Page 162 - Low Carbon Development in China and India
P. 162
private investors are not enthusiastic about investments in the climate 2.2
change sector due to its higher risks. Public funds would help the
private investment programme to realize the balance between risks
and returns by intervention of certain forms. To be specific, such
forms may include grant, loans on favourable terms, risk alleviation
instruments, insurance, loss sharing or market integration, etc. The
leverage rate may reflect the utilization efficiency of public funds
from one side. However, there is no uniform calculation method to
determine the leverage rate of public funds/mechanism levering
private capital. The Great Britain adopts the representation leverage
index in climate investment fund (CIFs), equalling to the proportion
of CIF investment and investment of other institutions (including the
investment of multilateral financial institutions, private institutions,
national public fund, non-governmental associations, etc.).
Grants could offer the direct additional fund for low carbon
development; nevertheless, the international grant is rather limited,
and the assistance to China for facilitating low carbon economy by
means of grants is declining; therefore, there is a certain uncertainty
and the government cannot regard grants as a source of low carbon
economy financing in the medium and long run.
2.5.3 Loans on Favourable Terms
Loans on favourable terms and grants have constituted the main
funding sources of international bilateral and multilateral institutions
to support the low carbon economy construction and development in
China. The report on green product innovation shows that international
development financial institutions has offered certain amount of loans
on favourable terms—mainly the sovereign loans for China’s pollutants
discharge reduction programmes. Such loans are characterized by low
interest rate, long maturity, and having a grace period.
Box 2.12: Wuhan Government Office Building Energy Saving
Renovation Program Implemented by AFD
The Wuhan Government Office Building Energy Saving Renovation Program
implemented by AFD is the first programme that supports energy-saving by means of a
sovereign loan in China. It is to renovate 30 public buildings in Wuhan, covering a total
area of 620,000 m2. Every year, 15,000 tonnes of CO2 emission would be reduced. AFD
will offer sovereign loans on favourable terms with an amount of 20 million Euros in the
form of on-lending from the Ministry of Finance to Wuhan, with an upper interest rate
of 5.94 per cent, maturity of 16 years, and a four-year grace period. At the same time,
Wuhan municipal government will invest 1 million Euros and offer incentive on taxes, etc.
Chapter 2 Innovative Financing for Low Carbon Development 127
change sector due to its higher risks. Public funds would help the
private investment programme to realize the balance between risks
and returns by intervention of certain forms. To be specific, such
forms may include grant, loans on favourable terms, risk alleviation
instruments, insurance, loss sharing or market integration, etc. The
leverage rate may reflect the utilization efficiency of public funds
from one side. However, there is no uniform calculation method to
determine the leverage rate of public funds/mechanism levering
private capital. The Great Britain adopts the representation leverage
index in climate investment fund (CIFs), equalling to the proportion
of CIF investment and investment of other institutions (including the
investment of multilateral financial institutions, private institutions,
national public fund, non-governmental associations, etc.).
Grants could offer the direct additional fund for low carbon
development; nevertheless, the international grant is rather limited,
and the assistance to China for facilitating low carbon economy by
means of grants is declining; therefore, there is a certain uncertainty
and the government cannot regard grants as a source of low carbon
economy financing in the medium and long run.
2.5.3 Loans on Favourable Terms
Loans on favourable terms and grants have constituted the main
funding sources of international bilateral and multilateral institutions
to support the low carbon economy construction and development in
China. The report on green product innovation shows that international
development financial institutions has offered certain amount of loans
on favourable terms—mainly the sovereign loans for China’s pollutants
discharge reduction programmes. Such loans are characterized by low
interest rate, long maturity, and having a grace period.
Box 2.12: Wuhan Government Office Building Energy Saving
Renovation Program Implemented by AFD
The Wuhan Government Office Building Energy Saving Renovation Program
implemented by AFD is the first programme that supports energy-saving by means of a
sovereign loan in China. It is to renovate 30 public buildings in Wuhan, covering a total
area of 620,000 m2. Every year, 15,000 tonnes of CO2 emission would be reduced. AFD
will offer sovereign loans on favourable terms with an amount of 20 million Euros in the
form of on-lending from the Ministry of Finance to Wuhan, with an upper interest rate
of 5.94 per cent, maturity of 16 years, and a four-year grace period. At the same time,
Wuhan municipal government will invest 1 million Euros and offer incentive on taxes, etc.
Chapter 2 Innovative Financing for Low Carbon Development 127
