Chongqing- Chongqing's green finance continues to gain momentum, and its innovative approaches to tackling financing issues offer a promising template for other cities worldwide. 

A year after its approval as a national-level green financial reform and innovation pilot zone, data reveal that Chongqing's commitment to a sustainable economic future has yielded promising results. 

The city has established more than 20 green financial specialized departments or branches and introduced over 270 innovative green financial products in recent years. Those projects are instrumental in supporting the green and low-carbon development of the economy.

Loans tie interest rates to carbon emissions

Chongqing Tiantai Thermal Power Co. Ltd., which processes, manufactures, and distributes aluminum products, needed money to build a combined heat and power project in June. Its recent loan, structured around its carbon emissions, represents an exciting frontier in sustainable finance. 

The loan, issued by the Chongqing Branch of Industrial Bank, sets a precedent by pegging interest rates to the carbon emissions produced over the project's life. 

In concrete terms, the project receives a starting interest rate of 3.1%. However, the interest rate can be renegotiated if carbon emissions drop below the pre-agreed threshold of 1 million tons/year. Such a model makes financial sense for businesses to adopt greener practices. 

As Chongqing's first "carbon-linked" loan, the credit amount reached 240 million yuan. As of the end of July 2023, Chongqing Tiantai Thermal Power Co. Ltd. has received 149 million yuan.

The loan's social implications cannot be overstated, where the project will transition from coal-fired power generation to natural gas, expecting to cut carbon emissions by 22,000 tons compared to the original power plant. 

Forestry carbon sink pledge loans

Another remarkable initiative is the forestry carbon sink pledge loan. 

Forestry carbon sinks refer to mechanisms that absorb atmospheric carbon dioxide through activities like afforestation and forest protection. Turning these carbon sinks into tradable commodities on Yuhuitong, the Chongqing carbon sinks trading platform, creates additional economic value for forest resources.

When an agricultural enterprise in Wulong District faced a funding dilemma for an ecological project in Fairy Mountain, Chongqing Three Gorges Bank harnessed the district's robust forest resources, using the expected revenue from forestry carbon sinks as collateral for the loan.

Wulong District allocated over 1.05 million mu of forestry land, with projections estimating an absorption of roughly 5.4 million tons of CO2 equivalent from 2016 to 2021, creating a significant forestry carbon sink. Revenue from this venture was forecasted based on Chongqing's prevailing carbon trading rates. 

Overseeing this process, the Chongqing Three Gorges Bank closely monitored the borrower's carbon account. Meanwhile, an anticipated revenue rights pledge was documented at the Credit Collection Center of the People's Bank of China. Subsequently, the Wulong agricultural enterprise was granted a novel 5-year loan of 50 million yuan.

The green financial products launched in Chongqing are more than just a proof of concept. They represent a future where financial systems reward sustainable practices, ensuring the environment and the economy prosper.