World Bank loan supports energy transformation and reform in China’s Shaanxi heating sector

WASHINGTON, June 28, 2024 — The World Bank’s Board of Executive Directors has approved a $300 million (€276.5 million) loan to support the supply of heat from renewable and low-emission sources and to promote a pilot pricing reform 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 approximately 10% of the country’s total greenhouse gas (GHG) emissions. Unlike the power sector, where renewable energy is growing rapidly, renewable energy penetration in the heating sector remains marginal.

This Demonstration of Energy Transformation and Innovation in Shaanxi District Heating Project aims to demonstrate innovative solutions to increase heat supply from renewable and low-carbon energy sources, including geothermal, waste heat and electricity. It also supports the promotion of pricing and billing reforms to improve the financial sustainability of the heating sector. The funding will support investment in enabling infrastructure and an inclusive process for designing and implementing the pilot reform programme.

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

The project will help China meet its climate commitments to become carbon neutral by 2030 and carbon neutral by 2060, and contribute to the creation of global public goods.

Total financing needs over five years are estimated at $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 remainder from Chinese counterparts.

The project is aligned with the World Bank’s Country Partnership Framework (CPF) for China 2020-2025, which aims to help China promote greener economic growth and contribute to global public goods, in particular reducing greenhouse gas emissions and generating replicable global knowledge.