BEIJING, Oct. 26 -- The trading arm of Paris-based energy giant EDF (Electricite de France) Group Wednesday signed an initial agreement with China's leading electricity distributor to buy 1.5 million tons of annual greenhouse emission credits under the Kyoto Protocol carbon-trading scheme.

    EDF Trading signed a letter of intent with China National Bio Energy Co Ltd, a renewable energy developer invested by the State Grid Corp of China, to purchase carbon credits from its China National Bio's three biomass power generation projects located in China.

    The accord was based on the clean development mechanism (CDM) system under the Kyoto Protocol's climate improvement initiatives. The international Kyoto Protocol allows affluent countries to achieve greenhouse gas emission targets by funding pollution cuts in developing nations and has spawned a global carbon market.

    Located in East China's Shandong Province and Northeast China's Heilongjiang and Jilin provinces, the three CDM projects are expected to come on stream in the first half of next year, and could cut carbon dioxide emissions by as much as 1.5 million tons a year by 2010, said Lin Mingshan, general manager of Beijing-based China National Bio.

    "These are the projects that will benefit both sides. China is fulfilling its duty to improve the nation's environmental conditions by massively investing in such projects," Lin said.

    Lin refused to give the financial figures involved in the EDF deal.

    Established in July last year, China National Bio is currently building as many as 14 biomass generation plants across the nation, boasting a total installed capacity of 350 megawatts (MW). These plants use biomass sources such as the stems of cut wheat to generate electricity.

    In the next four years, China National Bio plans to expand its biomass-fuelled capacity to more than 2,000 MW, accounting for 55 percent of the nation's biomass power generators.

    "By then, we will be able to cut greenhouse gas emissions by as much as 12 million tons per year," the company said in a statement, without disclosing the investment involved.

    Lin told China Daily that he expected more such CDM cooperation deals to be hammered out in the future with EDF or other potential buyers.

    The carbon credit market in China is heating up with the central government's recent incentives prompting an increasing number of energy firms to heavily invest in renewable energy projects.

    "The potential of the CDM market in China is huge," Wang Qi, secretary-general of Beijing-based China CDM Federation, told China Daily in an earlier interview.

    "There's great potential for profitability. An increasing number of companies, big and small, domestic and foreign, are flocking into China's carbon market," said Jiang Yun, program manager of the China Energy Conservation Association.

    EDF Trading was set up five years ago and became a wholly owned subsidiary of EDF Group in mid-2003.

    Now one of the leaders in European wholesale trading of electricity, gas and coal, EDF Trading optimises EDF's distribution and generation network through buying and selling both electricity and primary fuels, and manages EDF's diverse commodity risks on an integrated basis. European energy giant EDF operates coal-fired power plants with an installed capacity of 3,720 MW in China.