How can climate finance be used to promote the development of low-carbon technologies?

The R&D, promotion and application of green and low-carbon advanced technologies are an important support for China to promote the response to climate change and ensure the realization of the goal of carbon peak and carbon neutrality as scheduled. The report of the 20th National Congress of the Communist Party of China proposed to develop green and low-carbon industries, accelerate the research and development, promotion and application of advanced technologies for energy conservation and carbon reduction, and promote the formation of green and low-carbon production methods and lifestyles. The National Conference on Ecological and Environmental Protection proposed to promote self-reliance and self-improvement in green and low-carbon science and technology, take climate change response and new pollutant control as key areas of national basic research and scientific and technological innovation, and pay close attention to key core technologies. Recently, the Ministry of Ecology and Environment and other six ministries and commissions jointly issued the "Implementation Plan for the Collection and Promotion of National Key Low-carbon Technologies" (hereinafter referred to as the "Plan"), which clearly puts forward the key directions of China's key low-carbon technologies, the organization of technology promotion and related safeguard measures, which is of great significance for promoting the development of green and low-carbon technologies and promoting the comprehensive low-carbon transformation of economic and social development.

Focus on the development needs of key areas and provide guarantees for the promotion of green and low-carbon technologies

Since the "dual carbon" goal was proposed, China has always been guided by technological development and innovation, and guaranteed by market-oriented mechanisms, to continue to drive the green and low-carbon transformation and development of the economy and society. From the perspective of development path, to promote green and low-carbon transformation and development, it is necessary to integrate the concept of green and low-carbon development into all links of the whole chain of industry, agriculture and service industries, drive technological innovation, and actively build a green and low-carbon production system with the goal of carbon reduction, pollution reduction, green expansion and growth, vigorously promote market-oriented model innovation, and comprehensively improve the green and low-carbon level of the whole society. From the perspective of development factors, technological innovation is the core driving force to promote transformation and development, and market-oriented adjustment is an important means to stimulate the enthusiasm of transformation. From the perspective of development status, China has made great achievements in green and low-carbon transformation through technological innovation and market-oriented guarantee. China's green space pattern has been basically formed, the industrial structure has been continuously optimized, the green production mode has been widely implemented, and the green lifestyle has gradually become fashionable. Establish an initial distribution and trading system for carbon emission rights, carry out the construction of a national carbon emission trading market, vigorously develop green finance, and form a multi-level green financial product and market system such as green credit, green bonds, green insurance, green funds, and green trusts.

The Plan focuses on the development needs and technology development trends of key areas, accurately identifies the key directions of technology promotion, and provides comprehensive policy safeguard measures for the promotion of green and low-carbon technologies. China's green and low-carbon transformation involves all industrial links in the whole chain of industry, agriculture and service industries, including energy, transportation, residents' lives, resource utilization and other fields of production and life of the whole society. The "Plan" accurately identifies key technical directions, and strives to achieve the work goal of technology collection and promotion by point to area, demonstration leading, and promotion. From the overall idea of the "Plan", it mainly reflects the characteristics of three aspects.

First, it has strengthened the orientation of technology demand. The Plan strengthens the strategic goal orientation of the country in response to climate change, emphasizes the consideration of the carbon reduction potential and carbon reduction effect of technology, and vertically divides it into two types: demonstration technologies with carbon reduction potential, representing the direction of scientific and technological innovation, and promotion technologies with significant carbon reduction effects and suitable for large-scale application according to the advancement and maturity of the technology. Starting from the two realities of national urgent needs and long-term needs, we should not only pay attention to the overall, strategic and cutting-edge demonstration green and low-carbon technology needs, but also focus on the emergency and realistic green and low-carbon technology promotion needs, so as to maximize the efficiency of technology research and development and application resources. Form a development pattern of "overwhelming" promotion technologies and demonstration technologies "standing tall in the sky", and stimulate the vitality of green and low-carbon technology innovation.

