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Two Renewable Energy Carbon Projects Signed in Beijing

October 27, 2006

Beijing, October 27, 2006 — Two Chinese companies today signed greenhouse gas emission reductions purchase agreements with the World Bank acting on behalf of the Prototype Carbon Fund and the Community Development Carbon Fund (CDCF) for the one hydro projects and one wind farm project in China under the Clean Development Mechanism of the Kyoto Protocol. The signings took place at the CARBON EXPO ASIA, the region’s first carbon fair with more than 800 participants from government, civil society and the business world.

The Huitengxile Wind Farm Project is located in ChayouzhongqiCounty of the Inner Mongolia Autonomous Region. Fifty to100 wind turbines with total generation capacity of 100 megawatts will be installed to supply 245 gigawatt hours to the North China Power Grid. This project expects to reduce carbon dioxide emissions of 240,000 tons a year avoiding coal-fired generation. The PCF will purchase 1.6 million tons of certified emission reductions from this project.

The project will contribute to environmentally sustainable growth and protecting local people's health by reducing local pollutants—sulphur dioxide and nitrous oxide which would otherwise be generated by equivalent coal-fired power plant.

The second project for which an agreement to reduce emissions was signed today on behalf of the Community Development Carbon Fund was the China Hubei Guangrun Hydro Development Project, located in Guangrun county, China. The project will install three power stations in the GuangrunRiver.The 28 megawatt generation capacity of the Guangrun Station component will supply about 89 gigawatt hours renewable energy annually to the Jianshi Network, which is connected to Hubei Provincial Power Grid. The supply of renewable energy is expected to reduce greenhouse gas (GHG) emissions by increasing the supply of hydro-generated energy to the Hubei Provincial Power Grid, thus displacing coal and gas generated energy in the power grid. It is estimated that the Guangrun Stations component will reduce GHG emissions by 72,560 tons of carbon dioxide equivalent a year, at full capacity (expected by end of 2008).

The project is also expected to significantly reduce poverty. Jianshi County has a very high poverty incidence—more than 95 percent of its total population of almost 520,000 is living in poor rural areas. The Guangrun Stations component will enhance protection of the County Seat from flooding. It will also allow the population to access water supply for irrigation and consumption and provide cheaper and more reliable electricity to some of the poorest areas covered by the Jianshi County Network.

This company has developed a Community Benefit Plan to materialize benefits to local communities. The benefit plan will be financed by $0.8 per certified emission reduction of community benefit premium to construct a drinking water pipeline, renovate the local elementary school and support village clinics for the nine villages surrounding the hydro project sites. The company will also build a folk-custom Museum of the Tujia and Miao Minorities and fund an annual local ethnic cultural festival to strengthen and preserve the local minority group’s identity.

This is the first Clean Development Mechanism project in China with significant measurable benefit for disadvantaged communities. The CDCF through the World Bank will purchase around 485,000 tons of carbon dioxide equivalent from this project.


The Kyoto Protocol and the Clean Development Mechanism (CDM)

The Kyoto Protocol provides an unprecedented opportunity for the Organization for Economic Co-Operation and Development (OECD) countries to reduce greenhouse gas emissions and at the same time help developing countries and economies in transition invest in climate friendly technologies and infrastructure. The Protocol’s Clean Development Mechanism (CDM) and Joint Implementation (JI) provide an element of flexibility for the industrialized countries to meet their obligations under the Protocol to reduce greenhouse gas emissions by on average 5.2 percent below their 1990 levels by 2010. In so doing, the Protocol provides an unprecedented incentive for those seeking lower cost emission reductions, to leverage the flow of private capital and privately held clean technology from North to South.

Carbon Finance

Carbon finance is the general term applied to financing seeking to purchase greenhouse gas emission reductions (“carbon” for short) to offset emissions in the OECD. Commitments of carbon finance for the purchase of carbon have grown rapidly since the first carbon purchases began less than a decade ago. The global market for greenhouse gas emission reductions is estimated at a cumulative 200 million tons of carbon dioxide equivalent since its inception in 1996 Volumes are expected to continue to grow as countries that have ratified the Kyoto Protocol work to meet their commitments, and as national and regional markets for emission reductions are put into place, notably in Canada and the European Union (where trading started formally in January 2005).

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