Clean Development Mechanism - a Win-Win Mechanism in China

The Clean Development Mechanism ( CDM ) under the Kyoto Protocol facilitates developed countries to earn emission rights, called carbon credits, by 'green' investments in developing countries such as China, Asian and African countries. This mechanism enables emissions reduction at much lower cost for the Annex I countries.

The industrialized nations are required to reduce their greenhouse gas emissions by 5.2% of the 1990 levels, between 2008 to 2012. By 2006, China overtook the US in terms of total carbon dioxide emission, but its per capita emissions are much lower than the US and many industrialized countries. To play its role in concerted global effort to mitigate climate change. It has set its own target to reduce energy consumption per unit of GDP by 20% of 2005 level by 2010. (Chart: World Resources Institute)

Business Opportunities for Green Technologies in China
China's commitment and emphasis on building an energy-saving and environmentally friendly society is presenting huge market potential for the environmental protection industry. China has set up DNAs some years ago and its institutions are better acquainted with the CDM. China also has a store of the required skills available on the spot and a less bumpy investment climate.  These are core reasons why they constantly leapfrog other developing nations. How big is China's green market?  Enormous.

By 2008 year end, there are 4200 projects; and by 2012 it is estimated that over 8,000 CDM projects may be up and running or in the pipeline. Of these, China, India and Brazil takes the big slice of the cake.

India 27.76% Registered Project Activities Total= 1423 CDM by Feb 2009 (Source UNFCCC)		CERs Issued by Host Parties, Total=254 608 649 : UNFCCC Feb 2009

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Since the Kyoto Protocol came into force in 2005, China has approved 352 CDM projects by early 2007. That would cut carbon emissions by 780 million tons a year. It has become the most promising Certified Emissions Reductions ( CER ) supplier in the global emission,  with 86 projects getting CERs Issuance as at Dec 2008. Projects include wind power, solar power, hydropower, landfill gas power generation and solid waste management.

According to a Beijing-based report, CDM projects will help bring 1.96 billion Yuan (more than US$240 million) of foreign investment into China in 2007, and the figure is expected to rise to 3.94 billion Yuan (million US$485.8) by 2010.

Marketing consultancy KAE ASIA has recently raised a new investment estimate of US$33 billion for China by 2020 in their latest report Business Opportunities for Green Technologies in China.

In 2007, it says, China invested US$12 billion in renewable energy, almost as much as the world green energy leader Germany. It predicts that by 2020 China's renewable energy will be 15% of China's total energy consumption mix.

China has been very successful in encouraging private sector participation in CDM. A good part of that success is due to the government's decision to pursue CDM, and its success in laying the policy and procedural groundwork for CDM.

The following lists but a few of the numerous CDM contracts in China signed after the Kyoto Protocol was effected:

Shaanxi Mothers win top environmental award from the Ashden Award   The award recognizes the commitment of a small volunteer organization in bringing the health and environmental benefits of biogas to rural communities in China. The organization has installed 1,294 biogas plants in rural farming households in the Shaanxi Province of China since 1999. The plants produce biogas from pig and human waste. Shaanxi Mothers promotes the use of biogas plants connected to the pigsties. These plants provide clean fuel for cooking and lighting, improve sanitation and hygiene and help prevent further environmental degradation. The solid residue from the plants is a valuable fertilizer. Users pay about one third of the cost of the plant which can be covered by the savings they make on fuel and fertilizer within one to two years. Subsidies from the government and Shaanxi Mothers provide the remainder of the cost. (The Ashden Awards for Sustainable Energy)

China's first CDM project was a wind power plant which was launched in north China's Inner Mongolia Autonomous Region in 2002.

Early 2007, Hebei Province signed a contract for a wind power project through the CDM with Japan. The deal will provide Japan with 60,000 carbon credits a year between 2008 and 2012.

In march 2007, China's largest CDM project was jointly launched by Zhejiang Juhua Limited and Japan's JMD company. It provides Japan with 2.4 million credits. The projects include upgrading equipment in factories or converting coal burning factories to alternative energy sources.

(China Daily October 28, 2006)

Two Chinese companies signed purchase agreements for greenhouse gas (GHG) emission reductions with the World Bank in Beijing under the Kyoto Protocol's Clean Development Mechanism (CDM).

The World Bank inked the two deals on behalf of the Prototype Carbon Fund (PCF) and Community Development Carbon Fund.

1. The Huitengxile Wind Farm Project is located in the Inner Mongolia Autonomous Region. Fifty to 100 wind turbines with a total generation capacity of 100 megawatts will be installed to supply 245 gigawatt hours to the North China Power Grid. By avoiding coal-fired generation, this project expects to eliminate 240,000 tons of carbon dioxide emissions a year. The PCF will purchase 1.6 million tons of certified emission reductions from this project.

2. China Hubei Guangrun Hydro Development Project is located in Hubei's Guangrun county, which will install three power stations in the Guangrun River. The 28-megawatt generation capacity of the Guangrun Station component will supply about 89 gigawatt hours of renewable energy annually to the Jianshi Network, which is connected to the Hubei Provincial Power Grid.

Renewable energy is expected to reduce GHG emissions by increasing the supply of hydro-generated energy to the Hubei Provincial Power Grid, thus displacing coal and gas energy. The Guangrun stations component is estimated to reduce GHG emissions by 72,560 tons of carbon dioxide equivalent a year, and expected to reach full capacity by the end of 2008.

With the set up of the Nairobi Framework to extend the reach to CDM by Africa countries, the door of CDM opens to the world, the EU, Africa and China, a new horizon that is far and wide.

Louis Michel, European Commissioner for Development and Humanitarian Aid, proposed a "ménage à trois" or triangular partnership with China and Africa.....  to mitigate climate change...as China's growing presence in Africa is a positive force for the partnership.

"China could be of tremendous assistance if it works with African countries .......for the Clean Development Mechanism (CDM)", UNFCCC executive secretary Yvo de Boer told Xinhua during the first Africa Carbon Forum in Dakar.

Currently China has altogether 433 registered projects, with the total estimated annual CERs of 14,318,958 tonnes CO2e, 55.77% of that of the total projects as at Feb 23, 2009.

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