China has just launched five “green finance” pilot zones, according to the central bank. The purpose of the zones will be to promote and fund the country’s 3 trillion yuan ($440 billion) war on pollution. Financial institutions in each zone will be authorized to offer incentives such as special funds and credit for environmentally friendly businesses and industries. The program will also hasten the development of green insurance and encourage banks to explore new mechanisms for financing, including water use permits and emissions trading.
In fact, China is outpacing the US in terms of emissions reductions, and by 2030 will make as much clean electricity as the US does from all available sources today. By March of this year, China had decreased their fossil fuel use even as their overall energy demands grew. And this month in a historic first, the entire Chinese province of Qinghai and its six million residents received energy solely from renewable sources.
Despite all of this progress, hurdles for China remain in place, financing reform chief among them. Experts estimate that China will need green investments of up to 3 to 4 trillion yuan yearly for the next five years to achieve its environmental commitments. However, the government is likely to pay for only 10 to 15 percent of these costs.