A Guide to Clean Development Mechanism (CDM) Projects in China

By Rebecca Zhang of LeBoeuf, Lamb, Greene & MacRae

Global efforts to address climate change have led to an emergence of climate change laws and policies aimed at limiting the growth of global greenhouse gas emission levels. Since the promulgation of interim Regulations for CDM projects in 2004, and with the entry into force of the Kyoto Protocol in 2005, China has seen a surge in CDM activities.

While China has no obligation to limit its Greenhouse Gas (GHG) emissions under the Kyoto Protocol, the low cost of labor and facilities have made it a magnet for projects that seek to reduce emissions on a global scale, thereby producing carbon 'credits' that can be sold to more developed nations. Given the highly controlled government approval system for CDM projects, taking a closer look at how they work would be particularly useful for investors who are interested in CDM projects in China, such as carbon funds from European countries, international energy companies, and carbon finance companies who may have limited practical experience forming cooperative ventures with local partners or obtaining approval from authorities in China.