In pursuit of the carbon peaking and carbon neutrality goals, the People’s Bank of China (PBOC) launched the carbon emission reduction facility (CERF). This is a structural monetary policy instrument that aims to mobilize more social capital to promote carbon reduction, and support the development of clean energy, energy conservation, environmental protection, carbon reduction technology and other relevant key areas in a steady and direct manner.
Under this facility, the PBOC provides low-cost funds to financial institutions and guide the financial institutions to extend carbon reduction loans at rates close to the loan prime rate (LPR) of the same maturity. For the time being, the facility is available to financial institutions licensed to operate nationwide. For qualified carbon emission reduction loans, the PBOC provides the commercial lenders with funds worth 60 percent of the principal at the rate of 1.75 percent.
For the facility to be well-targeted and directly supportive of low-carbon transition, the PBOC requires financial institutions to disclose information concerning such carbon emission reduction lending, and the amount of emission reduction supported by such lending. The information disclosed will be verified by third-party professional institutions and subject to public scrutiny.
The launch of the facility sends a clear policy signal. It is designed to enhance financial institutions’ awareness of the importance of green transition, encourage more social capital to support the green and low-carbon industries, and to advocate the philosophy of green living, green production and circular economy, which will help achieve the carbon peaking and carbon neutrality goals.
