Green Finance in China

Here’s your weekly update on green finance in China with a big report, A SUMMIT, hurt, dolphins, and UK-China gf romance. It's written for you by the International Institute of Green Finance at the Central University of Finance and Economics. 6th of September 2019.  

一, a grand plan with grand consequences

A new report takes a look at the emission impact of the Belt and Road Initiative. The laydown: 

 

“If B&RCs [Belt and Road Countries] follow historical carbon-intense growth patterns (‘Worst in Class’ growth), it may be enough to result in a 2.7 degree path even if the rest of the world adheres to 2DS [2 Degree Scenario] levels of emissions.”

 

In the “Decarbonizing the Belt and Road” the authors from Tsinghua University, Vivid Economics and Climate Works Foundation, led Ma Jun and Simon Zadek, the founding fathers of green finance in China, have mapped out investments by the size and type to the BRI countries (for that alone the report is worth a read). 

 

“The 126 countries involved in the BRI (‘B&RCs’), excluding China, currently account for about 23% of the world’s GDP and about 28% of global carbon emissions.”

 

According to the authors, that is expected to grow to 66 percent by 2050. They further calculate that BRI investments will contribute 0.24 percent to growth in BRI countries until 2030. Historically those investments have gone to energy and transport infrastructure.  

That’s the graphed situation at hand (with giga tons of CO2 on the Y axis).  

And that’s the pessimistic message from the fine authors. Sorry, one more:

 

"In 2050, annual 'Best in Class' emissions would be 39% lower than BAU [Business As Usual] for the 17 key countries but 2DS requires a reduction of 68% versus BAU."

 

Our Analysis: There’s two ways of looking at this: 1) the Belt and Road Initiative is climate catastrophe that will put the nail in the coffin of ol’ Gaia, or 2) the BRI investments are needed and would have to come down anyway and the BRI gives us a chance to align the investments with our goal for the planet. Set with those choices, #2 seems like a fine option, but its up to the stakeholders to make sure that the clean tech expertise of Chinese companies and environmental clean up knowhow of local governments are included (and coal isn’t) in the BRI portfolios. 

 

The report also includes a roadmap on how to “get there”. So do click through the link at the bottom.

 

Find our IIGF analysis here

 

The report can be found here: Decarbonizing the Belt and Road Initiative 

二, OUR ANNUAL GREEN FINANCE SUMMIT IS HAPPENING, COME! 

Our annual green finance summit is coming up next week. 

 

Its on Sunday the 15th, starting at 9 AM, at the Central University of Finance and Economics Hall 202.  

 

It’s a day of academic discussions, talks and mingling, and this year we’ll have translations for anyone in need. 

 

Details are here: Click and sign up

三, Jiangsu goes green (policy wise, at least)

In Jiangsu, on the East coast, the provincial government has released a bunch of green finance policy documents. 

 

There’s the Jiangsu Green Bond Discount Policy, The Issuance and Award Policies of Jiangsu’s Green Enterprises, The Jiangsu Province Environmental Pollution Liability Insurance Premium Subsidy, and The Jiangsu Province Green Guarantee Award Supplement Policy. 

 

Different policies are aimed at different sectors and companies, with the Green Bond Discount Policy focusing on smaller non-financial enterprises by subsidising interest rates by 30 percent at a maximum of 2 million RMB. The Issuance and Award policy meanwhile is directed at larger companies that are planning on going public. Thus, the policy will give one-time awards of 2 million RMB for listing on the Shanghai Exchange and 2 million for listing abroad. 

 

Such direct subsidies for green bonds is a key way of sparking local green bond markets and make sure smaller organizations are included. While such already exist in a handful of local governments, we hope to see such measures rolled out more broadly or from the central government in the future.

 

IIGF: 江苏省打出“组合拳”支持企业绿色发展绿色产业企业上市奖励200万

四, hurt in the hinterlands

The biggest threat to the greening of finance is a recession. A crisis could be the perfect time to change course, but as recent history show, we are more inclined to revert to old ways when facing discomfort. The FT has left Beijing to investigate what discomforts the governments green push has on the economy in this downturn. In Baoding, Hebei they find what they are looking for:

 

"Migrant workers have left town, and even some locals have gone to look for work elsewhere despite a wave of subsidy spending designed to prop up household incomes. “The streets are cleaner,” says one cafeteria owner. “But I don’t get many customers any more.” 

 

Since 2013 policies have curbed pollution by shutting down the worst offenders and offering incentives to clean up or move. 

 

“There’s an internal debate [within the government] about climate change, and the Chinese side is looking at their options,” said Li Shuo, climate change campaigner for Greenpeace in Beijing. “In that context, the slowdown is cited as a reason to not do more.” 

 

The early success of the policies can in part be attributed to the 2014-15 economic downturn, but government subsidies helped in the push towards gas and renewables in production. 

 

"The anti-pollution campaign claimed an estimated 170,000 small factories in Hebei over the past two years, with job losses partially offset by a rise in government subsidies." 

