Financial Regulatory Forum

UN panel rejects carbon financing for China windfarms, lifts SGS suspension

December 4, 2009

A resident rides a motor bike past the Helanshan Wind Power Plant in Wuzhong, Ningxia province, September 23, 2009. LONDON, Dec 4 (Reuters) – A United Nations climate panel has blocked carbon financing for around ten Chinese wind farms on Friday over concerns that they are financially viable without receiving carbon offsets, the panel said.

The panel, meeting in Copenhagen ahead of U.N.-backed climate talks, 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.

SGS UK was suspended in September for submitting inconsistent information on its projects.

The U.N. panel said it will also 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 firm 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.


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.

“This is another reason why carbon prices look weak in Q1 2010.”

The Chinese wind farms were under review by the panel after it noted a drop in financial support from Beijing in the form of tariffs.

“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 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.

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.

(Reporting by Michael Szabo; Editing by Sue Thomas) ((; +44 207 542 9242; Reuters Messaging:

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