(Yicai Global) July 16 -- China’s biggest steel producer China Baowu Steel Group will join hands with three entities to set up a carbon neutrality fund with a maximum scale of CNY50 billion (USD7.7 billion) amid the country's ambitious plans to have net-zero carbon dioxide emissions by 2060.

Baowu penned an agreement with the National Green Development Fund, China Pacific Insurance Group, and CCB Financial Asset Investment to form the fund with an initial scale of CNY10 billion, Yicai Global learned.

The Shanghai-based company has already begun planning the second phase of the fund jointly with Bank of China’s subsidiary BOC Financial Assets Investment.

The topic is trending. China is striving to reach peak carbon emissions by 2030, and become carbon neutral by 2060, according to the government's plan revealed last September.

The goal will be tough to achieve particularly for steelmakers. Steel companies need to change their production process in the medium and long-term to decrease their emissions, several steel industry insiders told Yicai Global. Limiting output is only a short-term solution, they added.

The effects should be far-reaching. Chinese ministries and local governments are expected to control crude steel production this year for environmental reasons while the move should accelerate mergers and acquisitions in the sector. Meanwhile, steel prices are predicted to hit new highs amid large demand, rising costs, and widening global inflation.

The fund Baowu is launching will focus on clean energy, green technology, and environmental protection, and invest in high-quality industrial projects, said Zhu Yonghong, chief accountant at the firm.

The steel giant has published its own green roadmap. Carbon dioxide emissions should peak by 2023 and the company should have the technological capacity to reduce its emissions by 30 percent by 2025. By 2050, a decade before the national goal, its carbon footprint should be zero.

Editor: Emmi Laine, Xiao Yi