China’s boom in renewable wind-energy projects was financed, in part, by Western companies seeking “carbon credits” to offset emissions from their own plants back home. But questions abound about the effectiveness of the credit program.

Share story

In China, most wind-power projects are developed by large state-owned companies that are ordered by the central government to expand renewable-energy projects.

But they’ve gotten a financial boost from Western companies that have sought to offset their own greenhouse gas emissions by purchasing billions of dollars’ worth of carbon credits generated by Chinese wind power.

Some of these corporations, such as Microsoft, have purchased these credits as part of their own voluntary effort to combat climate change.

Most corporations, though, made these investments as part of a program set up under the 1997 Kyoto Protocol, which commits participating countries to reduce greenhouse gases. The United Nation certifies projects eligible for carbon credits.

China has been the biggest recipient of these dollars, with wind-power companies setting up special departments to court foreign investment.

By 2008, more than half of China’s wind-power projects found international buyers for carbon credits.

The projects are supposed to be wind farms that wouldn’t have been developed without the additional financial support. In turn, the international investors get to keep spewing emissions from their own plants without paying any penalties.

Critics say many of the wind projects would have been built regardless of international investment, because China’s government ordered state-owned corporations to ramp up wind power.

The debate escalated in 2009 as the United Nations rejected carbon-credit certification for 10 Chinese wind projects.

U.N. reviewers were concerned that the Chinese government was manipulating the tariffs used to assess the profitability of wind projects so they could qualify for international money. The Chinese government, in an angry response, contested the decision.

The rejections exposed cracks at the core of how carbon credits are verified in developing economies, according to a study of the Chinese wind-power industry by Gang He and Richard Morse of Stanford University. In China, there was no real way to know when the system was being gamed to gain access to the foreign cash, the study found.

Proponents of carbon credits say there have been plenty of real emissions savings from the investments. The U.N., in a 2012 report, estimated that during the past decade the program “helped nations offset 1 billion tons of carbon emissions.”

“There is a basic trade-off, and you’re never going to get this perfect,” said Cameron Hepburn, a London-based environmental economist who has studied the carbon markets.

“You are going to reject some projects that are worthwhile, and accept some that aren’t. And, as a result it’s been very easy for people who want to bring down the market — and stop putting a price on carbon — to focus on those.”

Since 2013, the European Union no longer allows investments in Chinese energy projects to count as carbon offsets. Global investments in China’s wind industry have dramatically declined since then.

Still, China’s wind industry continues to boom.

And some international companies continue to invest on a voluntary basis in carbon credits in China. Microsoft last year purchased 125,000 megawatts of power in a wind project in Inner Mongolia as part of the corporation’s effort to offset its own carbon emissions.

Those carbon credits were independently verified as a “gold standard,” and the money for the investment was raised by an internal “carbon fee” that Microsoft assesses on its operations.

“We look for projects which may not have happened without … the purchase of carbon credits,” wrote Robert Bernard, Microsoft’s chief environmental strategist, in a September 2013 blog post.

By the time of the Microsoft investment, the 50-megawatt project already was well established. It was developed by Longyuan, a China Guodian
subsidiary, and began operating in December 2008.

Microsoft purchased wind-power credits produced during the project’s first two years of operations and didn’t sell until 2013, according to Jonathan Shopley, managing director of The Carbon Neutral Co., the London-based firm that brokered the deal.

Shopley said the ability to sell these credits helped the project developer gain initial financing that otherwise would have been unavailable.

Hal Bernton: 206-464-2581 or