What Beijing’s “gift package” to renewables means for reaching a 2030 carbon peak

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By the end of 2020, China had generated 93.4 million kilowatts of renewable energy, an increase of 17.5 percent year-on-year. But in recent years some renewable energy enterprises have faced cash flow shortages, production difficulties, and other financial stresses.

But a game-changer may be on the horizon to relieve funding anxiety for China’s renewable energy landscape in the form of a “gift package.” The National Development and Reform Commission and five other departments have made it clear that financial institutions may negotiate with renewable energy enterprises in accordance with the principle of commercialisation, extend or renew loans, and grant subsidies to confirm the most suitable loans. While these measure do not come with gift wrap, they have been welcomed by the wind power, photovoltaic and other renewable energy sectors.

Focusing on renewable energy tariff subsidy funds, the National Development and Reform Commission’s Notice on Guiding and Increasing Financial Support for the Healthy and Orderly Development of Wind Power, Photovoltaic Power and Other Industries proposes a series of measures, such as supporting certain renewable energy companies facing temporary financial difficulties and easing cash flow pressures.

The Notice provides a guarantee for China’s green and low-carbon development in the context of reaching national of carbon peak and carbon medium targets. Last year, China declared its goal of achieving carbon neutrality by 2060 and a carbon peak by 2030. Shanghai aims to beat the national target by peaking its carbon emissions before 2025.

To ease the difficulties of renewable energy enterprises, the Notice points out that enterprises hosting renewable energy projects included in the subsidy list may apply for subsidy confirmation loans for financial subsidy funds that have already been granted. Banks and financial institutions may grant subsidies to qualified renewable energy enterprises within the prescribed amount. The amount, length of loan, and interest rate of loan shall be independently negotiated by both parties.

For renewable energy enterprises that are facing pressure with short-term repayment but which have a promising development outlook, a financial institution may extend the loan, renew the loan or adjust the repayment schedule and terms of repayment on the basis of independent consultation based on the actual and expected cash flow of the project.

For many countries, a major obstacle in both planning for global warming challenges and reducing emissions is funding.  The “gift package” approach on renewables may inspire an alternative for central governments in other countries seeking to ease pressure in sustainable project funding with inclusion from the commercial sector. Additionally, hope may be found in the costs of mitigating warming to within 2°C – about USD $840 million – being outweighed by the benefits of reducing carbon-linked air pollution. A Climate Analytics report entitled Decarbonising South and Southeast Asia finds that not rising above 2°C of warming would prevent 800,000 premature deaths in Asia (including China) by 2050 and would yield savings of about USD $2.8 trillion.

However, the way a post-pandemic recovery will be handled remains vital concern for climate policymakers, environmentalists, and communities that will disproportionately hurt by climate crises, especially with climate scientists emphasising not overshooting a warming target of 1.5 °C. The IEA notes that a post-pandemic rebound emissions increase will be hard to avoid; some countries’ monthly emission levels were already increasing by the end of 2020.

To not overshoot the 1.5 °C target, a UN Climate Change report from last month found that “global net anthropogenic CO2 emissions need to decline by about 45 percent from the 2010 level by 2030, reaching net zero around 2050. For limiting global warming to below 2 °C, CO2 emissions need to decrease by about 25 per cent from the 2010 level by 2030 and reach net zero around 2070.”

“Deep reductions are required for non-CO2 emissions,” said the report, like methane. That may point to why China included methane and other greenhouse gas reductions in its 14th Five-Year Plan. It should be noted that while methane is more potent as a greenhouse gas, it absorbs heat more effectively than carbon and does not linger as long in the Earth’s atmosphere. As Zhang Jianyu of Environmental Defense Fund’s Beijing office told the Shanghai-based periodical Sixth Tone, “If we care about the climate impact of our generation, we pay attention to methane; If we care about the impact of the next generation, we pay attention to carbon dioxide.”