Q1: What projects does the CERF support?
A: The CERF primarily supports projects with huge potentials in carbon emission cuts, including clean energy, energy conservation and environmental protection, as well as carbon reduction technology. To ensure it is well-targeted, the PBOC has taken into account both domestic and international standards. At the initial stage, the support may be small in scope yet highly targeted, prioritizing industries that are in the early stage of development but have great potentials in reducing carbon emissions if there is certain financial support.
More specifically, clean energy projects include wind power generation, the utilization of solar energy, biomass energy, hydrogen energy, geothermal energy and ocean energy, pumped storage, heat pumps, high efficiency energy storage (e.g. electrochemical energy storage), smart grid, large scale power source-grid-load-storage integration project of wind, electric and photovoltaic power generation, roof distributed photovoltaic development of the whole county, cross-regional clean electric transmission system, and emergency power supply and peak shaving. Energy conservation and environmental protection projects include improving the energy efficiency in the industrial sector, developing new power system and so on. Carbon reduction technology projects include developing carbon capture, storage, and utilization technologies. The support may be expanded to other areas in line with sectoral developments and policy needs.
The CERF is an addition to our effort in beefing up the overall capacity for energy supply by using incremental funds to support the investment and development of clean energy and other key areas. Financial institutions, on the basis of market principles and rule of law, assist in safeguarding national energy security and supply as well as promoting green transition through financial support.
Q2: How do financial institutions apply for the CERF?
A: Under the CERF, the PBOC provides funds to commercial lenders only after their extension of carbon emission reduction loans. To qualify, financial institutions shall lend to all kinds of firms in industries that are key to carbon emission reduction at rates close to the LPR of the same maturity. During such lending, the financial institutions shall make their own decisions and shoulder the potential risks by themselves.
After extending carbon emission reduction loans, financial institutions can file applications to the PBOC for CERF access. For qualified loans, the PBOC provides the lenders with funds worth 60 percent of the principal for one year at the rate of 1.75 percent. The financial institutions can roll over the loan twice, and are required to provide qualified pledges to the PBOC.
Q3: How will the CERF achieve its objective?
A: When applying for the CERF, financial institutions need to submit emission reduction data from carbon emission reduction projects supported by their loans, and commit to publicly disclosing such information. Financial institutions are required to calculate the annual carbon emission cuts supported by their loans based on data from emission reduction assessment reports, such as feasibility reports of emission reduction projects, environmental impact assessments and other reports issued by well-recognized institutions, as well as on the share of loans supported by the CERF in the projects’ total investment.
Once they get access to the CERF, financial institutions are required to disclose information on loans supported by the facility on a quarterly basis and subject to public scrutiny. Information will include which specific sectors are supported by the facility, the number of projects, the amount of loans, the weighted average loan interest rates and the emission reduction data. The PBOC will cooperate with other relevant authorities to verify such information by using the service provided by qualified third-party institutions.
The new facility will have a demonstration effect by defining key sectors for carbon emission reduction and strengthening related information disclosure by financial institutions. Guided by this facility, financial institutions and companies will have a better understanding of the importance of green transition, and more private sector funds will be mobilized to support green and low-carbon sectors. It will also help promote the idea of green living, green production and circular economy among companies and the public, supporting the achievement of carbon peaking and carbon neutrality goals.
