CHINA: December 10, 2007


BEIJING - China expects to raise US$1.5 billion by 2012 from a levy on sales of carbon credits, which it will channel into a government fund to raise awareness of climate change and cut emissions, the head of the fund said.


Chen Huan, acting director of the Clean Development Mechanism fund, said Beijing wanted to increase public knowledge of climate change and government capacity to cope with it, in a country that has already suffered slightly higher than average warming.

It would also invest some of the cash in projects that directly tackle climate change, potentially ranging from small-scale renewable energy to efficiency improvements at major industrial plants, Chen added.

"We hope that this fund could be a very creative financing mechanism to serve as a new driving force for the country to address climate change," he told Reuters in an interview at the fund's newly established Beijing headquarters.

"We are trying to help the government translate policies into concrete action," he added, as China won praise from campaigners for its constructive attitude at climate talks in Indonesia.

The Clean Development Mechanism, part of the Kyoto Protocol to tackle global warming, allows rich nation polluters to fund emissions cuts in poorer countries and put them towards domestic carbon reduction targets.

China has been the top producer of the Certified Emissions Reductions (CERs) under the system, and Beijing set up the CDM fund to spend a government cut of the earnings from the credits, which are now worth nearly 20 euros (US$29) each in European markets.

Beijing charges a sliding levy on projects, related to how profitable they are, and how much they do to promote government goals of a shift to a cleaner energy infrastructure.

Because of an innovative decision not to label the charge a tax, all the money bypasses government coffers to come straight to the non-profit fund, which was officially launched in July.

Chen hopes money from international lenders like the World Bank and central government cash will eventually also boost its coffers, because at present it is too small to make major investments in emissions cutting projects.


HFC FUNDING KEY

Of the money from CDM projects, around 80 percent will come from projects at chemical plants which destroy a gas called HFC 23, which is thousands of times more potent than carbon dioxide.

The government takes 65 percent of the sales price of these more easily-earned credits, compared with just 2 percent of the value of credits from renewable energy projects.

The fund is drawing up its charter and other key documents, which must be approved by a board staffed with officials from some of the country's top ministries -- Finance, Foreign and top economic planner the National Development and Reform Commission.

Chen hopes they will be approved soon and the fund fully running next year. It is already working on a potential publicity campaign which could include television and radio spots.

A former World Bank official, Chen is also eyeing a treasury department to focus on investing some of its cash in assets like bonds that could boost future funds.

"We have to make money because we don't have a large capital base," he said.

China's CDM fund is the only one in the world, but a Western development agency had approached them about sharing their ideas with African governments, Chen added.

(US$1=.6830 Euro)

(Editing by Bill Tarrant)


Story by Emma Graham-Harrison


REUTERS NEWS SERVICE