Denmark's government signed a deal on Wednesday to purchase 630,000 tons of carbon dioxide emission reduction credits from a Chinese company.

The value of the deal is put at about 50 million yuan (6.4 million U.S. dollars), said source with the National Bio Energy Company of China.

The bioenergy project is located at Shanxian County in east China's Shandong Province. It will give the two sides an opportunity to cooperate under the Clean Development Mechanism (CDM) from 2007 to 2012.

The Danish government has already paid 10 percent of the contract value, or five million yuan (640,000 U.S. dollars) to the Chinese company.

Established under the Kyoto Protocol, the CDM is a market-based mechanism that allows developed countries to fulfill their greenhouse gas emission reduction obligations by investing in clean energy projects in developing countries such as China.

China is the world's second largest energy consumer and producer. Official estimates show China could supply 250 million tons of carbon dioxide quotas each year, accounting for half of the world demand.

The Chinese government has approved more than 160 CDM cooperative projects to date.