DOING BUSINESS IN CHINA

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DOING BUSINESS IN CHINA
June 23th
2008
Lehman Lee Xus Beijing office

• Clean Development Mechanism

abonidenobili_at_cplex.it
aldo_at_lehmanlaw.com
Aldo Settimio Boni de Nobili Associate - China
desk - Beijing
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Facing global warming
DOING BUSINESS IN CHINA
Clean Development Mechanism
GLOBAL WARMING
EFFECTS
IPCC
Increase in the temperature of Earths surface
and oceans
Established in 1998 by WMO and UNEP
1990-2100 1.4 C 5.8 C
Sea level
TASK
Precipitations and extreme weather events
evaluate the risk of climate change
Agriculture
ACTIVITY
Glaciers
reports about UNFCCC implementation
Species extinctions
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UNFCCC
DOING BUSINESS IN CHINA
Clean Development Mechanism

• UNCED Rio de Janeiro 1992
• Signed in 1992 by 154 nations
• Parties 192 countries
• 1994 entered into force
• COP

• Aim stabilizing GHG to prevent dangerous
  interference with the climate system
• Common but differentiated responsibilities
• Non-binding

Non-annex 1

• report annual emissions and sinks
• submit annual inventories

Annex 1
NO RESTRICTIONS
Developed countries
Annex 2
Developing countries
OECD
Provide financial resources to Non-annex 1
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Kyoto Protocol
DOING BUSINESS IN CHINA
Clean Development Mechanism

• COP3 Kyoto 11 Dec 1993
• In force 16 Feb 2005
• June 2008 182 parties
• 36 Annex 1 EU reduce GHG (61.6)

• Cyprus, Malta and Kazakhstan intend to
  participate
• 137 Non-annex 1 ratified no obligation
• US not ratified

1 committment period 2008-12

• 1.3 emission allowances in 2nd commitment period
  for every ton of GHG exceeding
• suspension from transfers of credits

GAINING CREDITS BY UNDER-POLLUTING
Industrial entities
Governments
Emissions cap
reduce national emissions 5.2 below 1990 baseline
Credits
other parties
60 billion in 2007
brokers
Actual emissions
carbon projects developers
Buy credits
Buy credits
exchanges
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Emissions offset
DOING BUSINESS IN CHINA
Clean Development Mechanism
Emissions exceeding
OFFSET
CO2 emissions cap
Carbon credits
Emissions allowed
JI
CDM
ET
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Kyoto protocols flexible mechanisms
DOING BUSINESS IN CHINA
Clean Development Mechanism
Emissions Trading (ET)

• Article 17 Kyoto Protocol
• Annex 1 Annex 1

Joint Implementation (JI)

• Article 6 Kyoto Protocol
• Annex 1 Annex 1

Clean Development Mechanism (CDM)

• Article 12 Kyoto Protocol
• Annex 1 Non Annex 1

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CDM market in china
DOING BUSINESS IN CHINA
Clean Development Mechanism
INTENDED CERs BUYERS
PROJECT TYPES
Competitive labour and facilities costs
WHY
WORLD BANK SAYS
50 of CERs
POTENTIALITIES
2-8 bln US per year
1197 projects nationally approved (April 2008)
400 2006
210 projects internationally registered 500
2006
CURRENT STATUS
1449 projects are being nationally approved
625 approved hydro projects 50 of the total
approved projects
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laws
DOING BUSINESS IN CHINA
Clean Development Mechanism
INTERNATIONAL LEVEL
NATIONAL LEVEL
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authorities
DOING BUSINESS IN CHINA
Clean Development Mechanism
National Coordination Committee on Climate Change
(NCCCC)

• reviewing national CDM policies, rules and
  standard
• approving Boards members

Host governments Designated National
Authorities (DNA)

• national approval

NDRC
Chair

• validation (outset)
• making publicly available the PDD
• receiving public comments and stakeholders
  comments
• verification and certification of CERs
  (operation)

National CDM Project Board

• examination and approval
• reporting to NCCCC on progress in CDM activities
• making reccomendations on the amendments of the
  CDM Measures

Designated Operational Entities (DOE)
NDRC - MOST
Co-Chairs
MOFA
Vice Chair

• recommendations to the COP/MOP
• approve new methodologies
• DOEs accrediting and suspending
• reviewing accreditation procedures
• make publicly available CDM activities and
  procedures
• CDM project registry
• reviewing CR and VR
• issuing CERs.

SEPA CMA MF - MA
Board
CDM Executive Board (EB)
DNA

• accepting applications
• final approval

NDRC
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CDM requirements
DOING BUSINESS IN CHINA
Clean Development Mechanism

• Chinas legal system, sustainable development
  strategies and policies
• not introduce new obligations
• promote the transfer of environmentally sound
  technology

Funding for CDM projects from the developed
countries shall be additional to their current
official development assistance and their
financial obligations under the Convention.
PROJECT
Additionality
(Marrakech Accords)
Chinese funded or Chinese-holding enterprises
within the territory of China are eligible to
conduct CDM projects with foreign partners (art.
11 CDM Measures)

• 100 Chinese
• 51 Chinese (at least)

PROJECT OWNER

• FIEs?
• Hong Kong / Macau?

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Typical investment structure
DOING BUSINESS IN CHINA
Clean Development Mechanism
Government
65 (HFC PFC)
30 (N2O)
2 (Priority areas)
Broker
Company
CERs purchaser
TAXES
RMB/tCO2
Other chinese taxes
CERs
RMB/tCO2
CDM Project
Private company
Domestic company
Foreign investor
Governmental body
100 Chinese
Financial institution
FIE 51 Chinese (at least)
NGO
Project owner
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Cdm projects types
DOING BUSINESS IN CHINA
Clean Development Mechanism
Energy efficiency
Industrial process changes
Renewable energy
Methane recovery
Cogeneration
Afforestation and reforestation
Agriculture
Transports
priority
areas PRC
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Procedures
DOING BUSINESS IN CHINA
Clean Development Mechanism
National level
NDRC
PIN
Project owner
Documents --application form --PDD --enterprise
status --general information --project financing
PDD
Project owner

• stakeholders

Approval
DNA N Board

• LOA

• DOE s designation
• consultation
• validation report

Validation
DOE
Expert review procedure (30 days)

• filing of VR and LOA
• 8 weeks (potential review)
• EB files decision to PO
• PO files decision to NDRC

Registration
EB

• object
• modality monitoring plan PDD
• submitting reports to NDRC and DOE

Implementation and monitoring
Project owner
Decision from National CDM Board
DOEs designation
Project review
Validation Report to the EB

• DOEs designation
• Verification Report
• Certification Report

Verification
DOE

• CERs 15 days after reports
• send to participants accounts at request

Certification and issuance
LOA (20-30 days)
EB
International level
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June 23th
2008
Lehman Lee Xus Beijing office
THANK YOU FOR YOUR ATTENTION
DOING BUSINESS IN CHINA
Clean Development Mechanism
abonidenobili_at_cplex.it
aldo_at_lehmanlaw.com
Aldo Settimio Boni de Nobili Associate - China
desk - Beijing