CONCESSIONAL LOANS

A loan is money that a borrower must repay, normally with interest. A concessional loan comes from a public or mission-driven lender on easier terms than a comparable commercial loan, such as a lower rate, longer repayment period or grace period before principal payments begin. It suits projects with a credible route to revenue but risks or long construction periods that make ordinary bank debt unavailable or too expensive. By lowering capital costs and sharing risk, public development banks and government agencies enable projects that might otherwise struggle to secure affordable financing.

Key design factors include eligibility (which CDR technologies or project stages qualify) and loan conditions (interest rate, tenor, grace period). The support level should catalyse projects without displacing private capital. Rigorous due diligence is needed for first-of-a-kind technologies. Loans might be structured for individual projects (asset-backed finance) or at the corporate level for startups, each with different risk profiles.

Concessional loans can accelerate CDR deployment by easing financing barriers. Public loans make high-capex projects viable and often attract private co-investors (public funds de-risk projects and “crowd in” capital). This leverage means limited public budgets mobilise greater total investment. Early large-scale removal projects funded this way help prove technologies and drive costs down. Moreover, as loans are repaid, funds revolve into new projects, multiplying impact over time.

Potential downsides include financial losses if projects underperform or seeing public lenders bear default risk on high-risk CDR ventures. There is also the risk of inefficiency whereby concessional loans might subsidise projects that could have secured private finance, or back unproven technologies that fail to deliver. Furthermore, public loan programmes have finite budgets, so they cannot scale indefinitely; they serve more as a bridge to mobilising private capital, not a permanent solution.

Loan recipients should report verified CO₂ removal outcomes and project progress. Key performance metrics (e.g. tonnes CO₂ stored, financial viability, private investment mobilised) are tracked. Evaluating results against targets ensures the loan delivers climate impact and informs adjustments to future programmes.

Public lenders should ask developers and commercial banks which specific risks prevent ordinary lending and what terms would close the gap. Engineers and project-finance experts can test construction and revenue assumptions. Lifecycle, standards and storage experts can test whether financed activity delivers net removal. Smaller firms explain how asset requirements exclude them; communities reveal land, input and siting risks. Collaboration with any private co-financiers is also important to align expectations and structure partnerships.

International and supranational development banks can lend across countries, while national and regional public banks can use their own capital or dedicated funds for domestic priorities. Cities can operate funds that lend repayments again or municipal green banks for smaller facilities, land projects, equipment and local infrastructure. Foundations can make charitable, below-market loans, usually at smaller scale. Larger lenders suit major plants and cross-border assets; smaller lenders can group projects or lend alongside others. At every level, the lender must assess borrowers, sign contracts, release funds, monitor performance and recover debts.