Early this month, the Chinese government and the United Nations Development Programme (UNDP) launched a joint carbon finance project that would use carbon trades in China’s less-developed regions to help reach the UN Millennium Development Goals, including poverty alleviation and environmental sustainability.The three-year, U.S. $1.7 million project will set up Clean Development Mechanism (CDM) technical service centers in 12 selected provinces, including Hubei, Inner Mongolia, Jilin, Qinghai, and Xinjiang. The goal is to channel international “green” investment into local sustainable development, especially renewable energy use. CDM is a market-based mechanism under the Kyoto Protocol that allows participating industrialized countries to fulfill their greenhouse gases (GHG) emissions reduction obligations by investing in clean energy projects in the developing world at a lower cost. In a win-win situation, the industrialized country receives carbon credit for meeting its emission reduction target, while the developing country obtains the capital and clean technology to implement the project. In addition to the new “MDG-Carbon” project, China and the United Nations (UN) plan to open a carbon trading exchange in Beijing later this year — the first of its kind in a developing country — in an effort to share the multibillion-dollar global carbon trade market with similar structures in Europe and the United States, the Financial Times reports. The UN expects more “special” carbon credits that can be used to benefit the poor to be traded through the exchange. China held 60 percent of the total US$2.3 billion CDM market in developing countries in the first three quarters of last year, according to the World Bank. But the majority of CDM projects in China focus on reducing emissions of HFC-23, an ozone-depleting substance, from factories, with little use of clean technology. Facing dim prospects for its ambitious energy saving targets (reducing 20 percent of energy consumption per unit of GDP and increasing renewable energy use by 10 percent by 2010), China is pushing hard for CDM projects in the energy efficiency, clean energy, and renewable energy sectors. To respond actively to global climate change — a national strategic priority — the Chinese government will be launching a CDM Fund in March to help finance climate mitigation projects, Xinhua News reported. The money will come mainly from income generated through the government’s carbon credit transactions as well as donations from international financial institutions and individuals. So far, the government had approved some 300 CDM projects, with 37 already registered under the United Nations Framework Convention on Climate Change (UNFCCC), out of a global total of 500 CDM projects; others are still in process. China is predicted to be the world’s largest carbon credit provider, accounting for 41 percent of all carbon credits issued by the UN, by 2012. This article reprinted with permission of the Worldwatch Institute.