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PBOC issues first low-cost loans to support carbon emission cut

By Fitri Wulandari

03:38, 31 December 2021

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Smokestacks at a chemical plant on the banks of Poyang Lake in China
Smokestacks at a chemical plant on the banks of Poyang Lake in China – Photo: Shutterstock

China has issued its first batch of low-cost loans worth 85.5 billion yuan ($13.41bn) to financial institutions to reduce carbon emission as the country seeks to meet its target of achieving carbon neutrality by 2060.

The People’s Bank of China (PBOC) said on Thursday that the loans supported financial institutions that meet requirements, which have issued 142.5 billion yuan of carbon emission reduction loans.

The central bank provides financial institutions with 60% of the loan principal which is used for carbon emission reduction at a one-year lending rate of 1.75%, said Sun Guofeng, PBOC’s head of monetary policy department in a news conference.

Carbon emission report

“Financial institutions make decisions on their own and at their own risk to issue preferential interest rate loans to enterprises in related fields,” said Guofeng.

To ensure accuracy and give the full effect of the policy, PBOC requires banks to disclose publicly, information on the issuance of carbon emission reduction loans and the amount of emission cuts driven by the loans, he added.

“Professional institutions verify the information and accept public supervision.”

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Short position overnight fee 0.0021%
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A total of 2,817 companies have contributed to the carbon emissions reduction by approximately 28.76 million tonnes, according to the central bank.

Low-cost loan for clean coal

PBOC has also launched low-cost loans to support companies’ efforts on the use of clean coal, Guofeng said.

Clean coal use includes green and intelligent coal mining, clean and efficient coal processing; and clean and efficient use of coal and electricity, while at the same time continuing development of clean energy.

To support clean coal use, the central bank provides another 200 billion yuan.

Read more: China’s carbon neutral target will increase gas demand

 

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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