ADB, Carbon Credits, China, Emissions Reduction

China proposes US$3 billion carbon fund

November 13, 2007 (Financial News) – China’s State Council will plow about €2bn ($3bn) in taxes raised from the country’s trading in carbon emissions into a new state-owned fund that supports emissions-reducing ventures as part of its government’s strategy to foster and finance projects for climate change.


The China Clean Development Mechanism Fund, which has received financial and advisory support from the World Bank and the Asian Development Bank, will be managed by China’s Ministry of Finance.

It will use tax revenues from sales of certified emissions reductions to invest in environmental policy measures such as boosting energy efficiency, Reuters quoted Finance Minister Xie Xuren as saying.

The Clean Development Mechanism, part of the Kyoto Protocol, enables industrialized countries to invest in projects in developing countries that reduce emissions in return for carbon reduction certificates to boost their own domestic quotas.

As of last month, China had approved 885 CDM projects, which would prevent emissions equivalent to 1.5 billion metric tonnes of carbon dioxide and generate credits worth $15bn (€10.3bn), according to Reuters.

China, which has had economic growth of more than 10% in the last few years, is predicted to become the world’s largest emitter of greenhouse gases by the end of December.

Beijing is reluctant to introduce mandatory caps on emissions, which it fears could dent growth, and instead has prioritized the work of energy conservation and emissions reductions, and is actively encouraging the development of CDM projects across China.

In June, Point Carbon, a leading analysis, advisory and information service for the environmental and energy market, rated China as the country that hosted the most CDM Projects. Globally, CDM transactions in the primary and secondary market had a combined value of €3.9bn ($5.7bn) in 2006.

Among the many carbon funds operating worldwide is the €400m Peony Capital fund, which was founded early this year.

It is led by chief executive Tim Clissold and backed by the Bill and Melinda Gates Foundation Trust. Peony works in partnership with project developers, financial institutions and the Chinese government, and invests in CDM projects in China that have the potential to generate carbon credits.


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