China takes steps to exclude “clean coal” eligibility for green bonds

The People’s Bank of China has reportedly moved to exclude “clean coal” technologies from a list of projects eligible for green bonds

China’s central bank reportedly published long-awaited new draft guidelines last Friday, revising guidelines previously published in 2015, and which will be open to public consultation until June 12.

According to reports from both Reuters and Bloomberg, the current draft excludes “clean utilisation of fossil fuel” projects from the list of programs that are eligible to be funded by green bonds.

The inclusion of so-called “clean coal” in China’s 2015 list of projects eligible for green bonds put the country at odds with global standards, and did little to put environmentalist concerns to rest that the country was serious about transitioning to a carbon free economy.

Only $US31.2 billion worth of green bonds in the total $US42.8 billion issued in China in 2018 met the internationally aligned guidelines for green bonds, according to a 2019 report from the Climate Bonds Initiative.

The current draft serves to meet the “international relevant standards,” according to the central bank.

“The new catalog would make investing in China’s green bond market a lot easier for international investors,” said Wenhong Xie, China program manager at the Climate Bonds Initiative, speaking to Bloomberg.

“In the past, a sizable portion of green bonds from China were considered uninvestable due to a small fraction of coal assets in an otherwise green bond.”

The proposed new guidelines include projects that aim to replace coal with cleaner forms of energy for winter heating, while green financing will also reportedly be made available for renewable energy or carbon capture projects, as well as for steel mills to pay for mandatory upgrades to their own emissions control technologies.

Interestingly, included in the new guidelines is eligibility for bicycle sharing services, as well as infrastructure intended to support new energy vehicles.

Further, as part of China’s efforts to shift away from controlling air pollution to reducing greenhouse gas emissions, the draft guidelines also allow for green financing to be used to support the carbon and green power certificate trading sectors.

According to Bloomberg, the new guidelines also move to consolidate standards between the standard bank, the National Development and Reform Commission, and the China Securities Regulatory Commission, resulting in a single standard for sustainable financing of projects.

Sean Kidney, chief executive of the Climate Bonds Initiative, told Bloomberg it was a “hugely significant step” that would be welcomed by international investors.

As the world’s largest emitter of greenhouse gas, as well as mining and consuming approximately half of the world’s coal, these new proposed guidelines are a small but significant step forward as China continues to make strides to decrease its reliance upon fossil fuels.

It also serves as an important companion to China’s renewable energy investment plans. According to Bloomberg New Energy Finance, China invested more than $US750 billion into clean energy projects between 2010 through to the first half of 2019 – making it far and away the globe’s largest renewable energy investor.