The Asian Development Bank (ADB) has approved a loan of $150 million for clean energy financing in a bid to improve air quality in China.

A project to benefit from the loan will be deployed in the greater Beijing–Tianjin–Hebei (BTH) and Yangtze River Delta (YRD) regions.

The total cost of the project is $650.78 million, of which $500.78 million will be provided by sub-borrowers, domestic commercial banks, and the China National Investment and Guaranty Corporation.

The project is due for completion at the end of March 2026.

The project is the sixth loan under the Air Quality Improvement programme for the Chinese’s capital region that began in 2015 with a first policy-based loan in China focusing on policy reforms and strengthening regulatory capacity to improve air quality in Hebei Province. Subsequent loans established a green financing platform (GFP) to develop air pollution reduction projects, supported adoption of high-level technologies, and a switch from coal to natural gas and biogas.

The project will support Clean Air Bonds (CABs) meeting international standards to catalyse domestic financing for sustainable clean energy investments, develop a financial technology-powered lending platform and enhance financial access for micro, small, and medium-sized enterprises (MSMEs) and women.

The project will develop artificial intelligence technology with a machine learning-powered lending platform for clean energy investments in MSMEs, which account for about 60% of GDP and 80% of urban employment, but also 70% of air and water pollution.

Through PRC government actions to accelerate air pollution reduction coupled with ADB’s lending support, the annual average concentration of particulate matter of less than 2.5 micrometers in diameter (PM2.5) in the BTH region decreased by 27% between 2015 and 2019 to 47.9 μg/m3 in 2019.

However, this is still short of World Health Organization standards of 35.0 μg/m3. Increase in both ground-level ozone (O3), a major source of smog, and hydrofluorocarbon (HFC), a potent greenhouse gas (GHG), are other emerging challenges that require a wider area-based approach to reduce air pollutant and GHG emissions in the greater BTH and YRD regions. In addition, air pollutants and GHG emissions have started bouncing back after the COVID-19 lockdown, requiring immediate action.

ADB principal portfolio management specialist Shigeru Yamamura, said: “ADB has successfully carried out a series of programmes to clean up the air in the greater BTH region over the last 5 years leading to tangible improvements in air quality. But challenges remain.

“The project will focus on promoting cutting-edge technologies in transport, renewable energy, industrial energy efficiency, and cooling systems to further this process of containing air quality deterioration in greater BTH and YRD, which is the largest economic cluster in the PRC.”

Project administration head of ADB’s East Asia Sustainable Infrastructure Division Lei Zhang, adds: “Reducing PM2.5, ground-level O3, and HFC emissions require sustainable financing for clean energy investments in the long run.

“The credit enhancement scheme in the project will catalyze funds from the domestic debt market by supporting developers to issue internationally aligned CABs which would be the first air quality improvement dedicated green bond in the PRC.”