 

As the first story of this edition showed, a lot hinges on Chinese policies. This is another case. The predictions on the ground are optimistic (or pessimistic)

 

"An Zhen, the owner of a feather factory, plans to invest Rmb200m in his new facility — too high a cost for many of his competitors. The crackdown on polluters is only going to intensify, he said. “The regulations will only be stricter than this year, not the other way around. The government will fix the flaws if there are any. But they won’t stop.”" 

 

FT: China’s industrial heartland fears price of green policy 

五, hurt in the hinterlands ||

Caixin also has an excellent piece on subsidies for clean energy eating in to the discretionary spending of northern provinces. 

 

Meanwhile, in Linyi, Shandong, the local government might have gone a bit too heavy-handed at work when implementing the clean up policies:

 

"China’s environment ministry has criticized a city in the eastern Shandong province for its “heavy-handed” and “desperate” measures to meet air quality targets, after it had ignored the problem for an extended period of time. To reduce pollution readings, district and township governments in Linyi forced hundreds of businesses to suspend operations from Aug. 26. A total of 400 plywood manufacturing plants were ordered to shut down, as were at least 270 restaurants and 24 parking lots reserved for large delivery vehicles, resulting in a flood of complaints from the local businesses." 

 

From Caixin: Clean Heating Subsidies to Eat Up More of Northern Budgets  

 

From Sixth Tone: City Slammed Over Stopgap Solutions for Meeting Pollution Goals

六, ferrying off the future

Abandonporn is finding a previously inhabited place left for the wild to take over when people or industries move on. The Chinese countryside is littered with such places. In Nanjing they are not letting history run its course. The Jinling Shipyard, a hallmark of the industrial policies of the 1950’s, is shutting down and moving out. 

 

“...in order to implement General Secretary Xi Jinping's important speech on the development of the Yangtze River Economic Belt, we should adhere to the spirit of "ecological priority, green development" and "joint efforts to protect the Yangtze River Economic Belt without major development".”, the article in Huanbao says. 

As recently 2006 the ship building industry on the Yangtze shores received a government windfall of 800 million RMB, but the global financial wiped out the order books and took a heavy toll on the industry.

 

Xi Jinping has called the Yangtze River “sick”, and there are weekly news on clean up efforts, investments, and political urgings. 

 

“At present, the riverbank defense battle continues. "This year we will dismantle 13 shipbuilding enterprises, three of which have been dismantled, and we’ve settled on the remaining." Yang Chunyu said that as of last month, 24 gantry cranes had been demolished and 65,000 square meters of clearing ground had been removed.” 

 

There are hopes that the closing of the yards could bring back the Finless Porpoise to the area

 

国际环保在线: 守护一江碧水,南京拆除沿江多个造船带来源

七, results, successes and challenges

“China's carbon emission intensity pr unit of GDP has decreased by 45.8% in 2018 compared with 2005. And in 2018, it decreased by 4.0% year on year.” 

 

Li Gao, Director at the Department of Climate change, told reports this week. 

 

The story features a Q&A with him on the overall successes and efforts of green policy implementation in the past decade. 

 

IIGF: 继续付出艰苦卓绝努力,确保兑现2030年左右二氧化碳排放总量达峰承诺

八, the next big plan

The Ministry of Ecology and Environment is working on the 2020-2035 environmental monitoring plan, as well as an update to the Battle for the Blue Skies strategy.

 

The press release has Li Ganjie, the minister, saying: 

 

“We should take all measures to strengthen the institutional ecological environment monitoring, capacity-building and financial control. It was pointed out that the current atmospheric environment situation in key regions of China is still serious, and the problem of urban air pollution in some cities in non-key regions is becoming more and more prominent.”

 

It’s prep work for the 14th Five Year Plan that will be published next year. 

 

CENEWS: 生态环境部召开部党组(扩大)会议

九, cooperation in the time of climate change

Every fifth to sixth week or so, a version of this story pops up: China, UK reiterates cooperation on green finance. China needs UK expertise; UK needs a foothold financially and politically in China. This time it’s the Chinese ambassador to the UK at the Asian Financial Cooperation Association in London. 

 

“In his keynote speech at AFCA (Asian Financial Cooperation Association) International Forum for Green Finance, the ambassador [Liu Xiaoming] described green finance as one of the new frontiers in curbing anti-globalization and tackling global challenges in environmental governance.”

 

And from the horses (ambassador Liu Xiaoming's) mouth:

 

“Now is a critical moment for China-UK relationship. Both our countries are standing at a new historical starting point. We should build on our past achievements and move on to embrace the future. Against the backdrop of surging protectionism and unilateralism, China-UK financial cooperation will not only benefit our two countries but also carry global significance.”

 

Xinhua: China, UK hold forum to cooperate on green finance

 

Chinese Embassy to the UK: Speech

十, bonds, bonds, bonds

There were three labelled and six unlabelled green bonds issued last week

 

There are graphs and individual bond descriptions as well as international issuances through the link

 

盘点绿色债券 8.19 - 8.25

This is the twentythird issue of our Green Finance in China newsletter. The idea is to bring the latest in news, research, and opinion related to green finance in China to anyone interested. Please send tips and criticisms our way. You can also have a look at greenfinanceinchina.com where we host earlier editions, blog posts, and more. 

 

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Published by the International Institute of Green Finance, Beijing

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