'Green credit' policy failing to cut pollution

PUBLISHED : Thursday, 14 February, 2008, 12:00am
UPDATED : Thursday, 14 February, 2008, 12:00am

Local resistance hindering cleanup initiative

Beijing's efforts to rein in industrial polluters by cutting their access to bank loans have achieved only limited results in the past six months, dampening hopes that financial incentives will be able to curb pollution.

Rampant local resistance and unsupportive financial institutions were blamed for the setbacks in promoting the 'green credit' policy, which is aimed at barring banks from extending loans to polluters, according to Pan Yue, deputy director of the State Environmental Protection Administration.

The policy, jointly introduced by Sepa (the country's top environmental watchdog), the China Banking Regulatory Commission and the People's Bank of China in July, was Beijing's first attempt to use economic leverage to cut pollution and promote energy efficiency.

'Some provinces and financial institutions have not implemented the green credit policy at all, and some others have made only superficial efforts,' Mr Pan said in a statement posted on Sepa's official website.

'More importantly, energy-intensive and heavy polluting industries are still profitable because of the protection of local authorities.'

He said the setbacks in promoting the green credit policy not only underlined the difficulties in reforming the system, but also posed severe challenges to the country's top policymakers, who were keen to advance the so-called scientific concept of development, a pet slogan of President Hu Jintao .

High hopes had been placed on the policy after a succession of embarrassing setbacks in earlier pollution-control efforts, which mostly relied on administrative measures.

Under the policy, banks and other financial institutions would scrutinise companies' environmental track records using data from Sepa and local environmental offices.

Enterprises that failed to meet mandatory environmental standards would lose their ability to get bank loans or even be forced to repay them.

But local environmental agencies have failed to provide updated information about polluting enterprises to financial institutions, and many banks have yet to allocate adequate resources to implement the policy, Mr Pan said.

He admitted the policy, which did not include detailed instructions on the granting of green credit and the assessment of environmental risks, was too vague to be implemented by local banks. Without economic incentives, the policy discouraged law-abiding enterprises from making further progress in pollution control.

It also failed to rein in a large number of small polluters that rely on private financing rather than bank loans, Mr Pan said.

The statement did not list unsupportive local governments and financial institutions. It also offered little information on how the authorities would address local resistance, which Sepa has blamed for stalling pollution-control efforts in the past.

Instead, Sepa suggested the banking regulator should issue detailed instructions on green credits similar to the World Bank's Equator Principles, which attach importance to environmental and social standards in granting loans.

Mr Pan said Sepa had set up an information-sharing mechanism with the mainland banking regulator, the first such move his agency had made with a macroeconomics department.

 

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