Travelers to north China's Inner Mongolia Autonomous Region
might be astonished by the sight of wind farms sprouting along the
breezy steppes. On the outskirts of affluent Jiangsu Province,
power generators operating at full capacity are equally remarkable
- they are fueled by landfill gas.
Yvo do Boer, head of the UN
Framework Convention on Climate Change, responds to reporters'
questions at Carbon Forum Asia held in Singapore earlier this
month.
These far-flung projects and many others are supporting the
whirlwind growth of the Chinese economy in a cleaner way.
They are a result of the 1997 Kyoto Protocol, a global
initiative to cut greenhouse gas emissions. To date China's top
economic planner, the National Development and Reform Commission,
has approved about 800 projects under the clean development
mechanism (CDM), a component of the protocol.
The list is still expanding, reflecting China's enormous
potential.
Lucrative trade
The global carbon market, a result of emission-reduction
commitments negotiated under the Kyoto Protocol, tripled in size
between 2005 and 2006 to a value of more than US$30 billion, said
experts at the Carbon Forum Asia 2006 held in Singapore on November
6 to 7.
"It is worth much more than that now," said Andrei Marcu,
president and CEO of the International Emissions Trading
Association (IETA), adding that the value may double to USUS$60
billion or more in 2007, with Asia playing an increasingly larger
role.
He was echoed by Joergen Fenhann from the United Nations
Environment Program (UNEP) who said that China and India are the
front-runners in Asia. Fenhann says that a large share of certified
emission reductions (CERs), carbon credits that permit a country to
emit carbon above its quota, come from China.
The latest report by IETA shows that in 2006, CERs from UNEP
Asia accounted for 80 percent of the world's total carbon trade
volume, 61 percent by China, followed by India at 12 percent.
It was the second consecutive year that China led the world
supply in the carbon trading. In 2005, its portion was 73
percent.
China's market dominance may continue. The UN's climate change
secretariat said earlier that the nation is expected to account for
41 percent of all carbon credits issued by the UN by 2012.
Made possible by the CDM, a mechanism that allows developing
countries to sell their CERs to developed ones, clean coal
technology is being rapidly advanced in China.
By trading CERs, China has developed an additional revenue
stream to fund domestic low-carbon projects. In 2006, the revenue
from trading carbon credits totaled US$3 billion.
Statistics from the Office of the National Coordination
Committee on Climate Change in China show that as of October 9,
2007, the country had 120 CDM projects successfully registered with
the UN and 20 issued with CER credits.
Given its huge supply, a big portion of the market remains
untapped. To better bring into play China's huge potential, Japan
Bank for International Cooperation is seeking more opportunities
for cooperation with Chinese banks in financing CDM projects, said
its senior executive director Fumio Hoshi.
China's role
As a dominant force in the CDM market, China influences the
overall market price through its informal policy of requiring a
minimum acceptable price before approving projects.
A number of countries now use China's price floor as a basis for
negotiation of nearly equivalent prices in their transactions.
Antonio Aguilera Lagos, a senior manager from REW Power AG, said
the current China price level for CERs is reasonable.
China sets a relatively stable price floor for global supply of
CERs. IETA statistics show that China's floor price was around
USUS$10.4 to USUS$11.7 a ton in 2006, while the vast majority of
other transactions worldwide were in the range of US$8 to
US$14.
Due to China's large market share and dominant influence, the UN
has tentatively picked Beijing as the destination of Asia's first
carbon trading exchange. The move could establish the Chinese
capital as an important hub for the multi-billion-dollar global
trade in carbon credits.
If successful, the exchange would be the first in the developing
world. It would compete with the Chicago Climate Exchange and the
New South Wales Market, and would help to further open the
lucrative Chinese carbon market.
Efforts praised
Most of the speakers at the forum agree that they have seen
encouraging results of carbon trading from China.
Hoshi said that many efforts are underway as the Chinese
government tackles the issue of global climate change. He said that
the nation has included the target of energy conservation and
emissions reduction in its 11th Five-year Plan (2006-10), which
aims at cutting energy consumption per unit GDP by 20 percent
during the period.
Liu Yanhua, vice-minister of the Ministry of Science and
Technology, said earlier that he hoped the CDM would help China
achieve the goal.
China is well aware of the dilemma it faces in the relationship
between the economic boom with greater energy consumption and
pollution, and has already taken action to try to develop a
sustainable economy, according to Marcu.
Yvo do Boer, head of the UN Framework Convention on Climate
Change, said that China already has in place a climate change
strategy at national level.
In order to achieve its five-year goal, China just passed the
draft of a revision to its Energy Conservation Law, which has been
in use for the past nine years. The country has also established a
task force headed by Premier Wen Jiabao to tackle climate change
and conserve energy.
Challenge ahead
"This is a global challenge, but here in Asia, the need for
action is even heightened. Asia is currently facing a dual
challenge of ensuring energy security and preventing environmental
degradation," said Ursula Schafer-Preuss, vice-president for
knowledge management and sustainable development at the Asian
Development Bank.
Asia now accounts for 27 percent of the world's energy-related
greenhouse gas emissions, compared to less than 10 percent in the
1970s, she said. "Asia needs an estimated US$6 trillion in
investment in energy by 2030."
The complexity of the issue is compounded by the fact that
access to energy is critical to alleviate poverty. Even as Asia
dramatically increased its energy consumption, more than 600
million people still lack proper access to electricity, said
Schafer-Preuss.
"This means that Asia needs to balance itself by having greater,
but less environmentally harmful, access to energy. This is
certainly not an easy task," she said.
(China Daily November 19, 2007)
