Sun, May 13, 2007 - Page 9 News List

Clean power that reaps a whirlwind

Economic development advocates argue that the Clean Development Mechanism, a complex system of trading pollution credits, favors fast-growing economies like China while leaving poorer nations out in the cold


The wind turbines rising 55m above this dusty village at the hilly edge of Inner Mongolia could be an environmentalist's dream: Their electricity is clean, sparing the horizon sooty clouds or global warming gases.

But the wind-power generators are also part of a growing dispute over a UN program that is the centerpiece of international efforts to help developing countries combat global warming.

That program, the Clean Development Mechanism (CDM), has become a kind of Robin Hood, raising billions of dollars from rich countries and transferring them to poor countries to curb the emission of global warming gases. The biggest beneficiary is no longer so poor: China, with US$1.2 trillion in foreign exchange reserves, received three-fifths of the money last year.

Scientists increasingly worry about the emissions from developing countries, which may contribute to global environmental problems even sooner than previously expected.

China is expected to surpass the US this year or next to become the world's largest emitter of global warming gases. And as a result, some of the poorest countries are being left out.

That draws attention to the Clean Development Mechanism, which has grown at an extraordinary pace, to US$4.8 billion in transfer payments last year to developing countries from less than US$100 million in 2002.

The CDM raises its money through a complex market in trading pollution credits: Businesses and governments in affluent regions like Europe and Japan help pay to reduce pollution in poorer countries, offsetting their own emissions. This helps advanced industrial nations stay within their Kyoto Protocol limits for emitting climate-changing gases like carbon dioxide. For each tonne of global warming gases that a developing country can prove it has eliminated, the secretariat of the Clean Development Mechanism in Bonn, Germany, awards it a credit. Developing countries sold credits last year to richer nations for an average price of US$10.70 each.

Its growth has come almost entirely by focusing on efficient projects in China and other fast-growing countries that spread the administrative costs over many large efforts, while poorer lands have received almost nothing. And that is why the program is becoming a battleground, pitting an unlikely coalition of bankers, traders, industrialists and environmentalists, who defend it, against economic development advocates, who warn of distortions.

According to the World Bank, China captured US$3 billion of the US$4.8 billion in subsidies last year for dozens of projects. Yet it accounted for less than two-fifths of the developing world's fossil fuel consumption, the main source of warming gases.

One of the projects is the wind farm here -- nestled on a pine-forested hill beside a blue lake fringed by broad fields tilled into long furrows of freshly planted wheat. It is profitable even without the subsidies and is owned by a group of Chinese companies traded on the Shanghai Stock Exchange.

But it is China's financial sophistication that has helped it soak up so much in subsidies. A vigorous cottage industry of project designers and brokers has sprung up in Shanghai -- with workers translating forms into Chinese, promoting the program and taking steps to make it easy and inexpensive for Chinese companies to participate.

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