Abstract: To curb the unbearable pollution in China, the country has to invest annually about RMB2tr in its environmental, energy saving, and clean energy sectors in the coming five years. However, the current economic system fails to internalize the positive (negative) externality of green (polluting) projects into the corporates/consumers’ decision making, and thus provide the enough encouragement to the green investors . In this article, we construct a theoretical framework for thinking about “green financial policies”, review the relevant international experiences and, based on these, propose nine specific policy recommendations for China based on the international experience of green finance development. These policy recommendations are: 1) promoting to establish specialized green lending and investing institutions with green bonds as a major funding source; 2) improving and expanding the interest subsidy program for green loans; 3) requiring commercial banks and credit ratings companies to incorporate the environmental risk factor into risk assessment, and then perfecting the green lending system; 4) providing sector/company level environmental cost information to policy makers and investors as a semi-public good; 5) making green insurance a mandatory requirement in selected sectors; 6) promoting the development of a nation-wide carbon trading market; 7) making environmental disclosure a mandatory requirement for publicly listed companies and bond issuers; 8) establishing green investor networks in China to advocate social responsibility of investors; and 9) fostering consumer preference for green products via green education programs.
Full report :Green Finance Policies and Application in China.pdf
