Japan Bank for International Cooperation (JBIC) has signed an untied loan agreement of US$20mn with the government of the People’s Republic of China. The loan was cofinanced with Bank of Tokyo-Mitsubishi, with JBIC providing guarantee for the portion financed by Bank of Tokyo-Mitsubishi.
The proceeds of the loan will be used for financing the project under which methane gas emissions from a coal mine in Jincheng City, Shanxi Province, will be recovered and used as fuel for power generation and as manufactured gas for urban households in Jincheng City. This loan was provided in cofinancing with the Asian Development Bank (ADB).
Power generation and the supply of gas for urban households by making use of recovered methane gas amounts to efficient harnessing of hitherto untapped energy resources. This will alleviate tight supply in energy resources in China, while serving to secure a stable supply of energy resources in Japan. As this project will reduce the use of coal and emissions of air pollutants, including sulfur dioxides and nitrogen oxides, it will also contribute to environmental improvement.
The Chinese government has great expectations for this project as a candidate Clean Development Mechanism (CDM) project. The Prototype Carbon Fund (PCF) of the World Bank, where JBIC participated, has signed an emission reduction purchase agreement (ERPA) with the Chinese project executing agency.
The CDM is one of the mechanisms of the Kyoto Mechanisms, which are an economic scheme set out in the Kyoto Protocol under which industrial countries and economies in transition (Annex I parties) can achieve their greenhouse gas (GHG) emissions reduction targets. It allows industrial countries to undertake joint projects with developing countries, and the investing country (industrial country) may use emissions reduction credits (called certified emission reductions: CERs) generated from such projects to meet its own GHG emissions reduction target.