New financial tool unveiled to aid China's low-carbon development

BEIJING, Nov. 20 (Xinhua) -- China has rolled out a new financial tool to support the clean and efficient use of coal amid efforts to push forward green and low-carbon development.

The country will introduce a targeted re-lending program with a quota of 200 billion yuan (about 31.3 billion U.S. dollars) to support the clean and efficient use of coal, a State Council executive meeting chaired by Premier Li Keqiang decided on Wednesday.

"At present, coal is the energy source that we can truly rely on ourselves for supply. It will remain so for quite a long time to come, and this bears on China's development," Li said. "That said, we need to pursue a transformation in the path of development. We cannot stay on the path of energy-intensive development."

China is accelerating the pace at which it is optimizing its energy structure, with incentives to support the green transition so as to address pollution and climate change caused by fossil-fuel combustion. Currently, coal continues to account for the majority of the country's energy consumption.

Given China's coal-dominated energy resource endowment, it is important to work hard to make coal use cleaner and more efficient.

The meeting highlighted that the re-lending program should target the green and efficient operations of processes including coal-related mining, processing, power generation and heating.

According to the meeting, after major banks have independently issued preferential loans to qualified coal projects, the People's Bank of China (PBOC), the country's central bank, can provide re-lending support to those banks, with the re-lending amount same as their loan principal.

The loan interest rates provided by major banks should be basically in line with the benchmark lending rates, the meeting said, adding that policy supports such as tax incentives, special government bonds and trade-in projects will also be rolled out to make coal use more clean and efficient.

The re-lending program comes as a follow-up measure after China unveiled a supporting tool for carbon reduction earlier this month.

On Nov. 8, the PBOC said it would provide low-cost loans for financial institutions through the supporting tool, and will guide those institutions to provide loans to firms in key carbon-reduction fields on the premise of independent decision-making and risk-taking.

In fact, green finance has been an important measure for the country in facilitating carbon reduction.

By the end of the third quarter of 2021, China's balance of green loans hit 14.78 trillion yuan, up 27.9 percent year on year. Among the green loans, 66.9 percent have gone to projects with direct and indirect carbon reduction benefits.

Financial support is indispensable, said Dong Ximiao, a part-time researcher at Fudan University, adding that the re-lending program will help boost green development and increase the willingness and capacity of financial institutions to support the clean and efficient use of coal.

China aims to increase the share of non-fossil fuels in its primary energy consumption to about 25 percent by 2030, peak carbon dioxide emissions before 2030, and achieve carbon neutrality before 2060.