Towards an Effective Implementation of Clean Development Mechanism Projects in China
36 Pages Posted: 11 Jun 2004 Last revised: 27 Apr 2014
Date Written: July 2005
With the already huge and growing amount of greenhouse gas emissions and a great deal of low-cost abatement options available, China is widely expected as the world's number one host country of clean development mechanism (CDM) projects. But, making this potential a reality represents a significant challenge for China, because there has been a general lack of awareness by both the Chinese government and business communities, clear institutional structure, and implementation strategy. This has raised great concern about China's ability to compete internationally for CDM projects and exploit fully its CDM potential.
This paper aims to address how CDM projects will be effectively implemented in China by examining the major CDM capacity building projects in China with bilateral and multilateral donors, the treatment of low-cost, non-priority CDM projects, and how a system for application, approval and implementation of CDM projects is set up in China and what roles the main institutional actors are going to play in the system. We conclude that these capacity building assistances, the establishment of streamlined and transparent CDM procedures and sound governance, and the lessons learned and experience gained from the implementation of the CDM project in Inner Mongolia and the two Prototype Carbon Fund (PCF)' projects will help China to take advantage of CDM opportunities. Moreover, in order to further capitalize on its CDM potential, there is a pressing need for the Chinese government to amend its current interim CDM regulations, in particular those controversial provisions on the eligibility to participate in CDM projects in China and the distribution of the revenues derived from CDM project between the project developer and the Chinese government. We believe that taking these ongoing capacity building projects and the recommended actions to clearly define the sustainable development objective of the CDM and disseminate CDM knowledge to local authorities and project developers as sectorally and geographically wide as possible, addressing those controversial CDM provisions with clearer guidance, and gaining experience from real practice will reduce the perceived project risks and lower the barriers to CDM project development in China. This is, in turn, likely to lead a much greater percentage of carbon credits to come from CDM projects in China over the next several years.
Keywords: Clean development mechanism, Capacity building, Charge/tax scheme, China, Price of CERs, Sustainable development
JEL Classification: Q54, Q58, Q52, Q48
Suggested Citation: Suggested Citation