China's Rural Polluters Hazy on Kyoto Options
Date: 18-Apr-07
Country: CHINA
Author: Emma Graham-Harrison
Li represents both the opportunity and challenges for Beijing as it courts investment under the Kyoto Protocol on climate change, which allows rich nation polluters to gain credits to meet domestic emissions targets by funding cuts overseas.
In China's vast rural and mining hinterlands, it is not easy getting the message out to smaller firms that there is cash to be earned from making intangible cuts to invisible gases, a problem that could limit the country's efforts to curb growth in carbon emissions.
China already provides the majority of credits sold worldwide since its rapid growth, large industrial base and heavy reliance on coal make it a natural destination for investors seeking more credits and for firms providing the technology to cut emissions.
"Each month it is going up, sector by sector. Even equipment manufacturers are advertising to do projects," said Laurent Segalen, Investment Manager at the European Carbon Fund.
Methane is among the most attractive sector, as releasing the potent greenhouse gas traps heat over 20 times more effectively than carbon dioxide, so destroying it generates a relatively large number of credits.
A string of government workshops seems to have had an erratic and confusing impact, with ineligible entrepreneurs fired up by a vague notion of cash for "green" businesses, while genuine targets like Li's Duansi mine are ignored.
"I've heard of Kyoto... but we don't have this cooperation that people are talking about," Li said, beside a gas pipe that siphons gas from the coal seams to prepare for full-scale mining.
Beijing has not expressed strong concern about climate warming, despite its own vulnerability. But it promotes methane use because the gas generates less polluting electricity than coal and can be burned as a clean auto fuel, helping curb reliance on imported energy and clear smoggy skies.
DEMAND AND CONFUSION
China has set up regional offices to foster programmes under the Kyoto Protocol's Clean Development Mechanism (CDM), which regulates emission reduction projects in developing countries.
Shanxi province, where the Duansi mine is located, has its own CDM office and most of the big mines are already signed up with buyers, said ECF's Segalen.
There appears to be no shortage of buyers for other projects.
"We have had people from almost every European country come and talk to us, though so far nothing has come of it," said Fu Xiaokang from the International Cooperation Department at China United Coalbed Methane, the country's top producer of the gas.
And Li's 900,000 tonnes per year mine should be an attractive prospect. Its coal seams are so laced with methane it took nearly five years to prepare for commercial exploitation compared to a usual two or three.
Yet investors are wary of working with medium and small mines because projects require considerable upfront investment in power generation as well as gas capture and storage infrastructure that is not well enough protected by current laws, analysts say.
Beijing wants to consolidate and clean up the world's most dangerous mining industry, so an explosion or official crackdown could mean closure for a smaller mine, wiping out investment.
While carbon credits would normally push methane-powered generation into profit, despite low state-set power prices, grids may not even accept the electricity they generate because it has no priority over dirtier power under current legislation.
LOST IN TRANSLATION
Word is at least getting out to a more grassroots level, but some details seem to have been lost in transition.
An hour's drive from Duansi Mine, queues of taxi drivers with specially adapted tanks edge toward the pumps of Hao Xuebing's New Peace service station to fill up with the gas.
Already turning a tidy profit -- pulling in 200 times more than the taxi drivers each month -- Hao hopes his clean fuel could bring in extr