On December 12, the 2023 Zero Carbon Research Institute Green Development Forum was held in Beijing. This forum will take advantage of the climate wind of COP28 to sort out the achievements of green development across the country in the past year, summarize our latest findings and understanding of climate change, and encourage the country to take more effective climate response and adaptation actions.
At the roundtable forum with the core topic of "how to seize the opportunities of the times for green pioneer enterprises", Lan Hong, deputy director of the Research Center for Ecological Finance of Chinese University and professor of the School of Environment, said that at present, in terms of financing, there is still a gap between the yield of low-carbon industrial projects in China and traditional industrial projects, so carbon finance for low-carbon projects needs a more matching interest rate. More favorable policies and better market tools can only be more precise if there are standards that can be used to identify what is truly a low-carbon project.
Lan Hong proposed that the standard also needs to take into account the synergy between carbon standards and biological standards. It has become an international consensus to achieve a win-win situation through the synergistic governance of biodiversity and climate change, and the ultimate goal of these efforts is still the standard, which is used to measure products, and there will be no integrated products and markets without integrated standards.
Standards are the foundation of a low-carbon industry.
Lan Hong said that he has been engaged in carbon finance related work for nearly 20 years, and at present, in terms of financing, there is still a gap between the yield of China's low-carbon industrial projects, such as photovoltaic, wind power and energy storage and transportation costs, and traditional industrial projects, so carbon finance for low-carbon projects needs more matching interest rates, more preferential policies and better market tools, and only by forming standards that can identify what is a real low-carbon project, the policy orientation can be more accurate.
Lan Hong mentioned the example of her temporary position as the director of the Green Finance Management Committee of Guizhou Gui'an New Area, one of the country's first green finance pilot zones. Forestry carbon sequestration is a very effective way to reduce emissions, but the previous forestry carbon sequestration standards are aimed at large-scale afforestation carbon sequestration projects, with an area of more than 10,000 mu. In Guizhou, the carbon sequestration carried out by local farmers and society through tree planting is also of great significance for reducing emissions, so Lan Hong and her team launched a local forestry carbon sink standard, which can be used to calculate the carbon reduction effect of small and medium-sized carbon sequestration forest projects for farmers and communities. The local government has also set up a small voluntary carbon emission reduction trading platform, which not only attracts enterprises, institutions and individuals with carbon reduction awareness or small carbon sink needs to purchase, but also encourages local farmers and poor households to plant trees to generate income, promote poverty alleviation, and improve local climate and ecological environment.
According to Lanhong, the project is still in operation and can give back more than 30 million yuan to farmers every year. The core of what can be achieved by the project is still the establishment of standards. "With standards as the foundation, the market can function steadily. Lan Hong said.
It is necessary to take into account the synergy between carbon standards and biological standards to achieve a win-win situation.
Lan Hong also mentioned that the standard also needs to take into account the synergy between carbon standards and biological standards. For example, one of the European principles of sustainable finance is called the principle of no significant harm, when launching a green financial product, it needs to be clear that it will achieve environmental benefits in one aspect without causing significant harm to the environment in other aspects.
For example, we should pay attention to whether forestry carbon sequestration, photovoltaic and wind power projects may have adverse impacts on biodiversity while achieving carbon reduction. In reality, forestry carbon sequestration projects often choose to plant the same tree species in a large area, and the selected tree species may not be native to the local area, which may damage biodiversity and destroy the original vegetation and ecosystem. The same is true for wind power projects, where areas with better wind power resources are often inhabited by birds, and how to develop wind power while taking into account bird protection is also a problem that needs to be considered. Only by taking into account both carbon standards and biological standards can our carbon products go international.
When financial institutions invest in a low-carbon project, they should not only pay attention to the carbon reduction effect, but also pay attention to whether the biodiversity requirements are met, and integrate the biodiversity risks of the project into the investment decision-making for management. According to Professor Lan Hong, many enterprises have begun to voluntarily carry out biodiversity risk avoidance and management measures, and green finance should identify these effective management measures and provide financial support in a timely manner. The "Biodiversity Risk Management Standards for Financial Institutions" compiled by Lan Hong herself is a set of methodologies for banks to avoid and control biodiversity risks, which reduces the cost of financial institutions to manage biodiversity risks and improves accuracy. Through biodiversity risk management, banks not only reduce the damage to biodiversity of projects, but also reduce their own investment risks, so that more of the bank's investment flows to areas that are beneficial to biodiversity, so as to achieve a win-win situation between investment income and ecological income.
Lan Hong proposed that the innovation of financial institutions can provide the necessary financial support for biodiversity conservation. In addition to for-profit biodiversity conservation mechanisms, the combination of biodiversity conservation and carbon sinks is a very promising development area in the future. COP 28 also repeatedly emphasized the need to achieve a win-win situation through synergistic governance of biodiversity and climate change. She believes that the ultimate foothold of these works is still standards, which are used to measure products, and without integrated standards, there will be no integrated products and markets.
Green finance policies and project design are the catalysts for low-carbon projects to go to market.
Lan Hong mentioned that in actual operation, low-carbon projects can increase revenue in two ways. First, China has more green finance policies to help the ecological value of low-carbon projects be reflected, such as the central bank's carbon emission reduction support tools, etc., which indirectly increase revenue by reducing the financing cost of low-carbon projects.
Secondly, the design of the low-carbon project itself is also extremely important. She suggested that we could try to form a closed loop of the industrial chain through project packaging, so as to design a profit model. For example, a single wetland park project may not be profitable, but the wetland park can purify the water quality, and if the water purified by the wetland park enters the reservoir or enters the aquaculture industry, the income of the wetland project can be realized through the sale of clean water. At the same time, the combination of projects with different risk levels and different benefits can not only reduce financing risks, but also reduce financing costs.
Lan Hong said that now many low-carbon projects are hovering at the market threshold, and we see that many projects that have broken out of the market threshold have been packaged, especially the eco-environment-oriented development (EOD) model proposed by the Ministry of Ecology and Environment, which will package and launch projects that can achieve benefits to connect with the market, and use green financial policy means and tools to reduce financing costs and increase revenues, so as to truly realize the overall implementation of low-carbon projects.
Beijing News Shell Financial Reporter Zhu Yueyi.
Edited by Chen Li.
Proofreading by Jun Liu.