INDUSTRIAL Bank, which lists shares in Shanghai, said Tuesday that it has lent 40 million yuan (US$6.5 million) to a chemical company using carbon permits as collateral, showing firms are exploring new routes to funding amid a tightening of credit growth in China.

    The loan to Hubei Yihua Chemical Industry Co., earmarked to improve the Shenzhen-listed chemical firm’s energy conservation capacity, was the first in China to use permits from the country’s new carbon markets as collateral.

    “The loan will help those with CO2 obligations to activate their carbon assets, lowering the bar to access credit for small and medium-sized companies, and will ease the difficulties for those companies to finance energy saving and mitigation projects,” the bank said in a press release.

    The bank did not disclose the interest rate it is charging on the loan.

    Industrial firms in China are finding it increasingly difficult to get loans after the China Banking Regulatory Commission last November asked banks to scrutinize credit given to polluting industries struggling with overcapacity.

    In March, sources said that many banks had cut lending to industrial sectors by as much as 20 percent.

    Hubei Yihua is one of around 140 companies covered by Hubei Province’s pilot emissions trading program, launched earlier this year. Under the program, firms receive a set number of emission permits from the government, each representing one ton of carbon dioxide. Those that emit more CO2 than they have permits to cover must buy more in the market. (SD-Agencies)