UPDATE: CHINA state power firm partners with local govt to develop CO2 credits

  

(Reuters) -The State Power Investment Corporation, one of China's big five state power producers, signed a deal with the municipal government of Jiuquan on Tuesday to develop carbon credits from the city's wind and solar power plants.The partnership, the first of its kind, will give the state-owned company the opportunity either to buy carbon credits generated by local renewable energy projects or sell them to other market participants.The city of Jiuquan, home of some of China's largest wind and solar power plants, will offer the credits generated by 23 solar power projects in a single package."We will set up an institution to manage the first batch of 23 solar projects, small ones that are in need of external financing, and will aim to sell on carbon exchanges where prices are higher," said Zhou Xuehai, the city's vice mayor, speaking at a press conference. Jiuquan is planning to build a total of 5 gigawatts (GW) of wind power and 1.5 GW of solar power capacity. It is looking to China's carbon markets to make the projects more profitable. "New solar projects have better chance to be allowed for compliance use. The earlier we gain a foothold, the cheaper the costs would be," said Han Shudong, chief engineer of the carbon asset management subsidiary of the state power giant.Han said the company is also looking to packaging those credits into financial products and to setting up a green fund investing in carbon-related clean projects. To provide incentives for industries to cut emissions and shift to cleaner energies, China has already set up seven local carbon exchanges and a nationwide scheme is due to go into operation at the end of next year or the beginning of 2017.Over 10,000 Chinese companies are likely to be covered in the national carbon market, and will mostly consist of big state-owned power, oil and steel making firms.China's power sector, responsible for half of the country's emissions, is at the front line of carbon trading. The Huaneng Group, China's biggest state power generator, has reported a 16.1 percent return on its 30 million yuan ($4.8 million) carbon fund launched in 2014.China's biggest oil refiner Sinopec has traded nearly 3.9 million allowances in China's pilot carbon markets, with a market value of 140 million yuan. ($1 = 6.2084 Chinese yuan) (Reporting by Kathy Chen and David Stanway; Editing by David Holmes) http://af.reuters.com/article/energyOilNews/idAFL3N10834V20150728