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CDM in China Push Through Market
On 30 June 2004, China issued “Interim Measures for the Management of CDM Project Activities in China”. This regulation is China’s formalization of its intention to participate in the CDM and aims to reduce the uncertainties pertaining to the legal framework conditions of the CDM and its application in China.
The Interim Measures include: admission requirements, information about project development and implementation procedures, details on the UNFCCC and Chinese CDM authorities, etc. The National Development and Reform Commission (NDRC) is the Designated National Authority for CDM in China.
While China is eager to attract investments from Annex I countries, it is the particular aim of the Interim Measures to push only those projects that are in line with China’s technological priorities, such as the improvement of energy efficiency, the development and use of renewable energies and natural gas, and the utilization of methane and coal-bed methane. A remarkable element of the Interim Measures is that they require the project developer to share the benefits from the transfer of the certificates with the Chinese Government, with the distribution of the benefits to be determined by the Chinese government.
Furthermore, the Chinese Government currently considers only wholly Chinese enterprises and enterprises under Chinese control (meaning a Chinese ownership of more than 50 percent) eligible for this kind of projects.
After having been recognized as a market economy by several developed and newly industrialized economies, China is now taking further steps in the application of methods that are more oriented to the market economy by applying economic instruments rather than pure command and control measures. The Interim Measures are a good example of that process. There are, however, two problems.
Since the Chinese Government aims at limiting the range of projects according to their technological priorities, this new policy may imply competitive disadvantages both for the companies from Annex I countries that are ready to invest in China, and the Chinese suppliers of CDM projects.
For instance, foreign investors will hardly have access to cost-effective potentials for the reduction of HFC23 (a by-product of the coolant HFC22 that has a highly detrimental effect on the climate), since it is not among the priorities of the Chinese Government. Hence, it is likely that such potential projects will be burdened with a prohibitively high revenue share for the Chinese Government.
The second problem is that the requirement that solely Chinese or Chinese-controlled enterprises are eligible for project development imposes another significant barrier for foreign investments in Chinese CDM projects. However, if, due to these constraints, the interests of foreign investors in Chinese CDM projects will not increase, it may well be that Chinese regulations will be relaxed or abolished in the medium term.
Discussion Platform in JIQ Issue October 2004
Mr Donald Goldberg and Mr. Kevin Baumert on Action Targets
Discussion Platform in previous JIQ Issues
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