|
|
Home
| Search | Site Map | Privacy Policy | Contact Us | |
|
|
China Pursues Kyoto Protocol's Clean
Development Mechanism A January 2003 report from Embassy
Beijing. China
is slowly but surely pushing forward with a framework for Clean Development
Mechanism (CDM) cooperation with other countries. It may soon establish a National CDM Management Office and
has sought funding from several international donors for CDM-related capacity
building and technical programs.
Even while pursuing CDM projects, China has shown willingness to
explore cooperation in climate-related areas with non-Kyoto signatories,
particularly the United States.
The U.S.-China Climate Change Working Group is a good channel to make
the most of this opportunity. China
Organizes CDM Management Office Chinese
Premier Zhu Rongji announced China's ratification of the Kyoto Protocol at
the Johannesburg World Summit for Sustainable Development in August
2002. Although China accepted no
mandatory greenhouse gas (GHG) emissions target under the Protocol, Chinese agencies
have been working to define and develop programs to reduce carbon emissions
in cooperation with international partners under the Clean Development
Mechanism (CDM) emissions reductions trading program. China's State Development and
Planning Commission(SDPC), Ministry of Science and Technology (MOST), State
Economic and Trade Commission (SETC) and Ministry of Foreign Affairs (MFA)
have spelled out draft guidelines for a National CDM Management Office. The State Council will likely
promulgate these guidelines by the end of 2002. China has also sought funding from numerous multilateral
and international donors for capacity building and technical programs related
to the CDM program. As
early as October 2002, MOST, SDPC, SETC and the MFA submitted a joint
recommendation to the State Council calling for the establishment of a
National CDM Management Office along the following lines: ·
MOST, SDPC, SETC and MFA should be the
key governmental actors in all CDM projects; ·
These four agencies would form an
inter-ministry CDM Project Review Board, which would be the decision-making
body for CDM projects and policy; ·
The CDM Board must approve all
projects; ·
A CDM Secretariat/Administrative Center
will serve the Board and carry out daily administrative work; ·
The "implementing agency"
should be a Chinese entity that partners with a foreign entity to carry out a
CDM project; ·
After passing through the CDM Board,
projects should be verified/certified by an independent auditor. After this certification, the CDM
Board would send Certified Emissions Reductions (CER's) to the relevant
country or company account; ·
A "Cost Recovery Approach,"
using a flat commission rate, should be considered in order to enable the
government to recover its expenses used for monitoring and evaluating CDM
projects. This rate would be set
somewhere between 1% and 5%, but most likely at 2%. According
to officials, China will have a "one-stop" CDM project approval
process. Chinese provincial or
local government bodies will not be allowed to clear or approve CDM projects
independently. The national CDM
Board will be composed of working-level (Office Director or Bureau Director
General level) officials. The
Board will ideally review each proposal within a week to ten days, before
forwarding each project to a Minister or Vice Minister for final
approval. The senior official
approving each project will be responsible for issuing approval letters to
project participants. Issues
with CDM Implementation According
to experts in the Beijing donor community, MOST and other Chinese government
entities are quite keen to participate in CDM projects. But Chinese managers remain concerned
about pricing. Currently, the
price per ton of CO2 reduction is three to five U.S. dollars. The Chinese feel this is too
low. The Chinese also have questions
about "operational entities" and the issue of who will pay for
preparation of projects. Will it
be the sellers of the CER's, they ask, or will it depend on the cost of the
project? One
diplomatic source also said that Chinese interlocutors emphasize that
independent entities should be made responsible for objectively monitoring
and assessing CDM projects. They
also apparently feel that domestic bodies should be equipped to play this
role, in order to keep project implementation costs to a minimum. Canada:
An Active Partner on CDM MOST
has had significant interaction with several foreign partners on CDM-related
projects, and Canada has probably been the most active international
partner. Canada's International
Development Agency (CIDA) has already used $11.5 million to fund six projects
related to capacity building and technology transfer, in order to help China
kick-start its CDM process.
