The role of green finance in supporting the low-carbon transformation is gaining prominence in China, which intensifies its committment to achieving dual carbon goals.

Jiayuguan Hongdian Ferroalloy Co., Ltd, a subsidiary of the State-owned Jiuquan Iron and Steel (Group) Co Ltd, situated in northwestern China's Gansu province, is a case in point, according to a China Daily report.

In line with the company's ambition to align with sustainable practices, Jiayuguan Hongdian Ferroalloy is embarking on an endeavor — the retrofitting of its submerged arc furnaces. With the equipment having served intensively for an extended period, the imperative to shift towards a low-carbon operational mode has become paramount.

The retrofitting process of the submerged arc furnaces holds the potential to significantly enhance energy efficiency in ferroalloy production. Anticipated outcomes include an annual reduction of energy consumption exceeding 1,300 tonnes of standard coal, leading to a corresponding decrease in CO2 emissions of over 3,000 tonnes per year, as elucidated by Pu Shunchuan, Chief Engineer of the company.

However, this transition towards low-carbon practices incurs substantial costs, underscoring the need for financial support. Addressing this challenge, the Jiayuguan branch of the Bank of Lanzhou introduced an innovative solution — sustainable development-pegged loans. This novel form of green finance anchors loan interest rates to borrowers' performance in pollution reduction, CO2 emission curtailment, and energy consumption per unit of output.

JISCO's financial department estimates that this loan structure will yield interest payment savings of around 500,000 yuan ($69,613) for the company. Furthermore, should the retrofitting effort culminate in meeting energy consumption targets, the cost of borrowing is poised to decrease further.

Within the backdrop of Gansu's status as a significant industrial hub, the demand for funding during its low-carbon transition is substantial. Green finance, in this context, emerges as a compelling solution to address this financial need, according to insights shared by Chang Ye, an official with the Lanzhou Central Subbranch of the People's Bank of China.

China's commitment to attaining carbon neutrality by 2060, alongside its pledge to peak carbon dioxide emissions by 2030, has propelled the development of green finance into a pivotal role. This financial mechanism is poised to play a critical part in China's enduring pursuit of sustainable and low-carbon growth.

(Writing by Alex Guo  Editing by Harry Huo)
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