The second is to clarify the direction of key solicitation. To achieve the goals of the national climate change strategy, it is necessary to achieve deep emission reductions in greenhouse gases in all sectors of society and economic sectors. Emissions from socio-economic sectors such as electricity, industry, construction and transportation are the main sources of carbon emissions in China, and it is necessary to clarify the green and low-carbon technologies that need to be promoted in combination with the heterogeneity of each sector's own emission structure and development, and consider the reduction of non-carbon dioxide gas emissions. The Plan aims at the key areas and key links of climate change mitigation, and horizontally divides the focus of technology collection and promotion according to the type of application, and identifies five categories: green and low-carbon energy transformation, carbon reduction in key areas, carbon storage and sequestration, digital and intelligent empowerment, and non-carbon dioxide emission reduction, clearly pointing out the technical path of green economic and social transformation. Due to the different technical characteristics and maturity of each field, the Plan comprehensively coordinates the synergies and technical priorities, and lists the key technical links and technical routes in specific fields. In the field of green energy transition, in the near future, we will take the lead in decarbonizing through the development of green and low-carbon electricity, and then help decarbonize the terminal sector through electrification, and in the long term, we will focus on installing carbon capture, utilization and storage technology (CCUS) in fossil fuel power generation facilities; In the industrial field, in the short term, it mainly relies on the material-saving technology of industrial production to save energy and improve product utilization, and the electrification application of low-temperature processes with industrial heat pumps and other equipment, etc., and in the medium and long term, it focuses on deep industrial emission reduction through process change, raw material substitution, CCUS and process innovation, and in other greenhouse gas emission reduction fields, methane, Major greenhouse gas emission sources such as hydrofluorocarbons (HFCs) are the focus of attention, and key emission areas such as agriculture, refrigeration, coal and oil and gas are the focus scenarios, and technology is used to promote process innovation and media substitution. The Plan coordinates the goals of carbon dioxide peak before 2030 and carbon neutrality before 2060, combines the needs of short-term economic recovery, medium-term structural adjustment, and long-term development and transformation, and points out the key technical directions in each key area of climate change work under the two requirements of carbon peak incremental control and carbon neutrality and emission reduction technology reserves, focusing on the R&D and promotion of key technologies in the short, medium and long term, and helping to improve the technical capabilities in the future carbon-related fields.

Third, policy support in various fields has been strengthened. The Plan attaches great importance to the main role of the market in the development of low-carbon technologies, emphasizes the dominant position of enterprises in technological innovation and technology promotion, proposes that ecological and environmental departments at all levels strengthen work coordination with relevant local departments, and explore the implementation of a multi-party linkage mechanism for the promotion of low-carbon technologies. In particular, the safeguard measures emphasize the use of green finance and climate investment and financing as support tools, and propose to encourage banking institutions to increase support for upgrading and transformation projects using low-carbon technologies in the catalogue in accordance with the principles of marketization and rule of law, and support eligible enterprises to issue bonds for direct financing for the research and development and application of low-carbon technologies. Increase the extent of climate investment and financing support for low-carbon technologies, encourage climate investment and financing pilot areas to include low-carbon technology application projects in the climate investment and financing project library, and explore ways to achieve financial support for the application and promotion of low-carbon technologies. The release of the Plan will further promote the promotion of low-carbon technologies in the industry and the organic integration of the financial system, guide financial resources to support the transformation and upgrading of industry, agriculture, construction, transportation and other fields, and lay a solid policy foundation for innovative financial products and financing service models.

Climate investment and financing will help the innovation and development of green and low-carbon technologies

Taking the release of the Plan as an opportunity, future climate investment and financing work will comprehensively help promote the innovation and development of green and low-carbon technologies. Climate investment and financing focuses on creating a policy environment conducive to the R&D and application of low-carbon technologies, emphasizing the creation of a good market atmosphere to promote the implementation of low-carbon projects in various fields, and focusing on guiding the flow of various types of funds to areas that address climate change, including the promotion and application of low-carbon technologies. Specifically, climate investment and financing will support the development of green and low-carbon technologies in the following aspects.

The first is to build a library of local climate investment and financing projects to promote technology transfer, transformation and promotion. The establishment of a climate investment and financing project library is an important starting point for the pilot construction of climate investment and financing, and by incorporating key cutting-edge innovative demonstration technologies with local characteristics and promotion technologies with high maturity into the climate investment and financing project library, it can promote the transfer and transformation of demonstration low-carbon technologies and the realization of carbon reduction benefits of mature low-carbon technologies. At the same time, by building an information-based docking platform for climate projects and funds, the pilot localities will guide financial institutions to provide more accurate and high-quality financial services for warehousing projects in accordance with the principle of marketization with policy support, financial support, and scientific and technological support.

