China's central bank launched a new monetary policy tool to support carbon emission reduction projects through cheap lending to financial institutions, according to an announcement on Monday.

The new tool aims to leverage more social capital to promote the low-carbon transition of key industries and support the development of clean energy, energy saving, environmental protection and carbon emission reduction technologies, per the announcement published by the People's Bank of China, the central bank.

Financial institutions will provide carbon emission reduction loans to related companies, at interest rates close to the level of the country's benchmark lending rate - the loan prime rate. Then the central bank will provide 60 percent of the loans to these commercial lenders for one year at an interest rate of 1.75 percent.

The lenders can choose projects by themselves and can roll over the loans twice at most, and are required to provide qualified pledges to the PBOC.

The PBOC requires financial institutions disclose relevant information, such as the number of projects, the amount of loans, the weighted average interest rates and carbon emission reduction data supported by the new tool. Their information disclosure will be verified by a third-party professional institution and subject to public supervision.