ADB will provide three technical assistance grants totalling US$2.8M to support government initiatives to reduce sulfur dioxide gas emissions, increase energy savings, and strengthen a fund that supports clean energy projects.

Over the past two decades the PRC’s economy has grown at an average rate of over 9.5% a year. But the heavy reliance on coal for the bulk of its surging energy needs has resulted in harmful levels of sulfur dioxide and other air pollutants that are the primary cause of acid rain.

“PRC is confronted with serious environmental challenges that not only affect domestic production, but also have significant links with climate change,” said Anil Terway, Director, Energy Division of ADB’s East Asia Department.

To support the government’s target of cutting sulfur dioxide emissions by 10% between 2006 and 2010, an ADB technical assistance grant of $500,000 will be used to design and implement a national emissions trading system. This will provide a financial incentive to companies to curb emissions and complement other government measures to reduce air pollution. It follows ADB backing of a pilot sulfur dioxide trading scheme in Taiyuan City in 2004.

ADB will also provide technical assistance totalling $1.5M to support the government’s goal of making energy savings of 20% by 2010. It will be used to look at steps needed to attract international financial institutions to invest in energy efficiency and conservation projects. Presently, provincial governments in the PRC lack the capacity to readily initiate energy projects that could potentially tap external financing. The technical assistance will also help improve the scheduling of power generation by giving higher priority to zero- and low-carbon dioxide emitting power plants.

The PRC’s China Clean Development Mechanism Fund – designed to encourage clean energy projects that generate certified emissions reductions (CERs) that can then be sold to developed countries that need them – is also getting ADB policy and advisory assistance worth $800,000. It will be used to build up the capacity of the Fund for promoting and supporting climate change-related projects. The PRC is estimated to have the potential to generate about 50% of total worldwide annual CERs under the Clean Development Mechanism established in the Kyoto Protocol.

The financial support is in the form of grants with $1.4M coming from ADB’s regular technical assistance funding program and $1.4M from its Climate Change Fund. This Fund was established in May 2008 to help developing member countries put in place projects that mitigate the adverse impacts of climate change and bolster energy security.