China emission-cutting fund to reap up to $3 bln

By Lindsay Beck

BEIJING (Reuters) - China could have as much as $3 billion coming to a state-owned fund that supports emissions-reducing ventures, if a slate of projects on its books win U.N. approval, the Finance Ministry said on Friday.

As of last month, China had approved 885 projects, which would prevent emissions equivalent to 1.5 billion metric tons of carbon dioxide and generate credits worth $15 billion.

"Out of that, the state can take $3 billion to use for the Clean Development Mechanism (CDM) fund," China's Ministry of Finance said in a notice on its Web site (www.mof.gov.cn) that announced the official launch of the fund.

The CDM is part of the Kyoto Protocol. It allows rich nation polluters to fund emissions-cutting projects in the developing world in return for credits to put towards domestic quotas.

Beijing levies a fee on all CDM projects and has said it will use the cash to support activities to tackle climate change, from raising public awareness to mitigation and adaptation projects.

Managed by the Ministry of Finance, the fund appears to be profiting from China's dominant position in the CDM market, which the World Bank estimates was worth about $5.5 billion in 2006.

It is the top producer of credits, with particularly large volumes coming from projects to destroy an industrial gas HFC 23, which is thousands of times more potent than carbon dioxide.

Because the gas is relatively cheap to destroy in proportion to the amount of credits it earns, and projects do little to further Beijing's goal of cleaning up its energy infrastructure, they attract a 65 percent tariff.