China, the world’s largest emitter of greenhouse gases, established its first carbon-neutral financial leasing service platform in Nansha, Guangzhou. The State Council of the Chinese Communist Party (CCP) is also set to launch an online trading system of emission allowances this month. However, international experts believe that China’s green bonds usually do not meet the standards.
On July 8, China Southern Power Grid’s carbon-neutral financial leasing service platform was formally established in Nansha, Guangzhou. The platform has received more than $156 million in the first phase of projects. According to Huo Zhigang, general manager of the company, the platform uses innovative financial leasing service models that establish a floating mechanism linking leasing fees with carbon emissions, and claims to force carbon emitters to reduce emissions.
According to Chen Wanqing, deputy director of the Finance Bureau of Guangzhou Nansha Development Zone, the platform can develop climate investment and financing products, which will help companies in Guangdong, Hong Kong, and Macau issue green bonds. And at the same time, it claims to enable the regions to achieve “emission peak” and “carbon neutrality.”
At the Global Climate Video Summit in April 2021, Xi Jinping, China’s leader, promised that after China’s carbon “emissions peak” by 2030, they would begin to reduce emissions and reach “carbon neutrality” by 2060. Xi asked the Western developed countries to provide financial and technical support.
Sarah He, an expert in the financial sector and currently residing in the U.S., believes that the CCP hopes to utilize its so-called emission peak and carbon neutrality goals to attract large sums of foreign investment. She believes the CCP’s move toward green bonds is only a façade.
On July 14, the CCP’s State Council Information Office held its regular meeting at which Sun Guofeng, CCP’s director of Monetary Policy of the Central Bank, said that the bank would convert carbon emission reduction into real currency and provide low-cost funding through financial institutions to help finance key projects.
However, Sarah He believes that “reducing carbon emission” is not the real purpose of the so-called green financing platform initiated by the CCP and the local enterprises. It is to obtain investments and benefits.
“Even if the platform can somehow improve carbon emissions, the effect is minimal. A large amount of bad debt will likely incur and aggravate a credit crisis. The main reason is that Chinese companies generally lack integrity, are managed poorly, use funds ineffectively, and have many other problems,” Sarah He added.
The international community has similar concerns over the CCP’s green bonds.
On May 27, the Wall Street Journal stated that many of China’s green bonds did not comply with international regulations because half of the green bonds issued could be used in the company’s daily operation and not for what they intended, which is to improve its carbon emission. According to international regulations, only 5 percent of green-bond funds can be used for the company’s daily operation.
“This could increase the risk of greenwashing, where the true environmental benefit of the transaction is overstated,” said Lori Shapiro, a sustainable finance analyst at S&P Global Ratings.
In addition, Alan Meng, head of data analysis and services at Climate Bonds Initiative (CBI), also pointed out that in the first half of this year, 33 of the 127 CCP-issued green bonds did not meet the standards.
