China

CN-13:EE Financing Regulations and Instruments

Policy Description

Energy efficiency financing has been emphasized since the 11th Five-Year Plan in China, with the goal of supporting the achievement of the national energy intensity reduction target. A series of governmental policies and regulations have been issued on enhancing financial services related to energy efficiency, emission reduction and environmental protection. Main energy-efficiency financing policies include Green Loan/Credit and Green Security. In the 12th Five-Year Plan, these financing policies will be continued, with encouragement from the government to push for exploration on innovative financing products and mechanisms. 

Description

Energy efficiency financing has been emphasized since the 11th Five-Year Plan in China, with the goal of supporting the achievement of the national energy intensity reduction target. A series of governmental policies and regulations have been issued on enhancing financial services related to energy efficiency, emission reduction and environmental protection.

The policy of Green Loan/Credit (“绿色信贷”) was issued in July 2007 by the former State Environmental Protection Agency (now the Ministry of Environment Protection), the People’s Bank of China, and the China Banking Regulatory Commission. The policy was outlined in the Suggestions on Implementation of Environmental Protection Policies to Prevent Crediting Risk [1].The China Banking Regulatory Commission then released action plans for Implementing the Comprehensive Work Plan of Energy Conservation and Emission Reduction [2]. In November 2007, the China Banking Regulatory Commission issued the notice on Guiding Suggestions on Crediting in Energy Conservation and Emission Reduction [3]. Local governmental agencies and banking regulatory commissions issued local implementation plans as well. 

Three main components are included in the Green Loan/Credit policy: 

  • Utilize loaning/crediting policies and products (e.g., types of loans, durations, interests rates, and amount of loans) to support energy-saving and environmental protection projects or enterprises
  • Adopt punishment measures (e.g., stop, postpone, or withdraw loans) if enterprises or projects violate regulations related to environmental protection and energy conservation
  • Guide, supervise and urge lenders to prevent risks, implement social responsibilities and reduce loaning risks 

The policy of Green Security (“绿色证券”) was issued in February 2008 [4]. It requires listed companies in the fields of coal-fired power, steel, cement, electrolytic aluminium and heavy polluting industries to conduct an environmental review when applying for IPO financing or re-financing. This policy was co-developed by the former State Environmental Protection Agency and the Security Regulatory Commission. Its purpose is to make sure companies who get finance from public equity market have to be green and energy efficient. 

In 2009, four governmental agencies, including the People’s Bank of China, the China Banking Regulatory Commission, the China Securities Regulatory Commission, and the China Insurance Regulatory Commission announced Guiding Suggestions on Further Improve Financial Services to Support Key Industries’ Adjustments and Development and Restrain Over-Capacity of Some Industries [5].

In 2010, the People’s Bank of China and the China Banking Regulatory Commission issued Suggestions on Further Improve Financial Services to Support Energy Conservation, Emission Reduction and Phasing-Out of Backward Production Capacity [6]. Similar to previously released policies, this regulation requires local branches of the People’s Bank of China and local Banking Regulatory Commissions to review and examine the loans/credit/financing related to energy conservation, emission reduction, and phasing out of outdated capacity. By requiring strict control of credits and loans to energy-intensive enterprises, this policy strongly favors energy-efficient projects and phasing out of outdated production capacity. It also supports the deployment and distribution of energy-efficient technologies, such as technology catalogues promoted by the national government and the Ten Key Projects.  

In China’s Comprehensive Work Plan of Energy Conservation and Emission Reduction of the 12th Five Year Plan [7], financial policy is one of the four economic policies. Both Green Loan/Credit and Green Security are going to be continued. Besides increasing the support for credit and loans to energy-efficiency projects, financial institutions are also encouraged to explore new debt-financing or equity-financing management models. A green rating system for banks will also be established. 

Policy Information Expand this section for information on the key features of the policy, such as its date of introduction, categorization, main objective(s) and linkages with other policies.

Policy Categorisation

Policy Instrument Type: Administrative, Economic

Position in the Pyramid

About Us

Participation: Voluntary

Period

Start Date: 2007

End Date: 2015

Policy Linkages

Supports Energy and Carbon Intensity Targets of the 12th Five Year Plan Effort Defining
Supports Energy Performance Contracting and Energy Service Companies (ESCOs) Supporting Measure
Supports Top-10,000 Energy-Consuming Enterprises Program Effort Defining
Supports Ten Key Projects Program Supporting Measure
Supports Small Plant Closures and Phasing Out of Outdated Capacity Effort Defining
Supports Carbon Emissions Trading Pilots Supporting Measure
Complements Financial Rewards for Energy-Saving Technical Retrofits Supporting Measure

Agencies Responsible

Former State Environmental Protection Agency (Now the Ministry of Environment Protection)
China Banking Regulatory Commission
China Securities Regulatory Commission

Primary Objective: Energy

Objective

• Strictly control credit/loans to energy-intensive and high pollution industries • Actively support technical retrofitting projects and technologies related to energy efficiency, emission reduction, and environmental protection in credits and loans • Monitor and track the performance of energy-intensive industries and enterprises • Enhance communications between financial institutions and other governmental agencies • Strengthen energy-efficiency procurement and green procurement • Establish crediting/loan standards and procedures • Accelerate the development of energy performance contracting • Explore emission trading as conditions allow • Capacity building and trainings

Target Group

• Headquarters and local branches of the People’s Bank of China, provincial and local banking regulatory commissions, the National Development Bank, state-owned commercial banks and share-holding Commercial Banks • Enterprises in energy-intensive industries (e.g., coal-fired power, cement, steel, aluminum, etc.)

