China is now the world's largest source of certified emission reduction credits (CERs), with registered clean development mechanism (CDM) projects capable of generating more than 55m tonnes of carbon dioxide equivalent (CO2e) per year, or 42 per cent of the global total.

China released its revised CDM measures in October 2005. Up to 31 July 2007, the NDRC (the Chinese Designated National Authority (DNA)) had approved 684 CDM projects. Of these projects, 107 have been registered at the CDM Executive Board.

CDM projects have been developed at a fast pace. Support from the international community is one of the driving forces for this development.

In June this year China and the European Union (EU) launched a joint project designed to encourage sustainable development and emissions control in China. This project will be financially supported by the European Commission in the amount of EUR2.8m.

According to the EU the objective of this EU-China project is 'to strengthen the CDM as a driving force in China's path to sustainable development, and hence to tackle climate change on a global scale'.

Nevertheless, challenges exist alongside opportunities. CDM certification increases the return for project investors at no additional cost. Therefore, being qualified as a CDM project can help to accelerate the development of renewable energy projects.

However, the restriction that only Chinese companies or Chinese-controlled companies within the territory of China are eligible to conduct CDM projects with foreign partners has presented difficulties for foreign investors. Many foreign investors are reluctant to relinquish control of projects to domestic partners.

Peter Corne, managing director of Eversheds China, who is currently leading the Shanghai renewable energy team advising a high-profile CERs seller, commented that 'in the future it would be helpful for the government to relax these polices to allow more flexibility for investors to structure their projects'.

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