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Mainland Allows HK Firms To Run Green Projects – Relaxed Rules Give Conditional Access To Greenhouse Gas Market

Cheung Chi-fai, SCMP – Apr 08, 2009

Hong Kong companies will receive conditional access to massive carbon-reduction markets across the border after mainland authorities eased the eligibility rules.

The change came about after the National Development and Reform Commission “reinterpreted” the rules recently, Secretary for the Environment Edward Yau Tang-wah said.

Beijing had previously insisted that only companies with at least half their equity supplied by Chinese capital in a strict sense would be eligible to develop projects on the mainland under the Clean Development Mechanism (CDM).

Now, it says Hong Kong-registered companies based in the city and run by Chinese nationals or Hong Kong permanent residents who constitute half of the company’s board membership will also be acceptable.

Other criteria include a minimum threshold of 50 per cent of non-circulating shares for a listed company.

Under the UN-supervised CDM – the world’s second-biggest greenhouse-gas market after the European Union’s emissions-trading system – developing countries can sell certified emission reductions generated from qualified projects, such as renewable energy, to developed nations to meet their Kyoto Protocol commitments to cut carbon emissions.

The changes will put Hong Kong back into the growing CDM market on the mainland, which is the biggest supplier of CDM projects in the world, accounting for a third of the 1,500 projects already registered with the UN. The mainland is estimated to deliver more than 100 million credits a year from the projects, with each credit equalling a tonne of carbon reductions.

Mr Yau, who said he had been informed of the change in Beijing last week, hailed it as a “turning point”.

He said Hong Kong companies were set to benefit from new business opportunities in the huge CDM market all over the mainland.

But it would be difficult to assess what kinds and sizes of companies would benefit from the relaxed rules as they would still have to satisfy the national requirements for qualifying CDM projects, he said.

“The most important thing in the change is that it has lowered the bar for entering the market,” Mr Yau said. “Without that, no matter how big or small a company is, it just can’t participate.”

Industry sources said local utilities such as CLP Power (SEHK: 0002), which had a growing investment in renewable energy such as wind or hydro power, would be major beneficiaries.

The Hong Kong General Chamber of Commerce, which had advocated the change for some time, said it would allow genuine Hong Kong companies to take part in the green-technology market on the mainland.

Last year, Beijing also relaxed rules for CDM projects in Hong Kong, allowing companies registered in the city to develop projects without paying the administrative fee imposed on the mainland.

William Yu Yuen-ping, head of WWF Hong Kong’s climate programme, said the change might draw more companies to Hong Kong – including those that specialise in verifying and certifying CDM projects.

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