Chongqing's ability to dig deep into forestry carbon sinks| Improve the series of ecological product value realization mechanisms

Data shows that as of the end of 2023, the forest coverage rate in Chongqing City has reached 55.06%, and the forest stock volume has reached 274 million cubic meters."Revitalizing" forest resources has become a major focus of Chongqing's green development. In recent years, Chongqing has taken the lead in forestry carbon sink trading, injecting vitality into promoting the realization of the value of ecological products, assisting rural revitalization and green agricultural development through loans for expected income rights of forestry carbon sinks.

Establishing three-dimensional standards to solve forestry financing difficulties

The fundamental reasons why the forestry economy is difficult to develop are the long investment cycle, large capital demand, difficult development and high risk level. It faces the dilemma of "difficult financing" and "expensive financing".

In response to these problems, Chongqing has made full use of the price discovery function of expected income from forestry carbon sinks and actively innovated the pledge loan business of expected income rights from forestry carbon sinks to solve the financing problems of forestry operators.

To this end, Chongqing starts by establishing and improving standards and systems for green finance to support the realization of the value of ecological products.

Time is set back to January 2023. The People's Bank of China's Chongqing City Branch, Chongqing City Ecological Environment Bureau, Chongqing City Forestry Bureau and other departments jointly issued the "Chongqing City Forestry Carbon Sink Expected Income Right (Pledge) Loan Business Guidelines (Trial)", including general principles, financing conditions, financing elements, financing processes, financing management, risk warnings and preventive measures, etc., aiming to support qualified market entities to comply with relevant national laws, regulations and credit policies, Apply for loans and other financing from banking financial institutions with the right to expected income on forestry carbon sinks formed by the forest land it operates as collateral (pledge).

Green channel 210 million yuan forestry carbon sink loan

The establishment of standards means building a solid foundation, followed by the optimization and upgrading of financial products. In recent years, Chongqing financial institutions have opened up green channels, giving priority to supporting forestry carbon sink financing, and at the same time implementing preferential pricing to provide long-term and low-cost funds.

Taking Industrial Bank Chongqing Branch as an example, the bank has established front, middle and back office professional teams to open up a "special green credit scale" to give priority to ensuring the funding needs in the forestry carbon sink field.

"We have made full use of the industrial research results and the transaction price data of the Chongqing carbon quota market, and opened up multiple links such as opening accounts of forestry carbon sinks, freezing, value evaluation, new legal texts, and innovation pledge, providing comprehensive guarantees for the efficient advancement and smooth implementation of the project." According to the relevant person in charge of Industrial Bank Chongqing Branch, the bank successfully issued pledge loans for expected income rights of forestry carbon sinks of Chongqing City Fanmu Forestry Development Co., Ltd. in July 2023 and April 2024 respectively, with a total of 60 million yuan.

It is reported that in order to solve the pain points of corporate financing, Industrial Bank has provided targeted "one household, one policy" professional financial service solutions. After referring to relevant professional research results on forestry carbon sinks and actual transaction price data in the Chongqing carbon quota market, Industrial Bank calculated the expected return rights of forestry carbon sinks. At the same time, we conducted several rounds of communication with enterprises, regional forestry bureaus, and Chongqing Credit Information Center, and finally determined a financial service plan for credit enhancement measures with double guarantees of "pledge of accounts receivable + pledge of expected income rights from forestry carbon sinks".

In Chongqing, there is more than one similar case. Since 2022, Chongqing Three Gorges Bank has taken the future forestry carbon sink development benefits of afforestation that meet the conditions for forestry carbon sink development as basic assets, and has granted credit of 50 million yuan to Wulong District, Wushan County and Xiushan County respectively, and granted credit of 30 million yuan to Yongchuan District for a term of 5-8 years. It has effectively revitalized regional ecological resources, transformed resources into assets and assets into funds, and innovatively explored ecological value realization mechanisms.

Data shows that as of the end of June 2024, Chongqing City has implemented 5 loans with a total of 210 million yuan in expected income rights for forestry carbon sinks.

New highs, financial institutions innovate "green" products

In Chongqing, mortgage loans with expected income from forestry carbon sinks pledge forest carbon absorption capacity and are encouraging more forest-holding institutions to carry out effective forest protection and management and promote sustainable forest development.

In June 2024, Chongqing held a press conference on the interpretation of the "Action Plan for Chongqing City to Build a Pilot Area for Deepening the Reform of the Collective Forest Rights System."

At the meeting, Lu Mansheng, a green finance expert at the Chongqing City Branch of the People's Bank of China, said that he would give full play to the leading role of green finance, closely integrate the construction of Chongqing's green finance reform and innovation pilot zone with the deepening of collective forest rights reform pilot zones, empower each other, and incorporate qualified forestry carbon sinks, forest rights trading services, under-forest economic development, deep processing of forest products, eco-tourism, forest health care, natural education, etc. into the scope of green finance support. Promote the mortgage (pledge) loan business of expected income from forestry carbon sinks, carry out pilot projects of financial support for the value realization mechanism of forestry ecological products, and promote financial assistance for the development of forestry carbon sinks.

At the meeting, it was clear that financial institutions would be encouraged to innovate and develop forestry financial service products. On the premise of compliance with laws and controllable risks, they would increase financial support for the development of forestry business entities and forestry industries by expanding the scope of loan services, reducing loan interest rates, and extending loan terms. Park construction, forestry green technology innovation and other financial support. Encourage policy banks and commercial banks to increase financing support for the construction of national reserve forests.

In addition, forestry carbon sink pledge loans also provide more options for carbon emissions trading and help promote the development of the carbon emissions trading market. Through forestry carbon sink pledge loans, the forest's carbon absorption capacity can be quickly transformed into economic value, thereby improving the liquidity of carbon sink trading.

The relevant person in charge of Industrial Bank Chongqing Branch said that next, it will strengthen communication and coordination with forestry authorities and ecological environment departments, actively explore forestry carbon bill financing models, and help enterprises solve outstanding problems such as high technical thresholds, long revenue cycles, and existing methods for forestry carbon sink development. Learn outstanding issues such as limited quantity, innovate forestry value realization channels, and solve corporate financing difficulties.