Chinese firms, WB ink deal on carbon emission
(Xinhua)
Updated: 2005-12-20 09:33

Two Chinese companies yesterday signed 930 million USD emission reductions purchase agreements with the World Bank's Umbrella Carbon Facility for the largest emission reductions project on record.

Through the 775 million euro (930 million US dollar) contract, the two private chemical companies, Jiangsu Meilan Chemical Co. Ltd., and Changshu 3F Zhonghao New Chemicals Material Co. Ltd, in Jiangsu Province in China are expected to reduce emissions of about 19 million tons of carbon dioxide equivalent annually, the bank said in a statement.

The World Bank also signed a Memorandum of Understanding with the Chinese Ministry of Finance for collaborating in the design and development of a Clean Development Fund (CDF), through which revenues accruing to the Government of China as a result of the sale of emission reductions will be used to support sustainable development activities.

The Chinese government will retain 65 percent of all HFC-23 revenues for investing in projects and activities related to Climate change through the newly established CDF. The CDF is expected to finance climate mitigation projects in priority sectors such as energy efficiency, renewable energy, coal mine methane recovery and use.

Ju Kuilin, deputy director general of the International Department of the Chinese Ministry of Finance, said the Chinese government attaches great importance to and actively participates in global efforts under the Kyoto Protocol.

The World Bank, on behalf of a partnership between public and private sector buyers will purchase the emission reductions of HFC-23 (trifluoromethane), one of the most potent greenhouse gases responsible for climate change through global warming.

HFC-23, which has a global warming potential that is 11,700 times that of carbon dioxide, has generated as a waste gas in the manufacturing process of HCFC-22 which is a gas used as a refrigerant and as a feedstock, a raw material for other products.

HFCs are among the six greenhouse gases the Kyoto Protocol covers.

The project will capture and destroy the HFC-23 that would otherwise be released into the atmosphere in the course of HCFC-22 production. The companies involved will sell the HFC-23 emission reductions to various buyers through the Umbrella Carbon Facility of the World Bank.

Teresa Serra, the World Bank's East Asia Sector Director For Environment and Social Development, said China will move to the forefront of countries making contributions to global efforts to mitigate the effects of climate change.

The project provides a developing country like China significant resources for sustainable development activities, said the official.

China's CDF will receive revenue shares from all Clean Development Mechanism (CDM) projects in China from 2005 onwards and will be governed by China's CDM rules regarding approval procedures for project proposals, she said.

Warren Evans, director of Environment at the World Bank, said China is setting an example for the world with this project.

With 65 percent of the revenue going to sustainable development with the Clean Development Facility, China is demonstrating its commitment to tackling climate change and to sustainable development for its people, said Evans.

At the same time the carbon market is benefiting from this huge expansion of the CDM and the private sector is fully involved through the innovative Umbrella Carbon Facility managed by the World Bank.

The Umbrella Carbon Facility was recently established to handlelarge emission reduction purchases. The Umbrella Carbon Facility will pull together multiple sources of funding, including from theBank's existing carbon funds, to purchase large volumes of carbon emissions from pre-identified projects, on behalf of governments and private firms.

More than 75 percent of the money in the Facility represents private capital. The Bank already administers eight carbon funds, including the Community Development Carbon Fund (CDCF) and the BioCarbon Fund (BioCF) which help poor countries and communities to benefit from carbon trade.

Including the China HFC-23 window of the Umbrella Carbon Fund, the total carbon funds being managed by the World Bank will exceed 1.8 billion US dollars, said the bank.

With the signature of the two emission reductions purchase contracts in China, the World Bank has signed 36 emission reductions purchase contracts for over 1.1 billion US dollars.