Green Finance Empowers Green Technologies

(Photo: Getty Images/Laszlo Podor)

 

Application of advanced energy-conserving and low-carbon technologies broadly is critical to achieve further progress on China’s energy efficiency and low-carbon goals. Since 2008, China’s National Development and Reform Commission (NDRC) has focused on energy-conserving and low-carbon technologies as a key direction for low carbon and green policy development. Over the past decade, more than 5,000 advanced technologies have been collected across the country, of which the NDRC selected nearly 400 technologies believed to have the widest application, greatest potential, and be the most effective. The selected technologies were published in the “Catalogue of Promoting National Key Energy-Conserving and Low-Carbon Technologies” to facilitate application of the technologies nationwide.

In order to promote green technologies, two things must be done—identify if a technology is authentically green and what are the potential financing channels for the technology.

Research by China Energy Research Institute shows that the “inadequate capacity to obtain and analyze energy data, lack of information regarding energy-conserving technologies and products,” and “difficulty in assessing the effectiveness of energy savings” are large challenges to widespread corporate adoption of green technologies.

Financing is also often a significant hurdle. At present, most of China’s energy-intensive industries are facing tough times with low profit margins or even losses. Therefore, it is difficult for these industries to invest in green technology upgrading. The limited initial investment funding for green projects, the drying up of many government incentive policies for energy conservation, and the complexities to obtaining bank loans add to the challenges of adopting green technologies for the private sector.

Due to these obstacles brought on by the dearth of sound laws and regulations, an effective management system, and a liberalized market, green technology promotion and project financing have been facing the “last mile” dilemma where crucial measures for policy implementation exist, but are not robust enough to get to the finish line. The question of how to build a platform to promote the technology, financing, and policies through market-oriented measures and guide financial institutions to support technological transformation and upgrading of the corporate world is the challenge that the Chinese government, companies, and financial institutions will need to address together with collaboration and cooperation.

According to reports, the National Energy Conservation Center, an affiliate of the NDRC, is exploring a new market-based platform to boost energy conservation technologies. This is one way to begin to fill the gaps, which aims to provide a one-stop solution for companies by connecting owners and users of green technologies with capital markets. This would provide technical assistance, financing channels and financial products to support technological upgrading.

Another avenue to start making progress is in green credit as a form of green finance. The China Banking Regulatory Commission issued “Green Credit Guidelines” in 2012 and “Energy Efficiency Credit Guidelines” in 2015. In terms of policy, the Chinese banking sector has made great progress in developing green credit to support industrial restructuring and the upgrading of technologies.

Lastly, at a time when digital technologies have been increasingly applied to industrial upgrading, it is necessary to begin to think through the use of fintech means such as big data and blockchain to improve the efficiency in determining the economic value and positive impact of a green project. An innovative digital platform for green assets and financial market could be established to reduce the cost of identifying and certifying green projects and improve the transparency and credibility of disclosed information.

However, there remain many specific and unresolved concerns that the financial markets have in regards to green technologies and projects including environmental information disclosure, green project rating, green financial product development, and financing for green small and medium-sized companies. And given the fact that “green” is a concept that is applied to numerous industries, the capacity for financial institutions to identify green projects and technologies widely is still in novel stages.

China should strive for more pragmatic measures and innovative breakthroughs in the field of green finance. In short, these could be instrumental in supporting wider implementation of green technologies in the fight against pollution and help bring the country to the finish line—finishing that last mile.