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Thursday, August 12, 2004 

CDM Potential in China

According to a World Bank report on Clean Development Mechanism in China published in June, in year 2010, the CDM market in China is estimated at between 24.9-111.6 MtCO2, based on an equilibrium certificate price of $5.20 to $6.50/tCO2.
China'€™s share in the global carbon market is 11 percent, and around 50 percent in the CDM market. China’s CDM potential of 79.2 MtCO2 for 2010 is, however, still substantial. Supplying this amount of CERs would require a significant number of newly built larger power projects (300MW-600MW) registered as CDM projects, as well as several dozen to as many as 100 renewable power projects put into operation by 2006–07. (pp. xxxviii)

CDM potential also exists in various other sectors: steel making and the cement sector (10 percent); the chemical industry such as ammonia production, calcium, soda ash (5 percent); industries such as glass sector, brick production, aluminum, copper,
zinc&lead, paper making, ethylene, transport, service sector, urban and rural residential (15 percent); and projects abating non-CO2 GHGs in the industrial sector (10 percent).

Clean Development Mechanism will not have a significant impact on overall economic growth in China in the timeframe considered (up to 2010-“2020).

The report also noted that the CDM market is buyer dominated. Investors preferred “high quality” and “low risk” projects. However, the marginal incremental abatement costs of GHG emission reductions in China is not competitive. "Financial performance of the CDM case project investment (studied in the report) is not competitive with the baseline, unless the additional investment from CDM investors is involved with CERs as a return."

Subsidies for renewable energy will be removed as China deregulates its electricity sector. This will result in "higher power generation costs for renewables and higher prices for the respective electricity," adding yet another barrier for investment into the area.

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