The World Bank Board of Executive Directors approved a US$500 million loan to China today to support innovative financing for air pollution control in the Jing-Jin-Ji region.The new operation aims to reduce air pollutants and carbon emissions through increasing energy efficiency and clean energy, with a focus on the Jing-Jin-Ji and neighboring regions-specifically, Beijing, Tianjin, Hebei, Shandong, Shanxi, Inner Mongolia, and Henan.

"Energy efficiency and clean energy are ‘win-win' options to mitigate both air pollution and climate change simultaneously," said Wang Xiaodong, World Bank's Senior Energy Specialist and team leader for the program. "This Program will contribute to achieving the results of the State Council's Air Pollution Prevention and Control Action Plan, and help mainstream green financing in banks."

The Innovative Financing for Air Pollution Control in Jing-Jin-Ji Program has adopted the Program for Results (PforR) instrument for the first time in China and the energy sector. It is a new lending instrument developed by the World Bank that aims to better link loan disbursements to tangible results on the ground.

The PforR program will support the Hua Xia Bank, a government-designated commercial bank, to provide financing for the enterprises that take action under the Air Pollution Prevention and Control Action Plan. Achieving the targets under the Air Pollution Prevention and Control Action Plan requires a substantial amount of green financing, the bulk of which in the form of commercial financing for enterprises.

The Program objective will be achieved through three result areas:

(I) reduced coal consumption from improved energy efficiency in the industrial and building sectors, and increased renewable energy supply of solar PV, wind, and biomass technologies;

(II) reduced air pollution emissions from pollution abatement measures including installing end-of-pipe equipment for particulate removal, flue gas desulfurization, and denitrification; replacing coal with natural gas, and electric and compressed or liquefied natural gas vehicles; and

(III) stronger institutional capacity of the Hua Xia Bank, including the establishment of a Green Finance Center, development of green lending procedures, piloting of innovative financing models and products, and staff training. The total investment of the PforR program is expected to be US$1.4 billion, comprising US$500 million from the World Bank, US$500 million from the Hua Xia Bank, and an additional US$400 million equity contribution from sub-borrowers. The program will be implemented in a period of six years from 2016 to 2022.

"We are very pleased to support the Chinese government's war on air pollution," said Bert Hofman, World Bank Country Director for China. "This PforR Program not only cuts air pollutants' emissions but also reduces greenhouse gas emissions. Thus, it is benefiting both China and the world."

The World Bank Group has had a long-term engagement in the energy efficiency and renewable energy sectors in China. Over the past two decades, the World Bank has been working with China to help it move toward more market based approaches for energy conservation under the three phases of the projects supported by the Bank and the Global Environment Facility.