(Bloomberg) -- China’s central bank will offer cheap funding to banks which lend to firms that are working toward the nation’s goal of reducing carbon emissions.

The People’s Bank of China will lend financial institutions money to help them provide loans to firms working on China’s energy transition, according to a statement Monday evening. The central bank will lend 60% of the required funds at an interest rate of 1.75%, and banks can then use the money to provide loans at a higher rate around the level of the loan prime rate.

The financing will support companies in clean energy, energy-saving and environment-friendly sectors, as well as those with carbon emission reduction technology. That includes wind and solar power, high efficiency power storage and clean energy transmission, and is especially meant to back earlier-stage firms where there is high potential to cut emissions with the right funding.

Though the funds can be offered at banks’ own discretion, the central bank will require public disclosure of the use of the loans and quantification of the emissions reduced with the funding. 

The Chinese central bank has been looking to contribute to President Xi Jinping’s pledge to make China carbon neutral by 2060 after reaching peak emissions in 2030. The tool also comes amid a drive to fine-tune policies in the face of slowing economic growth, while the recent power crunch has underlined the large role fossil fuels still play in China’s economy. 

 

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