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CDM
Market Takes Off; China Gearing Up (2006-05-16) |
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World Watch |
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Little more than a year after the
Kyoto Protocol entered into force, a
key element of the agreement, the Clean
Development Mechanism (CDM), has begun
to take shape. Under this market-based
instrument, industrial-country polluters
can offset their emissions of carbon
dioxide and other greenhouse gases (GHGs)
by supporting emissions-reducing projects
in the developing world. Although China
has no specific obligations to cut its
emissions under the Kyoto agreement,
as the world’s second largest
producer of GHGs and the country with
the largest potential for future releases,
it is actively involved in the CDM market.
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As of May 12, as many as 46 Chinese
projects had received CDM approval,
according to Shu Wang, project officer
with the National Climate Change Coordination
Committee of the National Development
and Reform Commission. So far only seven
of these have been registered with the
CDM Executive Board, out of a total
of 150 registered projects worldwide;
however, they represent more than 30
percent of the expected certified emission
reductions (CERs) from CDM initiatives
this year. |
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The international carbon dioxide (CO2)
trading market got off the ground in
2004 and has seen dramatic growth in
the past two years, spurred by the launch
of the European Union’s Emissions
Trading System (EU-ETS) in January 2005.
According to Point Carbon, a Norwegian
firm that monitors the rapidly growing
emissions business, the global CO2 trade
reached 800 million metric tons in 2005,
up from 94 million tons in 2004. Around
362 million tons of CO2 were traded
in the EU-ETS alone last year. It is
estimated that the market will be worth
as much as 34 billion euros (US $40.2
billion) annually by the end of the
decade. |
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The surging carbon market has provided
an important platform for Chinese participants.
Statistics from the United Nations Framework
Convention on Climate Change show that
China is emerging as a major player
by volume, overtaking India and Brazil
as the largest supplier of CERs to the
market. Most of the country’s
CDM projects are conducted bilaterally
with an industrialized country partner
via the broker market. However, seven
of the projects are unilateral, being
undertaken solely by Chinese enterprises,
which allows China to retain and trade
all the carbon credits itself. |
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In 2005, the State Council, China’s
parliament, issued a new set of guidelines
to streamline the CDM project approval
process. The country’s current
portfolio of projects covers a wide
range of areas, including renewable
energy, energy efficiency, waste handling
and disposal, methane recovery and utilization,
and reduction of trifluoromethane (HFC-23)
emissions. Construction of wind power
infrastructure alone accounts for 45
percent of all projects. |
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Domestic experts believe renewable
energy and energy efficiency initiatives
have the greatest room for expansion
in China’s carbon market, given
favorable government policies and international
technical support. Their CDM status
is also expected to boost sectoral growth.
“Renewable energy projects are
currently not as profitable as traditional
power projects. The CDM will generate
extra benefit for these projects, making
new energy more attractive,” notes
Tang Renhu, director of the CDM Department
at China National Water Resources &
Electric Power Materials & Equipment
Company. |
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Energy efficiency is also a significant
growth area. According to Tang, on average
it takes 220 grams of standard coal
to generate 1 degree of electricity
in industrialized countries, while in
China the figure is as high as 350 grams.
“Chinese authorities have demonstrated
a willingness to work with the international
community to enhance energy efficiency
in the rapidly growing power sector,”
Tang says, noting that the European
Union has funded Chinese research and
development on the “ultra-super-critical”
(USC) methodology, which is key to the
deployment of energy efficiency technologies.
Tang’s company and Beijing-based
Tsinghua University have formed a development
group that will take on two initial
USC efforts as CDM projects. |
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Three major international entities
are currently responsible for validating
China’s CDM activities: Norway’s
Det Norske Veritas Certification Ltd.,
SGS United Kingdom Ltd., and TUV Süddeutschland.
A growing number of domestic consulting
firms are also participating in the
burgeoning CDM market, most of them
focusing on commercial services and
streaming of CDM products. |
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With more and more investors considering
projects in China, domestic enterprises
face both challenges and opportunities.
Establishing a CDM project is a multi-stage
process—from identification and
formulation of the activity to obtaining
certification—and has proved taxing
for project developers. Some domestic
experts worry about China’s lack
of strong CDM expertise, and are concerned
there is too much focus on selling CDM
products and services, rather than on
cultivating local expert groups to help
with project development. “In
the power sector, local players have
advantages over foreign consulting firms
because of the complexity of China’s
power network and the lack of availability
of key data,” says Tang Renhu.
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http://www.worldwatch.org/features/chinawatch/stories/20060516-1 |
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