Green finance bankrolls low-carbon transition of SOEs

LANZHOU — Amid China's broad efforts to reach its dual carbon goals, green finance has increasingly supported the low-carbon transition of businesses. A ferroalloy manufacturer in Northwest China's Gansu province is the latest beneficiary.

Jiayuguan Hongdian Ferroalloy Co Ltd, a subsidiary of State-owned Jiuquan Iron and Steel (Group) Co Ltd, is retrofitting its submerged arc furnaces.

Since several of its manufacturing facilities have been used extensively for a prolonged period, there is a pressing need to shift its energy-intensive equipment to low-carbon mode.

The low-carbon retrofit of submerged arc furnaces will boost energy efficiency in the production of ferroalloys, with an expected annual reduction of energy consumption of over 1,300 metric tons of standard coal, which translates into a reduction of CO2 emission of over 3,000 tons per annum, said Pu Shunchuan, engineer in chief of the company.

However, the low-carbon transition comes with a big bill, leaving the company with funding requirements.

To fill the gap, the Jiayuguan branch of Bank of Lanzhou offered a solution — the so-called sustainable development-pegged loans — a new form of green finance instrument that pegs loan interest rates to borrowers' performance in pollution and CO2 emission reductions, as well as their energy consumption per unit of output.

According to an estimate by the financial department of JISCO, the loan will save the company about 500,000 yuan ($69,613) in interest payments. If the retrofitting does help the company accomplish its energy consumption goals, the cost of borrowing will be further reduced.

Gansu, as a major industrial base, has huge demand for funds in its low-carbon transition, and green finance offers enterprises in the province a new solution to satiate the need, said Chang Ye, an official with the Lanzhou Central Subbranch of the People's Bank of China.

China has announced that it will peak carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060. Meanwhile, the country has seen the development of green finance enter the fast lane, playing a vital role in the country's long-term pursuit of low-carbon and sustainable growth.

Xinhua