Emissions Trading Deal Set For China

A major World Bank agreement to reduce greenhouse gas emissions in China went into effect last week as participants placed $1.02 billion into the bank's Umbrella Carbon Facility to finance the deal. The money will allow the participants to purchase credits for carbon emissions reductions to be made by two industrial gas operations in southern China and to support future sustainable development programs there.

The government and private organizations buying the carbon credits from China can use them to meet national pollution targets agreed to under the Kyoto protocol.

Greenhouse reductions will come from spending a portion of the money to cut HFC-23 (trifluoromethane) emissions at two Chinese chemical companies, Jiangsu Meilan Chemical and Changshu 3F Zhonghao New Chemicals Material Co., which produce the compound as a by-product of refrigerant HCFC-22 production. The HFC-23 will be destroyed by high-efficiency incineration, which could begin in late October, according to the bank.

HFC-23, one of the greenhouse gases specified in the Kyoto protocol, has 11,700 times the global warming potential of CO₂, and the projected annual reductions will be the equivalent of 19 million tons of CO₂.

The Umbrella Carbon Facility is a mechanism set up by the World Bank to handle large greenhouse gas reduction purchases under the flexible mechanisms of the Kyoto protocol. Joelle Chassard, manager of the Carbon Finance Unit at the bank, says opening up this mechanism has helped bring liquidity to the growing carbon market. "And the Umbrella Carbon Facility is producing a double dividend, with the government of China receiving 65% of the proceeds for sustainable development through their newly established Clean Development Fund," Chassard says.

China's Clean Development Fund is expected to finance climate mitigation projects in sectors such as energy efficiency, renewable energy, and coal mine methane recovery.