The Institute for Energy Economics and Financial Analysis (IEEFA) examined the first batch of yuan-denominated carbon-neutral bonds issued this year by giant state-owned energy corporations such as China Energy Investment Corporation (CEIC) and the China Huaneng Group.

It said 30% of proceeds from the bonds were to be allocated to the working capital of the issuers.

“The promise of green bonds is that they can help channel capital to energy transition investments,” IEEFA researcher Christina Ng said.

“But potentially the proceeds raised by the SOEs from these bond deals could be spent on maintaining a steady or growing coal business, particularly as they have new coal assets in the pipeline.”

Neither CEIC nor Huaneng responded immediately to a request for comment.

Green financing has become one of China’s top priorities as it tries to pay for the clean energy infrastructure required to bring emissions to a peak by 2030 and to net-zero by 2060.

China central bank adviser Ma Jun said in January that China would require at least 100 trillion yuan to meet its 2060 carbon neutrality pledge.

China overtook the US when it came to issuing green bonds in the first quarter of this year, raising US$15.7 billion, but analysts said more policy support was needed.

Companies were previously allowed to apply for green finance to fund “clean coal” projects, even though they still produced large amounts of carbon dioxide.

The central bank has since excluded “clean coal” from the list of projects eligible for green bonds, but up to 50% of green bond proceeds can still be allocated to working capital and used to finance coal, Ng said.

“100% of green bond proceeds should be going to green projects,” she said.