China quake may cut carbon offset supply

VENICE (Reuters) - China's deadliest earthquake in decades could cut by up to 5 percent the country's supply of carbon offsets under the Kyoto Protocol over the next 12 months, a market China dominates, Lehman analysts estimated on Thursday.

Rich countries can meet Kyoto greenhouse gas limits by investing in emissions cuts in developing countries, earning carbon offsets in return.

China is expected to supply about half of the annual 540 million tonnes of offsets called CERs (certified emissions reductions) developing countries are projected to sell through 2012 and worth more than 25 billion euros ($38.75 billion) on a secondary market.

Some 15 million tonnes of China's annual output were within a 150 kilometer radius of Monday's quake centered in the southwest Sichuan province, Lehman said.

"We counted seven impacted companies among the world's top 20 project developers," said Laurent Segalen, Lehman head of emissions trading, who listed EcoSecurities, Deutsche Bank, Endesa and Mitsubishi Corp among developers with nearby projects.

They included projects to cut greenhouse gas emissions from chemical plants or by replacing fossil fuels using wind and hydropower.

Stockholm-based project developer Tricorona said on Thursday that it had over 10 offset projects in Sichuan that it said may have been affected and corresponded to 8 million tonnes emission cuts through 2012.

"There is still no information on the status of the individual projects or the extent of the indirect damages that might come to affect the delivery of emission reductions from these projects," the company said in a statement.

British carbon project developer EcoSecurities said that two local Chinese nitrous oxide (N20) plants and several hydro plants where it had emissions-cutting projects had stopped for safety checks but were not damaged.

"The view is that the hydro projects are fine but are going through safety checks," an EcoSecurities spokeswoman said. "The N20 projects are fine but one of them will be delayed for several weeks for safety checks."

The quake could interrupt monitoring of emissions cuts, a required step before projects can claim their offsets, adding to the uncertainty of the scale of impact, Segalen said.

Dongfang Turbine, a major manufacturer of wind turbines including supplying planned Kyoto projects, had a major plant in the area, Segalen added.

"Some sources said the blade workshop is completely destroyed," he said.

(Reporting by Gerard Wynn; additional reporting by Michael Szabo and Chris Wills in London; editing by James Jukwey)