The European Investment Bank (EIB) has granted a EUR 250 million loan to the People’s Republic of China (PRC) for forestry projects that contribute to climate change mitigation through carbon sinking and avoidance of greenhouse gas emissions. The China Forestry Framework Loan (CFFL) was signed by Mrs Magdalena Álvarez Arza, Vice-President of the EIB, and Mr Li Yong, Minister of Finance.

EIB Vice-President Magdalena Álvarez Arza said “The Bank is pleased to contribute to the efforts of the Chinese government to tackle the global challenges posed by climate change. This loan also represents a further step in our commitment to abate greenhouse gas emissions and is the latest in a series of very successful operations with the Chinese authorities in this area, which started back in 2007 with the first Climate Change Framework Loan granted to China. This initiative is more than a loan: it provides the right opportunity to make available the Bank’s know-how and technical support in a sustained and fruitful technical dialogue with the PRC."

The proposed CFFL would be a multi-investment scheme under which the Bank would support several individual forestry projects across China that contribute to the forestry programme (12th Five Year Plan) of the People’s Republic of China and that have the following two objectives: (i) environmental and biodiversity preservation and improvement, (ii) climate change adaptation and mitigation.

The EIB’s China Forestry Framework Loan II comprises a number of actions centred on the following areas:

  • Restoration of existing forest and forest management improvement including: sustainable forest management demonstration projects and forest resource restoration projects
  • Protective forest projects geared to soil and water erosion control and biodiversity protection including: ecological forestry development in key watershed areas; protective forest and coastal protective forest projects 
  • Forest biomass
  • New forest and economic tree plantation
  • A technical training and technical assistance component is foreseen under the loan to address proper forest management capacity-building

The framework loan will comprise a maximum of eight investment schemes, to be identified and pre-selected by China’s National Development and Reform Commission and the Ministry of Finance. The EIB will then select individual schemes and perform due diligence to ensure that all projects are economically and financially viable, technically adequate and in compliance with the Bank’s environmental and social requirements.

This loan is being provided under the EUR 4.5 billion Energy Sustainability and Security of Supply Facility. This will be the first operation of its kind in China but will follow the same principles as the previous China Climate Change Framework Loans and have a similar structure.

The EIB has a well-developed track record of successful investments in afforestation, reforestation and forest-derived/wood-based industries, both in the EU and around the world. In total, approximately 100 individual investment loans have been handled by the Bank during the past 30 years (1979-2010), together with an estimated 9 000 smaller projects/allocations under Global Loans during the same period. The ElB's lending volume to forestry-focussed operations during 2010 approached EUR 1 billion, leveraging at least twice that amount of investment in the sector. The Bank has proven experience in financing technically, economically, environmentally and socially sustainable forestry investments adapted to the location and type of forest project. The Bank is a key contributor to the EU objective of addressing deforestation and forest degradation within the Union and around the world in order to tackle climate change and reduce biodiversity loss.