Legal Issues for Implementing the Clean Development Mechanism in China

Author:Xiaoyi Jiang - Fahui Hao
Position:Lecturer at the China Institute of Boundary Studies. LL.M.(Wuhan), Ph.D.(Western Sydney). - Fahui Hao is a doctoral candidate in International Law from Law school, Wuhan University, China
Pages:7-40
SUMMARY

The Clean Development Mechanism under the Kyoto Protocol was implemented in China several years ago. In spite of the significant benefits the CDM has brought to China, legal research on the CDM is relatively weak and there are many legal problems with the implementation of CDM projects in Chian. This article clarifies the legal problems of implementing the CDM in China by exploring and analyzing... (see full summary)

 
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Legal Issues for
Implementing the Clean
Development Mechanism
in China
Xiaoyi Jiang
& Fahui Hao

The Clean Development Mechanism under the Kyoto Protocol was implemented in
China several years ago. In spite of the significant benefits the CDM has brought to
China, legal research on the CDM is relatively weak and there are many legal
problems with the implementation of CDM projects in Chian. This article clarifies
the legal problems of implementing the CDM in China by exploring and analyzing
how to implement CDM projects, the legal relationships involved, CDM-related
contracts and various key legal issues. The conclusions drawn from the above
discussions could have implications for the future carbon reduction activities in
China beyond 2012.
Keywords
CDM, UNFCCC, Climate Change, Legal Relationship, Carbon
Reduction
KFBJM2)3122* DENjoDijob 7
Lecturer at the China Institute of Boundary Studies. LL.M.(Wuhan), Ph.D.(Western Sydney). The author may be
contacted at: xjiang28@gmail.com/Address: The China Institute of Boundary Studies, Wuhan 430073 P.R. China.
This article is a revised version of Chapter IV of the authors dissertation submitted to the University of Western
Sydney. The research for this paper is supported by the Post-70s Scholars Academic Development Program of
Wuhan University Sustainable Development and Environmental Law.
 Fahui Hao is a doctoral candidate in International Law from Law school, Wuhan University, China. The author may
be contacted at: haofahui@gmail.com
I. Introduction
Climate change is one of the highly topical issues of todays world. The international
community has been working together to minimize climate change risks through the
1992 United Nations Framework Convention for Climate Change (UNFCCC)
1
and its
innovative 1997 Kyoto Protocol.
2
According to the Kyoto Protocol, industrialized
countries are assigned legally binding reduction targets for Greenhouse Gas (GHG)
emissions by an average of 5.2 percent during the first commitment period 2008-2012
below 1990 levels, while developing countries whose paramount task at present stage is
economic development and to get rid of poverty are free of emission obligation during
this period.
The Clean Development Mechanism (CDM) is a market-basedperforming
system defined in the Kyoto Protocol as part of the Kyoto response towards mitigation
of global warming. With the dual aim of fostering sustainable development in
developing countries and helping industrialized countries meet their mandated GHG
emission reduction targets cost-effectively, the CDM is the only mechanism under the
Kyoto Protocol open to industrialized and developing countries. It allows industrialized
countries to buy the Certified Emission Reduction (CER) credits
3
from emission
reduction projects undertaken in developing countries by providing financial assistance
or clean technology transfer to offset a part of their emission reduction targets under the
Protocol.
Since it was initiated, thousands of CDM projects have been carried out.
4
China,
especially with its large carbon emission potentials and favorable investment
environment, has dominated the global carbon market through participating in CDM
projects and has become its largest beneficiary. Despite the significant benefits the CDM
has brought to China, there are legal problems pertaining to implementing CDM
projects in China due to the fact that the CDM is an extremely complex, technical and
legal mechanism which is implemented under both international and domestic legal
frameworks. In addition, legal research on the CDM is relatively minimal as it is a new
mechanism with the first project registered in 2004. Thus, there is a dearth of literature
that seriously or thoroughly explores the legal issues surrounding the CDM in China.
Against this background, it is necessary to explore the various legal issues
1U.N. Doc. FCCC/INFORMAL/84 GE.05-62220 (E) 200705 (June 12, 1992).
2UNFCCC, K
YOTO
P
ROTOCOL TO THE
U
NITED
N
ATIONS
F
RAMEWORK
C
ONVENTION ON
C
LIMATE
C
HANGE
(Kyoto Protocol)
(Dec. 11, 1997),
available at
http://unfccc.int/resource/docs/convkp/kpeng.pdf (last visited on Mar. 20, 2011).
3CERs, each equal to one tonne of CO2and generated from a CDM project activity, can be transferred under the rules
of Kyoto Protocol.
4
See
the official website of CDM,
available at
http://cdm.unfccc.int (last visited on Mar. 20, 2011).
8Kjboh'Ibp
surrounding the implementation of CDM projects in China. With the expiration of the
first Kyoto period, as one of the largest GHG emitters and major developing countries,
China is expected to play an indispensible and decisive role in combating global
warming beyond 2012. Therefore, it is of great significance to discuss and clarify the
legal problems of the CDM in the context of China with a view to assisting China in
making full use of the CDM to meet the challenge of global warming. Based on the
above analysis, this article aims to clarify the legal problems of implementing the CDM
in China through discussing various legal issues.
This article is divided into six parts. Part II introduces how to implement CDM
projects under the contemporary international regulatory framework as well as Chinese
domestic laws and regulations. Part III discusses various legal relationships involved in
implementing CDM projects. Based on the discussion on Part III, Part IV explores CDM-
related contracts. Part V assesses key concrete legal issues sourounding CDM projects.
Part VI is a conclusion and some recommendations to help clarify the legal problems of
implementing the CDM in China and addressing implications of developing the carbon
reduction projects beyond 2012.
II. Implementing CDM Projects in China
Article 12 of the Kyoto Protocol, the Marrakech Accords
5
and other decisions of the
conferences of parties of the UNFCCC stipulate the CDM modalities, operational rules
and procedures. Additionally, in October 2005, the Chinese Government issued
Measures for the Operation and Management of CDM Projects in China (Measures),
6
which is regarded as a basic regulation to guide the implementation of CDM projects.
According to the international treaty and documents as well as the Measures, how to
implement CDM projects in China is introduced.
A. Legal Requirements for CDM Projects
The general requirements for CDM project activities, with a view to protect Chinas
rights and interests, shall not only conform to the requirements under the UNFCCC, the
Kyoto Protocol and relevant decisions by the conference of parties in an international
KFBJM2)3122* DENjoDijob 9
5UNFCCC, T
HE
M
ARRAKESH
A
CCORDS AND THE
M
ARRAKESH
D
ECLARATION
,
available at
unfccc.int/cop7/documents/
accords_draft.pdf (last visited on Mar. 20, 2011).
6
See Measures for the Operation and Management of CDM Projects in China 2005
(the Peoples Republic of China),
available at
http://cdm.ccchina.gov.cn/english/NewsInfo.asp?NewsId=905 (last visited on Mar. 20, 2011).

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