UN panel to rule on ChinaÂ’s wind projects

CDM Review of Chinese Wind Projects examines additionality under the Kyoto Protocol, carbon offsets and CERs, UN board scrutiny of wind tariffs, emissions reductions, coal baselines, and market integrity in China's fast-growing power sector.

Lobbyist pressure will not weigh on a UN panel's decision whether to award carbon finance worth about 100 million euros (US$144 million) to Chinese wind power projects, said the chair of the panel.

"If you add it all up there are quite a number of projects, all from China," Lex de Jonge told the Reuters Global Climate and Alternative Energy Summit, on a UN ruling on wind farm financing due soon.

The issue has caused long-running tension between the panel and project developers and brokers after a series of wind farm rejections over the speed of approvals in the $6.5 billion global carbon offset market.

Under the UN-led Kyoto Protocol's clean development mechanism, with some Kyoto profits in China raising questions, rich countries can buy rights to pollute by funding cuts in greenhouse gas emissions in developing nations.

The UN executive board in the past three months has decided to review if many new Chinese wind projects qualify, after noting a drop in financial support from Beijing.

The Kyoto scheme is supposed to fund additional cuts in emissions and, if projects are self sufficient, with some renewables powering ahead without the CDM in China, it may be that they are no longer cutting emissions below normal trends.

"We see a downward trend in (windpower price premium) tariffs in certain areas in China. Changing the tariff, as sectors aim to wean off subsidies over time, may have an impact on a final decision on whether a project is additional," he said at the summit held at the Reuters office in London.

The panel is reviewing 17 projects with a total capacity of more than 900 megawatts, enough to power about 1 million homes. The projects would produce through 2012 some 8 million tonnes of carbon offsets called certified emissions reductions (CERs), even as reducing emissions in Europe remains difficult, worth 107 million euros at today's prices.

Clean Development Mechanism (CDM) projects, which are favored in India by many developers, must prove either that the scheme allowed a project to overcome some barrier such as financial uncertainty, or that the project was not as financially attractive as an alternative such as coal power.

Market participants say the rules should be simpler — pointing out that in China electricity generation is dominated by high-carbon coal.

"The need to encourage the deployment of wind energy in countries like China, where energy needs are growing rampantly, is enormous," said the lobby group the International Emissions Trading Association in a letter to de Jonge last month.

China has recently firmed its support for the wind power sector in some regions with a premium tariff levied, complicating the issue of whether Chinese official support is indeed falling.

"I didn't count and I don't care," said de Jonge when asked how much the projects under review were worth. "That might sound strange but this is about safeguarding integrity of the CDM."

"With so much money involved, people have interests and if they don't see their interests followed they start complaining. I don't feel pressured about this. To me it's normal."

De Jonge said that some past "bashing" of the board had been justified, for example with regard to a lack of transparency, but added that waiting times were falling following new guidance.

Most criticism of the CDM now came from the United States, he said. "(American) NGOs and academics are critical toward the CDM... based on arguments that are no longer valid."

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