Carbon Credits, China, Climate Change

Bill Gates-backed Carbon Fund Taps China Emissions

August 8, 2007 – SYDNEY (Reuters) – A new 400 million euro ($552 million) carbon trading fund backed by Microsoft founder Bill Gates will start by buying 10 million tonnes worth of emissions reductions by 2012 from projects in China.

Peony Capital Ltd, a Beijing-based investment vehicle, said on Wednesday it had committed to buying certified credits from two fuel switching and one wind power project, and hoped to complete fund-raising by December to invest in further projects.

The Bill and Melinda Gates Foundation Trust has provided 100 million euros in seed capital for the fund, which is currently tapping investors in Australia, the United States, Europe and Asia for another 300 million euros.

But Peony said delays in getting decisions on credit lines were inevitable due to the global credit turmoil in recent weeks.

“No-one is immune to what has happened in the last weeks when trying to get or make financial decisions,” said Peony director Peter Yates.

“If we can have it completed by December I think we would have done extremely well and if takes a few months after that it won’t be a big surprise,” Yates, a former Macquarie Bank banker and senior Australian business executive, told Reuters.

Peony was established in March to invest in carbon emission reduction projects in China under the Kyoto Protocol’s Clean Development Mechanism (CDM).

CDM projects allow companies or governments in countries with Kyoto targets to fund emission-cutting projects in developing countries to get carbon credits to offset their own pollution or to sell to others.

Utilities in the European Union and Japan are key buyers, and credits for guaranteed delivery are worth about 16 euros a tonne this week, well above China’s minimum price for producing credits of around 8 euros.

“The bonus is we are also doing something good for the planet,” Yates said. “The second objective of Peony is we believe the introduction of air as a commodity into the capitalist system is going to accelerate rather than decelerate over the medium term.”

Peony said it was working with one of China’s largest power generation companies on the projects. China, the top destination for developing CDM carbon credits, is expected to overtake the United States as the largest emitter of carbon dioxide because of surging energy use, experts say.

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