China’s green credit move faces obstacles

China’s green credit move faces obstacles

By Richard McGregor in Beijing

Published: February 13 2008 11:36 | Last updated: February 13 2008 11:36

China’s chief environmental watchdog says local officials are sabotaging a central government edict to restrict loans to heavily polluting industries, despite limited success in withholding credit in some provinces.

Pan Yue, the outspoken deputy head of the State Environmental Protection Agency, said in a statement on the organisation’s website on Tuesday that “the obstacles met by green credit have shown the difficulties in changing current trends and rules.”

“Some provinces and financial institutions have not implemented the policy at all,” he said.

Under the programme launched in mid-2007, Sepa was to provide the central bank and the banking regulator with a list of serious polluters for whom loans would be limited or declined altogether.

The ‘green credit’ programme is one of a number of policies being used by the central government to try to limit pollution and soaring emissions of greenhouse gases.

After improving rapidly for two decades, China’s energy efficiency began to decline at the start of this century, mainly because of a surge in investment in heavy industry, such as steel, aluminium and cement.

Banks have wanted to continue lending to such industries because they have remained highly profitable for the most part.

The announcement on the Sepa website said the agency had forwarded an initial list of 38 companies who had seriously transgressed environmental regulations to the banks last July.

Altogether, since the programme’s launch, the names of about 30,000 companies with less serious breaches have been reported to the banking authorities.

“Some were banned from getting more loans and two companies (of the 38) were even asked to give up the loan they received previously,” Sepa said.

But Sepa said its successes were only “partial” and far from the goal the agency had set for itself.

“The reason is that some provinces are not following the green credit plan, and even if they are, it’s only superficial.”

“High polluting and energy-intensive companies are protected by local governments. Some of them make a lot of money very quickly, so it’s hard to cut their credit.”

Sepa may struggle even more to implement the program this year, with a new government, and a host of new provincial and local leaders, due to take up office in March following last year’s National People’s Congress.

The first year of the five-year terms of governments have traditionally seen strong investment, overseen by officials keen to make their mark on the local economy immediately.

Sepa has traditionally been a very weak agency, understaffed in Beijing and with limited loyalties in its provincial offices, where its officials are often appointed by the local authorities.

Sepa is expected to be elevated to a Cabinet-level ministry in a shake-up of the bureaucracy some time this year.