Chinese Most Lucrative Carbon Credits Dry Up
Date: 30-May-07
Country: CHINA
Author: Nao Nakanishi
China sells carbon emissions permits to rich countries in exchange for cutting its own greenhouse gas emissions under Kyoto's Clean Development Mechanism (CDM).
Buyers of such carbon credits have exhausted the potential from the destruction of industrial gases, and are focusing on renewables and energy efficiency, said Michiaki Chiba, greenhouse gas manager at Lloyd's Register Quality Assurance (LRQA) Ltd. for Asia and Pacific.
He said investors were also interested in emerging clean coal technology, including still-uncertified carbon capture and storage projects.
"Wind has more potential," he told Reuters in an interview on Tuesday on the sidelines of a climate conference.
"In the coming years, China would like to seek CDM projects in more essential areas of energy efficiencies and low-carbon economic development," he said.
Looking ahead, it would be important to work on coal sector projects as the dirty-burning fossil fuel accounts for about 70 percent of the country's electricity needs.
Chiba said the UN panel in charge of approving CDM projects was still lagging Beijing, with around 200 of the 300 projects approved so far by China still awaiting a go-ahead.
DECLINING SHARE OF HFCs
A by-product of the refrigerant industry, industrial hydrofluorocarbons (HFCs) have a warming effect some 12,000 times stronger than carbon dioxide, so destroying one tonne is highly lucrative.
HFC projects are associated with big chemical plants and have dominated the CDM so far, although their share is now declining, at 34 percent last year, while remaining double the renewable energy projects widely considered more sustainable.
Some potential investors have been put off from buying HFC credits and are already paying a premium to buy "HFC-free" credits that exclude such projects.
"It has been a challenge for CDM controllers how to prevent ...unsuitable claiming of carbon credits," said Chiba.
"But we are learning through trial and error," he said.
Four major HFC projects in China will each generate emissions reductions equivalent to around 10 million tonnes of carbon -- worth about 320 million euros (US$432 million) in total, Chiba said.
Kyoto rules prevent HFC plants cashing in on any increase in output of the greenhouse gas after 2004. This is meant to avoid factories deliberately producing the gas and then destroying just to earn credits.
The future Kyoto status of the greenhouse gas is up for discussion.