China has signed the first ever greenhouse gas emission reductions purchase agreement (ERPA) for a coal mine methane project. Over 60 percent of China's energy needs are met by coal, but methane from coal mines is one of the world's largest greenhouse gas emitters on a stand-alone gas basis, eight percent of the entire worldwide emissions. Coalmine methane (CMM) is twenty-three times more powerful than carbon dioxide at affecting global warming.

China's National Climate Change Coordination Committee has placed coal methane projects as of its top four prioritized categories in developing projects under the Clean Development Mechanism of the Kyoto Protocol. The Kyoto Protocol, which, with Russia's ratification, will now come into effect in February 2005, is the 1997 agreement to limit climate altering greenhouse gas emissions.  The Clean Development Mechanism, (CDM), a flexible mechanism of the Protocol, allows OECD countries to fulfill some of their greenhouse gas emission-reduction commitments through projects in the developing world.

The project developer Jincheng Anthracite Coal Group Co. Ltd. will capture coalmine methane and utilize it for power generation at the Sihe coalmine in Jincheng City, Shanxi province. The certified greenhouse gas emission reductions generated by the project will be purchased by the Prototype Carbon Fund (PCF), a public/private partnership, made up of six governments and 17 private companies, which authorizes the World Bank, as Trustee, to purchase greenhouse gas emission reductions from projects on behalf of the participants of the fund. The PCF will purchase 40 million tons of carbon dioxide equivalent emission reductions over the project's 20-year lifetime.

The Jincheng Project will produce tangible benefits for the local population. Shanxi province, located in northwestern China, is the center of the country's coal mining industry. Economic and employment conditions in Shanxi are heavily coal-dependent, the Sihe mine alone employs 27,000 people in Jincheng City. This project will improve conditions at the mine for current employees, and create 60 new jobs for re-trained miners and additional specialist staff at the power project. The project will also help improve the safety of miners by establishing a better way to eliminate explosive methane from the mine.

"The success of signing of this ERPA serves as a model case for further promotion of similar CDM activities in China," said Madam Sun Cuihua, a Director in the Climate Change Office under the National Development and Reform Commission of China. "I wish to convey my gratitude to the people involved for this success"
 
Methane, which is released from coal seams during the mining process, causes explosions if it is allowed to build up in the mines. Chinese safety regulations require that mine operators remove the gas to a certain safety level. Mine operators currently take the least-cost method for venting the CMM gas, they release it into the atmosphere. The Jincheng Coal Group will capture the coalmine methane by upgrading the Sihe mine with several new, internationally proven technologies to improve mine safety and efficiency during gas drainage. The project will recover CMM from the mine and process it into energy at a nearby power plant. The energy will be delivered to the local power grid, in that way improving the capacity of the Jincheng Power Network and mitigating its lack of electricity.

"This first success illustrates and rewards the determination of all PCF participants in the carbon fund to include CDM projects in China within their portfolio," said Jean-Claude Steffens, PCF Participants' Committee Chair and Director Environment & Innovation, Suez-Tractebel of Brussels. "It results from constant efforts by the Chinese authorities and World Bank staff to overcome all the difficulties and to build trust in this new type of partnership for a better environment. I am certain that many other projects, within the PCF and outside, will follow this breakthrough."

"This indeed is a historical event", said David Dollar, World Bank's Country Director for China, "not only because this ERPA is the first to be executed in China, but also because the size of the ERPA amount is the largest within the World Bank's carbon finance business so far conducted. I sincerely congratulate all of the parties concerned on this transaction, and look forward for further expanded CDM activities here in China." 

By introducing new technology, this highly replicable project will build local capacity and will serve as an example for other countries.

(China.org.cn December 2, 2004)