in capital support for green projects: experts
Published: Nov 17, 2021 09:10 PM
Photo: VCG

A worker checks the operation of equipment to ensure efficient and clean use of coal resources in Huainan, East China's Anhui Province on November 10, 2021. Photo: VCG

China will set up a special relending facility worth 200 billion yuan ($31.36 billion) to support the clean and efficient use of coal, the State Council, China's cabinet, said on Wednesday following an executive meeting chaired by Premier Li Keqiang, in another major financial support for the country's carbon emissions reduction efforts. 

The move would further put in motion about 2 trillion yuan of capital support from commercial banks toward clean energy projects as China beefs up efforts to meet its carbon goals, experts said on Wednesday.

The relending facility, rolled out in addition to previous financial lending tools to support carbon emissions cuts, will focus on supporting clean coal, including the energy's clean and high performance processing, green and smart exploitation, clean and efficient usage and coalbed methane exploitation, China Central Television reported on Wednesday, citing the meeting. 

The facility would focus on key projects and be based on the principle of marketization, according to the report. China's national banks will issue preferential loans to those projects based on their evaluation, while the People's Bank of China (PBC), China's central bank, will provide relending facilities based on the size of the loan principal.

The meeting also noted that China will study measures, such as issuing government special-purpose bonds or offering some tariff bonuses, to increase support for projects on the clean usage of coal. 

The special relending facility is the newest example in a slew of measures rolled out by the Chinese government recently to push for realization of its carbon emissions peak and carbon neutrality goals. The PBC said on November 8 that it would provide low-cost loans for financial institutions that will be issued to enterprises in the key areas of carbon emissions reduction.

Experts noted that directed fees can be used to support generator retrofits and help reduce carbon emissions, while acting as a lever to generate about 2 trillion yuan of capital support by commercial banks. 

"The 200 billion yuan is just the base. If commercial banks could fully take advantage of the policy, there would be 2 trillion yuan financial support as heading toward carbon neutrality is the nation's goal," Dong Dengxin, director of the Finance and Securities Institute at the Wuhan University of Science and Technology, told the Global Times on Wednesday.

According to Dong, as development and utilization of clean energy requires a large amount of capital for research and development and technology innovation, financial support, especially in the form of relending, becomes crucial to companies that are in the renewable energy sector, including wind power, hydropower, solar power, nuclear energy and new-energy vehicles.

"However, these companies must have made some achievements in their industry before they apply for the special refinancing fund in order to avoid 'green washing,'" he stressed. 

Zhang Xiaorong, director of the Beijing-based Cutting-Edge Technology Research Institute, told the Global Times that the loans are more likely to be given to large enterprises, specifically large coal-fired power plants. 

China's move to support clean usage of coal also came after the government rolled out a slew of measures to address the country's shortage of power in the wake of surging coal prices. 

Li said at the World Economic Forum Special Virtual Dialogue with Global Business Leaders that China has eased its shortages of energy such as electricity and coal, and that the future supply of those energies is guaranteed, the Xinhua News Agency reported.

According to Li, China will push for a low-carbon transition in a balanced and orderly manner under the precondition of a stable and safe supply of energy.