A coal mine/coal bed methane utilization project in northeast China entered into agreements Tuesday with two separate buyers under the Clean Development Mechanism (CDM), according to the Asian Development Bank (ADB).

The transactions were structured by ADB's Clean Development Mechanism Facility and Clearworld Energy, a clean energy development company headquartered in Beijing.

The seller in the transaction is Fuxin Mining Group and the buyers are ICTJ Limited and a consortium led by Natsource. The transaction includes innovative pricing structures that will provide economic benefits to the seller.

The project will improve coalmine methane and coal bed methane extraction, distribution, and utilization at mines around Fuxin, Liaoning Province, said the bank.

This will boost safety in the mines and supply methane as a clean fuel to residents, industry, and electricity generation schemes. The process reduces greenhouse gas emissions by capturing and using methane that would otherwise be released into the atmosphere during the mining process.

The project attracted strong competition from buyers. This was helped by the fact that underlying project finance had been secured, with ADB approving a loan for 15.8 million US dollars in November 2004.

The bank said there was strong host country support for the project from both the central government and the Liaoning provincial government, and it complied with ADB's social and environmental guidelines.

The CDM is a market-based financial instrument set up under the Kyoto Protocol that allows industrialized countries to invest in developing country projects and acquire greenhouse gas emission reduction credits, or carbon credits, that they can then use to meet their greenhouse gas reduction targets under the protocol.

The Kyoto Protocol sets binding targets for industrialized countries for the reduction of greenhouse gas emissions that would lower the risk of global climate change. As a greenhouse gas, methane is 21 times more potent than carbon dioxide.

ADB's CDM Facility was set up in September 2003 to provide technical and administrative assistance to eligible projects in parallel with project identification and loan processing. ADB undertook a call for expressions of interest from entities interested in buying carbon credits from the project in March 2005.

The larger volume of credits from the project were purchased by ICTJ Limited in association with a major oil and gas trading house. ICTJ Limited is a company established by the shareholders of ICECAP Limited to carry out trading activities in carbon emissions.

Dave Allen, a director of ICTJ, said the company is very pleased to have played its part in closing this ground-breaking transaction with Fuxin Mining Group and they believe it will become the template for sales of carbon emission reductions out of China.

The Transaction Services division of Natsource, the other entity engaged in this transaction, led a syndicate that included KfW, a large German Development Bank. This syndicate will receive an initial allocation of credits.

Natsource President Jack Coge said the deal shows the potential for improving the safety conditions in the mining sector, reducing greenhouse gas emissions and producing clean affordable energy.

Source: Xinhua