China To Assign Environmental Protection Credit Ratings

China has pledged to cut carbon emissions per unit of economic output "by as much as 45 percent from 2005 levels" by (in part) assigning credit ratings to companies in industries with heavy pollution or overcapacity based on their efforts to protect the environment.  The Ministry of Environmental Protection has stated the new ratings system will provide a risk-based reference point for banks reviewing a company's credit and for authorities arranging subsidies. Companies will be ranked on a four-level, color-coded scale, with green representing the best and red, well, not so good.  Under the applicable rating system rules, which come into effect starting March 1, banks are advised not to offer new loans to companies with red ratings until companies improve their standing. ¹