(Canada's Climate Change Development Fund has $76 million to be
allocated worldwide.) The six
Canadian projects focus on: ·
Capacity building on "awareness
and outreach," "national communications," and "impact and
adaptation"; ·
Enhancing China's capacity for carbon
sequestration (capacity building in terrestrial carbon cycle monitoring and
modeling); ·
Coalbed methane technology (CO2
sequestration); ·
Reduction of CO2 emissions from
coal-fired utility boilers; ·
Solar energy for rural electrification
in Western China; and ·
Renewable energy diversification
(primarily promotion of small hydropower facilities). Canada
has made an additional $3.2 million available for China projects, to be
implemented through the Canada Trust Fund on Climate Change managed by the
Asian Development Bank. Asian
Development Bank: Pursues Small-scale Projects The
Asian Development Bank (ADB) is pursuing China CDM-related activities in
cooperation with CIDA, GTZ (Germany's international development agency), the
Netherlands, Italy, the World Bank and the United Nations Development Program
(UNDP). On its own, ADB
implements only small-scale CDM projects in China, fitting the COP-6
definition of "small scale projects" which conserve less than 150
million MW of energy per year. ADB
and CIDA have so far used $750,000 from the Canada Trust Fund on Climate
Change mentioned above to implement a handful of small-scale renewable energy
and energy efficiency projects in Gansu and Guangxi. The Gansu projects will focus on
small-scale hydroelectric
and solar energy facilities, while the Guangxi projects will focus on energy
efficiency, animal waste, biomass and industrial innovation. The International Resource Group, a
U.S.-based consulting firm, won the contract for these projects. In addition to these activities,
Chinese interlocutors are reportedly eager to cooperate on the promotion of
renewable energy, as well as the development of coal bed methane (CBM)
resources. Japan:
Interested, But Not Yet Committed Several
recent articles in the Chinese and Japanese press have mentioned potential
Japan-China collaboration on CDM projects. Japan's New Energy and Industrial Technology Development
Organization (NEDO), however, has only just begun to discuss capacity
building and project management with Chinese interlocutors, and NEDO has not
yet been allocated a budget for work on CDM in China. Some earlier Japanese projects
related to climate change include a ten-year-old project with SDPC on energy
efficiency, and an Activity Implemented Jointly (AIJ) feasibility study on
CDM started in 1987. Australia:
Also Interested Australia
has some limited climate change cooperation with China. The United Nations Development
Program (UNDP) is funding Chinese experts to go to Australia to study
collection of statistics and data management. Australia is also looking into non-Kyoto Protocol
mechanisms for emissions trading, and Australia may promulgate regulations on
"unilateral" CDM projects. Opportunities
for Non-Kyoto Countries? China
has not yet developed a clear policy concerning climate change cooperation
with countries that have not ratified the Kyoto Protocol, but officials say
that China will be flexible enough to allow non-Kyoto foreign partners to
engage in emissions reduction trading projects in some form or another. Non-Kyoto entities may face problems
trying to use or bank an abundance of CER's. They may also face CER price discrimination. But Chinese officials say they hope
non-Kyoto entities can find creative ways to access the global emissions
trading market. Another
area for potential expanded U.S.-China cooperation is climate change
research. In fact, a meeting of
the U.S.-China Working Group on Climate Change held in Beijing in January
2003 succeeded in outlining a wide-ranging program of research cooperation,
covering ten fields. A joint
statement released by the Working Group following its meeting contains more
details (http://www.usembassy-china.org.cn/sandt/Statement-USChina-Climate.htm). Comment Once
the State Council promulgates the regulations for the CDM Management Office,
Kyoto Protocol signatories will have a clearer roadmap for how to proceed
with CDM projects. For entities
residing in countries that have not ratified Kyoto, the mechanisms for involvement
in GHG emissions trading remain unclear, although China may be open to
pragmatic arrangements which might allow non-Kyoto entities to collect CER's
from China. Regardless, the
Chinese have expressed willingness to explore areas for cooperation in climate-related
research. The January meeting of
the U.S.-China Working Group on Climate Change helped define these areas
further. |