China hits back at carbon trading free-ride claims

BEIJING (Reuters) - China has made huge financial contributions to the global Kyoto compact to cut CO2 emissions and it is unfair to accuse it of taking advantage of the system, a senior Chinese climate change official said on Friday.

In a veiled criticism of current E.U. calls to reform the U.N.-backed carbon credit system known as the clean development mechanism, Gao Guangsheng, the director general of the climate change office at the National Development and Reform Commission, said China was not just getting a free ride.

"I don't believe the theory that China has benefited the most from the CDM. I think the widespread development of CDM projects in China is an important aspect of China's contribution (to the fight against climate change)," he told a conference organized by the E.U.

The CDM allows developed countries to meet their carbon reduction commitments by buying U.N.-verified carbon credits generated from clean energy projects in developing nations. Over 60 percent of the total "certified emission reductions" or CERs have originated from China.

But far from exploiting the system for financial gain, China has actually paid for the bulk of its clean energy projects itself, including those supported by the CDM, he added.

"China has paid just as much or more in terms of economic costs for the development of this kind of (CDM) project," he said.

Critics have said the system has been concentrating on "low-hanging fruit" -- relatively easy and low-cost projects like the abatement of industrial gases or hydropower. They have also said China has been the major beneficiary while least developed countries have been left behind.

The E.U. said in January that "only those projects that deliver real additional reductions and go beyond low-cost options" should be given carbon credits.

"Sixty percent (of all carbon credits) are from China, but how does China develop so many? The situation is complicated but the most important factor is that China -- from a government and policy standpoint -- has greatly supported the CDM," Gao said.

The E.U. has proposed the system be reformed in order to channel crucial carbon abatement funds to unindustrialized countries, but Gao denied China's large share of the current CDM market has prevented development elsewhere.

"The question is -- have other countries got the same preferential policies?"

The CDM, part of the Kyoto Protocol, is set to expire in 2012 and the deadline for a replacement has been set for the end of the year, when negotiators from 200 nations gather in the Danish capital of Copenhagen.

(Reporting by Beijing newsroom; Editing by Ken Wills)