Beijing is expected to become the home of Asia's first carbon-trading exchange this summer, giving China a presence in the multi-billion-dollar global carbon market.

The three-year, $1.7 million project to develop the carbon-trading market in China will feature technical service centers in 12 provinces. It will also develop pilot schemes for carbon-trading and capacity-building in the provinces and provide policy input for the expansion of the carbon market.

Carbon trading is widely seen as a cost-effective way of reducing greenhouse gas emissions. Other exchanges have been set up in London and Chicago.

China is currently the source of about a third of the carbon credits traded on the global market through the Kyoto Protocol's Clean Development Mechanism (CDM).

The CDM allows developed countries to fund environment-friendly projects in developing countries in exchange for credits toward meeting their own mandatory emissions cuts.

The technical service centres will help people develop programs under the CDM in 12 of China's provinces.

The centers are to act as brokers between international investors and local partners to kick-start "green" investment projects in China's less developed regions.

The program is a joint effort between the United Nations Development Programme (UNDP), the Ministry of Science & Technology (MOST), and China International Centre of Economic and Technical Exchange (CICETE) under the Ministry of Commerce. Arcelor Mittal, the world's largest steel producer, has also pledged to provide financial support.

"As highlighted in the recently issued Report of the UN Inter-Governmental Panel on Climate Change, climate change has emerged as one of the most important issues facing the world," said Khalid Malik, UN Resident Coordinator and UNDP Resident Representative in China.

"Assisting China in its efforts to cope with the impact of global climate change and to create more sustainable, less Greenhouse Gas intensive development paths is an important focus for UNDP. A range of market-based instruments has now emerged to support this effort, with carbon trading emerging as a major opportunity," he said.

Nearly 500 registered programs have been set up under the CDM worldwide. Such projects are expected to reduce emissions 750 million tons of carbon dioxide by 2012. China has offered permits to nearly 300 projects, of which 37 have registered.

"The 11th Five-Year Plan sets an energy conservation target of reducing 20 percent of energy consumption per unit Gross Domestic Production (GDP) by 2010, along with targets for greatly increasing use of renewable energy by 10 percent. We hope that these projects can contribute to achieve these ambitious energy goals," said Liu Yanhua, vice-minister of science and technology.

"The programme presents an innovative market-based approach to attract large amounts of foreign investment and establish public-private partnerships in developing sustainable energy solutions to alleviate poverty and achieve Xiaokang and Millennium Development Goals," he added.