World Bank Loan Supports Energy Transition and Reform in China’s Heating Sector in Shaanxi Province

WASHINGTON  — The World Bank’s Board of Executive Directors approved a US$300 million (€276.5 million) loan to support heat supply from renewable energy and low-carbon energy sources and promote a pricing reform pilot program in the heating sector in China’s Shaanxi province.

China’s heating sector is heavily dependent on coal and natural gas and accounts for about 10% of the country’s total greenhouse gas (GHG) emissions. Unlike the electricity sector, where renewable energy is growing rapidly, renewable energy penetration remains marginal in the heating sector.

The Shaanxi Energy Transition and Innovation Demonstration in the Heating Sector Project aims to demonstrate innovative solutions to increase heat supply from renewable energy and low-carbon energy sources, including geothermal, waste heat, and electricity. In addition, it supports advancing pricing and billing reforms to help improve financial sustainability of the heating sector. The financing will support investment in enabling infrastructure and the inclusive process of designing and implementing the reform pilot program.

“The Shaanxi Energy Transition and Innovation Demonstration in the Heating Sector Project aims to help China demonstrate a pathway to facilitate the energy transition in the heating sector through a comprehensive approach on both supply and demand sides,” said Mara Warwick, World Bank Country Director for China, Mongolia, and Korea. “It also provides an opportunity to generate important lessons to be shared with other provinces in China and other countries with heating demand for replication.”

The project will help China advance towards its climate commitment to carbon emissions peaking before 2030 and carbon neutrality before 2060 and contribute to global public goods.

Total financing needs over five years are estimated to be $585 million, of which $300 million (€276.5 million) will be financed through an International Bank for Reconstruction and Development loan from the World Bank and the rest from Chinese counterparts.

The project is in line with the World Bank’s Country Partnership Framework (CPF) for China for FY2020 to 2025, which aims to help China promote greener growth and contribute to global public goods, in particular reducing greenhouse gas emissions and generating replicable global knowledge.