Driver of energy consumption or emissions affected by policy: Improving energy efficiency and environmental performance

Implementation Information Expand this section for information on targets, monitoring, verification and enforcement regimes, and implementation requirements and tools.

Coverage

• Enterprises in energy-intensive industries • Heavy polluting industries • Enterprises that are applying for IPO or re-financing

Quantitative Target? no

Progress Monitored? yes

Verification Required? no

Enforced? yes

Sanctions: Energy-efficiency loans and credit are one key component in evaluating financial institutions. Energy-efficiency financing is also linked with business development and promotion. The people who violate the regulation by approving loans shall be sanctioned.

Requirements on the Target Group

 

  • Review and examine financial status of energy-efficient projects
  • Submit reviews to the People’s Bank of China and the China Banking Regulatory Commission
  • Research and establish more targeted crediting/loan measures for different enterprises
  • Strictly control the financing applications from energy-intensive and high emissions enterprises
  • Actively support key technologies, Ten Key Projects, and energy performance contracting
  • Encourage innovation on financing products and services to support financing for energy efficiency and emission reduction

Support by Government

 

  • Information exchange and sharing platform
  • Policy explanation and outreach
  • Supervision and monitoring

Implementation Toolbox

 

  • Lists of key enterprises that have potential high safety risks, low energy efficiency levels, and high pollution
  • Environmental performance is closely linked to credit rating, loans, and financial resources

Complexity of Implementation

Government

unclear

Target Group

unclear

Impacts, Costs & Benefits Expand this section to find information on policy effectiveness and efficiency.

Impact Quantitative Estimate Qualitative Estimate
Estimated effect on energy consumption or emissions N/A It is estimated that the policy will have a positive impact on reducing emissions and increasing energy efficiency. By promoting financing for energy-efficiency projects and technologies, enterprises will have more incentive to invest in energy efficiency and environmental protection.
Estimated costs/benefits for industry N/A
Estimated cost for government N/A

References & Footnotes

References

[1] Ministry of Environmental Protection, 2007. Suggestions on Implementation of Environmental Protection Policies to Prevent Crediting Risk. http://websearch.mep.gov.cn/info/gw/huanfa/200707/t20070718_106850.htm

[2] China Banking Regulatory Commission, 2007. Implementing the Comprehensive Work Plan of Energy Conservation and Emission Reduction. http://www.cbrc.gov.cn/chinese/home/jsp/docView.jsp?docID=2008012943EB5CDDFF64DDF5FFACBAD39E1C2D00

[3] China Banking Regulatory Commission, 2007. Crediting in Energy Conservation and Emission Reduction. http://www.sei.gov.cn/ShowArticle2008.asp?ArticleID=167472

[4] Ministry of Environmental Protection, 2008. Guiding Suggestions to Strenghten Environmental Protection Supervision and Management for Listed Companies. http://www.gov.cn/zwgk/2008-02/25/content_900324.htm

[5] China Banking Regulatory Commission, 2008. Guiding Suggestions on Further Improve Financial Services to Support Key Industries’ Adjustments and Development and Restrain Over-Capacity of Some Industries. http://www.gov.cn/gzdt/2009-12/23/content_1494922.htm

[6] China Banking Regulatory Commission, 2010. Suggestions on Further Improve Financial Services to Support Energy Conservation, Emission Reduction and Phasing-Out of Backward Production Capacity. http://www.cbrc.gov.cn/chinese/home/docDOC_ReadView/201005310282238DB3FEF804FFE979FDCB907A00.html

[7] China Government Website, 2011. Comprehensive Work Plan of Energy Conservation and Emission Reduction of the 12th FYP. http://www.gov.cn/zwgk/2011-09/07/content_1941731.htm

Footnotes

(*1) China Environment Website, 2008. The National Environmental Protection Bureau Established Green Security Policies. February 26, 2008. http://www.cenews.com.cn/xwzx/zhxw/jrkd/200802/t20080228_222587.html

(*2) Environmental and Economical Policies Research Center of the Ministry of Environmental Protection, 2011. 2010 China Green Loan Development Report. http://www.prcee.org/upload/Attach/default/276074.pdf

(*3) Nanfang Daily, 2011. The Framework of Green Security during the Twelfth Five-Year Plan. July 1, 2011. http://nf.nfdaily.cn/nfdsb/content/2011-07/01/content_26224788.htm

(*4) Xinhua News, 2008. Overcome the Barriers of Green Loan. Guangming Newspaper. February 15, 2008. http://news.xinhuanet.com/politics/2008-02/15/content_7609719.htm