Carbon Credits, China, Coal, Germany

RWE Buying Coal Mine Methane CERs in China

September 19, 2007 (Reuters) – RWE Power, an arm of German utility RWE (RWEG.DE), expects to start collecting emissions reduction credits from its first coal mine methane project in China in 2008, and is eyeing others, a company official said. Andreas Feldmann, director of the firm’s Climate Protection Projects in China, said he expected to get up to 350,000 tonnes of credits a year from the venture in northern Shanxi province.

RWE is also considering another four or five large coal mine methane projects in China, and expects to sign some deals later this year, he added. He declined to comment further.

The investments are made under the Kyoto Protocol’s Clean Development Mechanism (CDM), which allows polluters in rich nations to meet part of domestic greenhouse gas quotas by paying for emission-cutting projects in developing countries.

Investors have flocked to China, in part because its massive industrial and coal mining sectors have offered relatively easy pickings. Last year it provided over 60 percent of all CDM credits generated worldwide.

Feldmann said RWE has already agreed to buy 20 million tonnes of credit from China, nearly a quarter of the volume it needs through 2012, but in future it hopes to have a “more direct involvement in projects” to ensure their demand is met.

“Lots of projects have suffered due to the failure to deliver the Certified Emission Reductions (CERs) they promise,” he told Reuters on the sidelines of a coal conference in Shanxi.

“That also brings trouble for buyers.”

The Shanxi project is a joint venture with a local partner, which should be operational by the second quarter of 2008 and earn reductions for a seven-year phase through 2015 — although the current provisions of the Kyoto Protocol only run to 2012.

The project, with total investment of less than 10 million euros, may be extended for two more seven-year phases if it gets government approval, he said.

“We are intending to be a constant and continued business in China in the next decade,” Feldmann said.

“The prices in the Chinese market are a bit more expensive than in some other countries, but you do not want to buy the cheaper ones that may never be delivered,” he added.

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