China’s financial institutions must help fund carbon neutrality goal, says central bank governor
- Yi Gang says financial markets must step in to provide the funding needed to meet the country’s climate change targets
- Xi Jinping has pledged to reach peak emissions by 2030 and to make China carbon neutral by 2060
China’s central bank will include climate change among the issues it considers in implementing its monetary policy and supervisory role in future and will encourage financial institutions to help meet the country’s goal of becoming carbon neutral, the bank’s governor has said.
Yi Gang, governor of the People’s Bank of China, made the comments at a closed-door session at China Development Forum on Saturday and they were published on the bank’s website the following day.
The target of reaching peak carbon emissions before 2030 and becoming carbon neutral by 2060 had raised new and higher demands for the bank, he said.
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Extensive investments will be needed to meet the target and the financial markets must take the lead in providing the funding, Yi told the forum.
He estimated that it would need hundreds of trillions of yuan to fund the programme and the government could only cover a small proportion.
“We need to establish and complete a green financial policy system that leads and inspires the system to support green investments in a market-oriented way,” he said.
“Public finance, however, can cover only a tiny fraction [of the cost]. It is therefore imperative to put in place sound public policy incentives to encourage market forces to fill the gap,” he said.
It said solar, wind, storage and nuclear power projects would need to be given priority if the country is to produce enough electricity to cope with an estimated 75 per cent increase in demand and fill the gap left by fossil fuels.
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Yi also said there needed to be more research into how climate change would affect financial stability and monetary policy, including the cost of extreme weather events and the impact of high carbon emissions on companies’ asset values.
The central bank has made green finance a central task in its new five-year plan for 2021-2025, Yi said, highlighting the need to strengthen information disclosure on climate change issues, encourage financial institutions to cut emissions and deepen international cooperation in achieving global solutions.