6 Feb 2007, Beijing - Carbon finance will be used to alleviate poverty and develop the renewable energy sector in western China through a new project launched today in Beijing between the United Nations Development Programme (UNDP) and the Chinese government.

Entitled ‘’MDG Carbon: Carbon Finance for Achieving Millennium Development Goals”, the US$1.7 million initiative aims to pilot carbon trading in 12 provinces, build capacity and provide policy input for the expansion of carbon market and reduction of greenhouse gas (GHG) emissions in China.

“As highlighted in the recently issued Report of the UN Inter-Governmental Panel on Climate Change, climate change has emerged as one of the most important issues facing the world, said Khalid Malik, UN Resident Coordinator and UNDP Resident Representative in China, at the launching ceremony.

"Assisting China in its efforts to cope with the impact of global climate change and to create more sustainable, less GHG intensive development paths is an important focus for UNDP. A range of market-based instruments has now emerged to support this effort, with carbon trading emerging as a major opportunity,” he said.

Carbon trading, through the Clean Development Mechanism (CDM), is one of the ways that developed countries can meet their obligations of reducing GHG emissions under the Kyoto Protocol by investing in GHG emission reduction projects in developing countries.

China now supplies over 1/3 of carbon credits to the global carbon market established under the CDM. Currently, however, there are few efforts in place to ensure that "carbon credits" are used to benefit the poor, as ongoing CDM projects often focus on "end of pipe" solutions, by, for example, reducing GHG emissions caused by chemical industry process. Many do not lead to technology transfer or foster the development of clean energy in China.

The 'MDG Carbon' initiative, by contrast, will use carbon trading as a tool to generate income for impoverished communities in China's western region by increasing investment and job opportunities through promoting "green" industry. It is part of a global drive to achieve the Millennium Development Goals (MDGs), a set of internationally recognised targets aiming to eradicate poverty and ensure sustainable development by 2015.

The 3-year project aims to establish CDM technical service centres in 12 provinces, such as Xinjiang, Qinghai, and Inner Mongolia. These centres will act as brokers between international investors and local partners to kick-start "green" investment in China's less developed regions.

“The 11th Five Year Plan sets an energy conservation target of reducing 20% of energy consumption per unit GDP by 2010, along with targets for greatly increasing use of renewable energy by 10%. We hope that CDM projects can contribute to achieve these ambitious energy goals, “said Liu Yanhua, vice minister of Science and Technology.

“The MDG Carbon Programme presents an innovative market-based approach to attract large amounts of foreign investment and establish public-private partnerships in developing sustainable energy solution to alleviate poverty and achieve Xiaokang and MDG goals.” he added.

The programme is a joint effort between the United Nations Development Programme (UNDP), the Ministry of Science & Technology (MOST), and China International Centre of Economic and Technical Exchange (CICETE) under the Ministry of Commerce, with financial support from Arcelor Mittal, the world’s largest steel producer. The company also brings best practices in terms of energy efficiency steel production, for which it has been a leader in innovation.