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International Finance Corporation (IFC), the private sector arm of the World Bank Group, has signed an agreement to provide a US$1mn (Rmb8mn) grant to XinAo Gas’s energy efficiency operations. The grant is part of IFC’s China Utility-Based Energy Efficiency Finance Program and is expected to have a significant environmental impact by reducing pollution and greenhouse gas emissions.

Sources of funding for the programme include the Global Environmental Facility and Finland’s ministry of trade and industry.

“IFC’s energy efficiency programme in China provides a great opportunity to develop market-based solutions to address environmental issues,” says IFC executive vice-president Lars Thunell, who signed the agreement. “IFC is proud to partner with XinAo Gas and to assist the Chinese government in achieving a key policy objective – reducing energy consumption through energy efficiency and conservation measures.”

IFC’s programme brings together, for the first time, three parties – a utility company, suppliers of energy efficiency equipment, and commercial banks – to create a new financing model for the promotion of energy efficiency. 
XinAo Gas will act as a marketing agent to commercial banks, providing services to its customers to prepare energy efficiency projects for investment. The grant will help XinAo Gas to rapidly develop market capabilities and increase awareness among small companies of the benefits of energy efficiency.

Overall, IFC’s programme will support over US$150mn in energy efficiency projects and equipment investment, which in turn are expected to achieve greenhouse gas reductions of about 5mn-10mn tons.

“XinAo Gas has emerged as a comprehensive energy services provider, focusing on the development of clean energy supplies and distribution. IFC’s China Utility-Based Energy Efficiency Finance Program provides our company with an excellent opportunity to further enhance our clean energy strategy,” states chairman Wang Yusuo of XinAo Gas. “XinAo Gas is proud to be selected by IFC to be the first utility to participate in the programme. We will commit our full attention and resources to develop an energy efficiency business line with the aim to reduce the impacts of economic growth on the environment.”

The new financing model is a result of IFC’s energy efficiency experience in other countries and its local knowledge of China. IFC found that utilities, such as gas or electricity distributors, can be effective agents for marketing and delivering energy efficiency projects.

Utilities can act as a ‘one-stop-shop “to offer advice on reducing energy consumption and pollution, and equipment such as gas boilers and heating systems to realise these improvements. At the same time, utilities can partner with commercial banks which provide loans for the equipment.