The second is to encourage low-carbon technology entities to participate in carbon trading and accelerate the realization of "low-carbon premium". Compared with traditional technologies, most of the low-carbon technologies have the characteristics of low maturity, high cost, relatively new technology fields, and long capital payback periods, and carbon market trading is an important catalyst to accelerate the research and product iteration of low-carbon technologies, promote the technology from emerging to mature, and reduce the cost of technology. By encouraging and guiding local enterprises to actively participate in various emission rights and emission reduction trading markets, including national and local carbon emission trading markets and voluntary emission reduction carbon markets, the climate investment and financing pilot projects will help low-carbon technology enterprise holders achieve a "low-carbon premium". At the same time, the "low-carbon premium" technology recognized by the trading market can also help low-carbon technology holders enhance their R&D confidence and financing capabilities, so as to obtain higher financing amounts, lower financing costs, and shorter financing cycles. At present, the pilots with a good foundation or potential for the development of carbon assets in the climate investment and financing pilot mainly focus on the research on the methodology of low-carbon technology emission reduction, guiding enterprises to participate in carbon market transactions, developing carbon inclusive platforms, and innovating carbon financial tools and services.

The third is to encourage innovation in financial products and services, and guide multi-dimensional capital flows to the field of low-carbon technologies. The climate investment and financing pilot provides effective financial support for the demonstration and application of low-carbon technologies by encouraging local financial institutions to innovate climate-friendly financial products and services. For green and low-carbon technologies with low technological maturity, we mainly rely on the early support of government funds to promote the transformation of early-stage scientific and technological achievements through the establishment of climate-themed industry funds and science and technology innovation funds, and for green and low-carbon technologies with high technological maturity, we will mainly strengthen social capital investment through diversified financial products and direct investment. At the same time, in order to alleviate the financing problems of low-carbon technology enterprises, the pilot areas have actively explored the establishment of mechanisms such as loss sharing, risk compensation, and guarantee credit enhancement. Financial institutions have also actively carried out the construction of green finance franchise systems, including climate-friendly banks and zero-carbon outlets, demonstrating their enthusiasm for deep participation in the climate field.

Fourth, strengthen climate information disclosure and force the research and development and application of low-carbon technologies. The climate investment and financing pilot actively promotes carbon accounting, climate information disclosure and carbon account establishment of enterprises/financial institutions, and links the climate performance of enterprises with their financing costs, so as to consolidate the pressure on all parties to take climate action and stimulate enterprises to improve their ability to develop and apply various low-carbon technologies. The carbon account mainly obtains the greenhouse gas emissions of enterprises through online monitoring and accounting, and correlates the carbon emission level of enterprises with financial products, so as to attract more funds to flow into the field of low-carbon technologies while realizing the measurable, traceable, asset-based and value-worthy emission reduction benefits generated by low-carbon technologies.

During the "14th Five-Year Plan" period, China's ecological civilization construction has entered a critical period with carbon reduction as the key strategic direction, promoting the synergy of pollution reduction and carbon reduction, promoting the comprehensive green transformation of economic and social development, and realizing the improvement of ecological environment quality from quantitative to qualitative change. At the beginning of 2024, the Central Committee of the Communist Party of China and the State Council issued the "Opinions on Comprehensively Promoting the Construction of a Beautiful China", which clearly stated that it is necessary to vigorously promote green and low-carbon economic and social development, accelerate the green and low-carbon transformation of energy, industry, transportation, urban and rural construction, agriculture and other fields, strengthen green technology innovation, and enhance the endogenous power and innovation vitality of the construction of a beautiful China. Technological innovation has always been the core driving force for China's economic and social transformation and development, and continuing to increase climate investment and financing and strive to promote the green and low-carbon transformation of industries and technologies are important means to ensure high-quality development. It is believed that the release of the Plan will further encourage more social capital to actively participate in the R&D and promotion of green and low-carbon technologies through climate investment and financing channels, stimulate the innovation vitality of financial institutions and technology R&D and promotion enterprises in financing models and financial instruments, and contribute to the construction of a beautiful China.

Author's Affiliation: CECEP Ecological Product Development Research Center Co., Ltd