A scheme aimed at curbing pollution by tightening loans to polluters has not fared well, the country's top environmental agency acknowledged yesterday.

"Implementation of the green credit policy has yielded initial achievements in the past half year, but it still falls far behind our expectations," vice-minister of the State Environmental Protection Administration (SEPA) Pan Yue said.

"There are institutional and technical difficulties in promoting it across the country," he said.

Pan said SEPA will deepen cooperation with the financial sector to develop an effective green credit mechanism as financial regulators and institutions play a key role in promoting green credit.

In July, SEPA, the central bank and banking regulators jointly issued the green credit policy requiring SEPA to hand over the names of heavy polluters to the central bank and the banking regulatory commission.

Companies on the list that fail to meet environmental standards or implement environmental protection measures are disqualified from receiving loans.

Those that have already secured loans but are later found to have violated environmental protection regulations will have their loans recalled.

The government has vowed to cut the discharge of major pollutants by 10 percent between 2006 and 2010, while improving energy efficiency by cutting energy consumption by 20 percent per unit of GDP.

Since the policy was launched, companies on the list of heavy polluters have had key bank loans recalled, suspended or rejected.

By linking firms' environmental performance with their creditworthiness, the green credit policy is aimed at curbing pollution as well as lowering financial risk, officials have said.

But it has been difficult to substantially cut bank loans for high energy-consuming but profitable polluters at the local level, Pan said.

Technical difficulties include inadequate exchange of information between environmental agencies and financial regulators, and the lack of detailed guidelines for green loans, Pan said.