UN wind farm decision unfair, irresponsible -China

* U.N. climate body "irresponsible" to reject China projects

* Carbon trading mechanism needs more transparency

By David Stanway

BEIJING, Dec 14 (Reuters) - The U.N. decision to strip 10 Chinese wind farms of carbon financing this month was "unfair" and "irresponsible" and the carbon trading system needs more transparency, a Chinese official said on Monday.

The executive board of the United Nations Framework Convention on Climate Change ruled that the 10 projects contravened the key principle of "additionality", meaning they would have been profitable without the proceeds earned from selling carbon credits.

It accused China of deliberately under-reporting the tariffs paid to the wind farms in order to qualify for the U.N. carbon trading scheme known as the Clean Development Mechanism (CDM).

Sun Cuihua, vice-director of the National Development and Reform Commission's climate office, rejected the allegations.

"I don't know what their motives might be, but the executive board is just unfair towards Chinese projects," she said on the sidelines of a press briefing.

"Saying that Chinese projects are not compliant with CDM principles, and that China is pushing down tariffs artificially, is extremely irresponsible," she said.

The CDM allows rich "Annex I" countries to meet their carbon dioxide reduction targets by investing in clean projects in the developing world, which are granted offsets known as "certified emission reductions" or CERs.

Reforming the CDM is one of the subjects up for discussion in Copenhagen, where representatives from 192 countries have gathered to thrash out a new global accord to combat climate change when the first phase of the Kyoto Protocol ends in 2012.

The European Union has been calling for wholesale changes to the CDM system, saying that advanced developing nations like China, India and Brazil have benefited at the expense of poorer regions like Africa.[ID:nPEK218759]

Sun responded to allegations China has been exploiting the system to flood the carbon markets with cheap and environmentally dubious carbon offsets by saying all it could do was comply with the rules.

"Our project design documents were checked and approved. The criticisms are not objective."

She added that at least one of the projects will now be abandoned as a result of the U.N. decision, proving that it would not have been viable without the proceeds of carbon trade.

A CDM project developer attending the conference said that CER proceeds sometimes accounted for as much as 15-20 percent of a wind power project's revenues -- more than enough to determine its viability.

Another said it was absurd to suggest that China was rigging its entire power pricing mechanism in order to obtain CDM financing for a small number of projects.

"Why would China adjust its wind power tariffs just to obtain a small amount of money," said Tang Renhu, director of the CDM department of China National Water Resources Co. Ltd. "It is ridiculous and irrational to say that."

While some suggested the decision could have been an attempt to put Beijing on the defensive during the Copenhagen talks, others conceded China could be a victim of its own success.

China has been responsible for around a third of all registered projects and nearly half of the CERs issued so far.

"I do think this is a political decision, and I think the executive board has come under pressure from other countries to do something about China's complete domination of the CDM," said one carbon trader.

Sun said China's delegation in Copenhagen would continue to raise the issue, and was pressing for more consistency and transparency from the executive board and from any new carbon trading system beyond 2012. (Reporting by David Stanway, Editing by Anthony Barker)