Some Chinese enterprises have found that greenhouse gas, identified as the chief cause of global warming, can also be profitable.
But to make money from it, they have to cut the discharge of pollutant instead of seeking a high output.
Six producers of steel, coal, gas and power in Chongqing, a metropolis in southwest China, will receive more than 420 million yuan (about US$53 million) by 2012 under a recent agreement on cutting greenhouse gas emission signed with Britain-based EcoSecurities Group Ltd, a major greenhouse gas trader in the world.
The six companies have to commit to reducing carbon dioxide (CO2) emissions by 1.54 million tons annually. One precondition is that they must spend the money on clean production projects.
To Chinese enterprises, which are short of money for pollution-control technology but under increasing pressure for clean production, such a deal is heaven-sent.
Under its agreement with EcoSecurities, the Chongqing Iron and Steel Group, one of the six companies, has to invest about 400 million yuan (about US$49 million) to upgrade its technologies for cutting CO2 emissions.
"It's a huge cost for us, but considering the sustainable development of our company, it's worthwhile. Besides, the money we can get from EcoSecurities in the following years is like a bonus that makes us feel compensated," said Yang Zhiwei, general manager of the group, a major CO2 producer, in Chongqing.
Yang's company is to get nearly 100 million yuan (more than US$12 million) through its clean production projects under the contract with EcoSecurities.
An estimated annual deal of 200 million tons of CO2 emission in the next five years, almost half of the global potential market, makes China the most alluring destination for investment by foreign enterprises which have to reduce CO2 emissions, thanks to the Clean Development Mechanism (CDM), an international arrangement under the Kyoto Protocol.
The protocol is a United Nations (UN) pact to contain global warming, which allows developed countries and their enterprises to earn emission rights by investing in energy efficiency or renewable energy projects in developing countries to help reduce their emissions.
Under the protocol, which took effect in February, industrialized countries, except the United States, agreed to cut the emissions of heat-trapping gases like CO2 by an average 5.2 percent from the 1990 levels during the 2008-2012 period.
"With the CDM, China has become the most promising supplier in the global emission market for greenhouse gas and it will also harvest great profit from the CDM projects," said Marc Stuart, executive board chairman of EcoSecurities.
According to a research report on CDM development made by Beijing-based Qinghua University, CDM projects will help bring 1.96 billion yuan (more than US$240 million) of foreign investment into China this year, and the figure is expected to rise to 3.94 billion yuan (million US$485.8) by 2010.
The current average price for emission rights trading is five to US$10 per ton.
Marc Stuart said that the deal was a win-win choice for Chinese companies and foreign emission credits buyers.
"The market is playing its due role in helping developing countries like China step out of the dilemma of economic growth at the cost of the environment," said Zhou Changyi, an official with the State Development and Reform Commission (SDRC).
More Chinese companies are vying for CDM projects to the commission since the country's first CDM project, a wind power plant, was launched in north China's Inner Mongolia Autonomous Region in 2002, said Xu Huaqing, head of the SDRC's research center for energy, environment and climate change.
Xu said the market-based mechanism injects an economic incentive into pollution-producing industries, which are obliged to adopt clean technology but are unwilling to do so because of financial strain.
Compared with imperative government orders on emission reduction, a flexible market mechanism is more acceptable in a market economy, he said.
(Xinhua News Agency November 12, 2005)