China: EUR 500 million loan for Climate Change mitigation projects
- Release date: 03 December 2010
- Reference: 2010-218-EN
The European Investment Bank (EIB) has granted a EUR 500 million loan to the People’s Republic of China (PRC) for projects supporting climate change mitigation. The Climate Change Framework Loan II (CCFLII) was signed by Mrs. Magdalena Álvarez Arza, Vice-President of the EIB and by Vice-Minister of Finance Li Yong, in Beijing today.
EIB Vice-President, Magdalena Álvarez Arza said “the EIB is renewing its support for China in its fight against climate change. This operation ranks among the EIB’s most efficient loans in terms of GHG emissions reduction. It is estimated that up to 3 million tonnes of CO2 will be saved every year with its first Climate Change Framework Loan, and we are looking forward to achieving the same performance with this second framework loan”. Mrs Álvarez Arza added “this new loan is coming at an opportune time, when the whole world is gathering in Cancún to reach an agreement on Climate Change actions”.
The proposed CCCFL II will be a multi-investment scheme under which the Bank could support several individual Climate Change mitigating projects contributing to the avoidance or reduction of greenhouse gas emissions. Projects will be selected in particular on the criteria that they will be making more and better use of renewable energy sources and enhancing energy efficiency. Some schemes may have the possibility of generating carbon credits. The schemes will be located in different provinces in China.
The project will significantly contribute to the EU-China strategic partnership and cooperation with China in the area of climate change: fostering the efficient use of energy, the development of renewable energy, and the associated avoidance of GHG emissions included in China’s National Climate Change Programme. The project will help to achieve the ambitious targets set by the Chinese government in the context of both the 11th and 12th five-year plans.
The proposed operation is the second of its kind in China (the first one being the EUR 500 million China Climate Change Framework Loan, CCCFL, signed in November 2007, which has been successfully promoted by the Chinese government). As of today, more than 80% of the framework loan has been approved under the CCCFL.
Based on the successful and efficient allocation of the CCCFL, the Chinese government requested the Bank to renew its commitment to contributing to China’s efforts to address Climate Change issues.
The CCCFL II will pursue similar objectives to the previous framework loan, and project schemes will be identified and pre-selected by China‘s National Development and Reform Commission and the Ministry of Finance. The EIB will select individual schemes and perform due diligence to ensure that all projects are economically and financially viable, technically adequate and in compliance with the Bank’s environmental and social requirements. The framework loan will be made up of a maximum of 15 projects in the following sectors: renewable energy based on onshore wind, biomass, solar (thermal and photovoltaic), geothermal and small hydro; improvement of energy efficiency and reduction of GHG emissions on industrial sites; district heating contributing to EE and the use of RE.
This loan is provided under the EUR 3bn Energy Sustainability and Security of Supply Facility.
Lending operations outside the EU are part of the EU’s cooperation policy with third countries. Since 1993 the Bank has carried out four successive lending mandates for Asia and Latin America. Under the current mandate (ALA IV), covering the period 2007-2013, the EIB is authorised to lend up to EUR 3.8 billion for financing operations that contribute to climate change mitigation or support the EU presence in those regions through foreign direct investment or the transfer of technology and know-how. The EUR 3.8 billion regional ceiling is broken down into indicative sub-ceilings of EUR 1 billion for Asia and EUR 2.8 billion for Latin America.
In addition to the mandate, the Bank is running a Facility for Energy Sustainability and Security of Supply (ESF), a multiannual EUR 3 billion facility aiming to reinforce the EIB’s contribution to renewable energy and energy efficiency in non-member countries. The facility is used essentially when the Bank does not need the support of the EC guarantee to mitigate sovereign or political risk to protect its own credit standing (i.e. in investment-grade countries or where appropriate security can be provided). In contrast, the resources under the external lending mandate would be used when the support of the Community guarantee is needed to mitigate sovereign or political risks (mostly in lower-rated countries) or to support projects in other sectors.
The European Investment Bank recognises the major threat posed to the welfare of nations and sustainable economic growth by climate change and is committed to global efforts to keep long-term atmospheric concentrations of greenhouse gases within safe levels. The EIB is fully engaged in supporting the European Union’s leading role in the global fight against climate change through the full weight of its lending and human resources, and a diverse range of financial instruments and products. Climate action at the European Investment Bank has emerged to form a key part of the EIB’s overall strategy and objectives. In meaningful terms climate action criteria are incorporated into project assessment of all initiatives financed by the Bank. This allows the strength of the European Investment Bank’s policy-driven financial targets to increasingly focus on schemes with the most effective climate action potential.