U.N. panel rejects China windfarms, lifts suspension

LONDON - A United Nations climate panel on Friday blocked carbon financing for around 10 Chinese wind farms over concerns about whether they are financially viable without receiving carbon offsets, the panel said.

The panel also lifted a suspension on emissions verifier SGS UK, one of the biggest players in the $6.5 billion carbon offset market, the panel's chairman Lex de Jonge told Reuters.

The panel's decision on the Chinese wind farms could have serious implications for billions of dollars' worth of wind farm investment in China.

The panel said it lacked sufficient information in support of the projects' claims of making additional emissions cuts. It was concerned about prices paid to the projects for the electricity produced.

The panel was reviewing the Chinese wind farms after noting a drop in financial support from Beijing in the form of tariffs.

The Global Wind Energy Council said the panel's decision was "unsupported by evidence" and sent a negative signal to renewable energy investments in any country.

The panel stressed that wind power is still eligible under the CDM and projects continue to be registered.

The panel, meeting in Copenhagen ahead of U.N.-backed climate talks, also lifted a suspension imposed in September on SGS UK for submitting inconsistent information on its projects.

The U.N. panel said it will conduct spot checks on two more emissions auditors -- TUV-Sud and TUV-Nord.
SGS UK has verified around 35 percent of the 350 million tonnes of climate-warming carbon dioxide cuts made so far under the Kyoto Protocol's Clean Development Mechanism (CDM), U.N. data showed.

The company was not immediately available for comment.

Under the tightly-regulated CDM, companies can buy carbon offsets, called Certified Emissions Reductions (CERs) by funding cuts in greenhouse gas emissions through clean energy projects in emerging nations.

The emissions cuts are verified by private sector certification companies called Designated Operational Entities before CERs are issued by the U.N.'s climate secretariat.

CUTS

SGS UK was barred from verifying new emissions cuts made by projects registered under the scheme, but was allowed to continue to work on projects already started.

This would hamper the supply of CERs but analysts said the suspension's effect on the market had not been realised.

"The market has not yet felt in any way whatsoever the impact of the SGS UK suspension. That will end the moment the last pre-suspension CER issuance is made, which will be in the next two weeks," said Alessandro Vitelli, a director at analysts IDEAcarbon.

"It's too late to have an impact on 2009 prices, but you should see a pick up in issuance in the first quarter of 2010 which should ease the CER market a bit," said Trevor Sikorski of Barclays Capital.

The issue has caused long-running tension between the panel, project developers and emissions brokers over the speed of project approvals and the issuance of offsets.

"We expect there to be considerable discussion and no little controversy over this decision when the (climate talks) convene on Monday in Copenhagen," Vitelli said.

The U.N. data showed that investors in the projects include Tokyo Electric, Essent Energy Trading and EDF Trading, the trading arm of French utility EDF.

Delegates from nearly 200 countries, including almost 100 world leaders, will meet in Copenhagen next week to work on a successor agreement to Kyoto.