Soaring demand for renewable energy investment has prompted the world's largest development finance institution to provide new green loans to fund renewable energy projects in China.
In its work plan for achieving the carbon-reduction targets set by the Chinese government, China Development Bank (CDB) will set aside 500 billion yuan ($78 billion) in loans to finance green energy projects over the next five years with 100 billion yuan earmarked for borrowing this year.
The green-lending instrument is being made available to a growing pool of investors to fund projects covering onshore and offshore wind, solar, hydrogen and hydropower as well as natural gas supply and sales systems and coal-bed methane exploration and production.
CDB said that the scheme offers borrowers loans on differentiated basis, which implies that different projects could have different financing schemes.
The capital markets have a crucial role to play to reduce carbon footprints by redirecting capital flows to environmentally responsible projects and innovative technologies, CDB said.
In March, CDB issued 20 billion yuan ($3.1 billion) inaugural green bond to raise funds for renewable energy projects such as wind and solar that promote decarbonisation in the power system and transform the energy industry.
The three-year bond bears a coupon rate of 3.07%. It was offered among global investors through the Bond Connect investment platform.
Green credits for projects offering energy savings or emission reductions now make up about 10% of the portfolios of China’s top 21 banks due to mandatory Green Credit Guidelines issued by the China Banking Regulatory Commission and the People’s Bank of China, the World Bank said.
China is scaling up investments on renewable energy projects led by offshore wind and hydrogen dedicated to mitigate carbon emissions amid growing concerns on climate change.
Speaking at the 75th session of the United Nations General Assembly via video last September, President Xi Jinping said his country aims to reach peak carbon dioxide emissions before 2030 and to achieve carbon neutrality before 2060.
The net-zero and carbon-neutrality drive will require China to invest 100 trillion to 130 trillion yuan ($15.6 trillion to $20.3 trillion), which accounts for 1.5% to 2% of the country's total gross domestic product, according to Ding Zhimin, the former deputy director of the Policy & Law Department of the National Energy Administration.
Ding said coal will be replaced by renewable energy — led by wind and solar — which will eventually account for more than 80% of China's total energy mix by 2060, up from the 15% last year.
China is one of the world’s largest carbon-emitting countries, with CO2 emissions of 10 billion tonnes per annum now accounting for 30% of the world's total.