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On August 15, southern Guangdong province, which hosts China’s most active regional carbon market, introduced a new financing framework that treats greenhouse gas emissions allowances as legally recognized collateral for loans. This marks the first time such a practice has received formal judicial protection nationwide.
The announcement, issued on August 12 by entities including the Guangdong branch of the central bank and the provincial higher court, also promotes financial institutions to leverage carbon-reduction support tools. These tools aim to provide low-cost funding options for eligible green initiatives. Those institutions leading the development of green finance will receive additional policy support and incentives.
This move is expected to invigorate Guangdong’s carbon finance sector, said Li Zhiping, a prominent legal scholar and professor at Sun Yat-Sen University’s Law School. Combining legal protections with innovative financial approaches, the initiative could serve as a blueprint for other regions, fostering the expansion of green finance and advancing China’s dual-carbon targets.
The policy further encourages financial institutions to diversify their green lending options to better cater to various business needs. Proposed products include financing secured by pre-allocated annual quotas, pledges of future revenues from carbon sinks, bonds backed by carbon quotas, and securitized carbon assets.
Guangdong remains China’s leading pilot area for carbon trading. As of last month, the Guangzhou Emissions Exchange had facilitated the trading of approximately 230.9 million tons of carbon allowances valued at CNY 6.7 billion (around USD 933.2 million), representing over 30% of all transactions across the country’s eight pilot markets.
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