BEIJING, Dec 17 (Reuters) - A Chinese forestry firm has applied to receive offset credits under the nation's nascent carbon market, the first to target domestic emissions trading schemes to fund reforestation projects.
Plantation firm Cuifeng said it could store 18,000 tonnes of carbon dioxide a year over two decades in trees by planting 867 hectares of new forest across nine counties in Guangdong province.
If the government approves the application, Cuifeng will be issued offset credits known as Chinese Certified Emissions Reductions (CCERs) for the carbon cuts it achieves.
It can sell the CCERs to big emitters covered by one of China's four pilot emissions trading markets, who are allowed to use the offsets to meet 5-15 percent of their obligation under the carbon schemes.
China, the world's biggest greenhouse gas emitter, has opened carbon markets in Beijing, Guangdong, Shanghai and Shenzhen, and plans to start three more in the next few months.
Last month, state-owned PetroChina became the first Chinese company to announce it had bought CCERs, paying renewables firm Longyuan 16 yuan ($2.62) a piece for 10,000 credits.
If successful, the carbon markets can provide a new source of funding for forestry projects as China strives to meet its target of increasing its forest coverage by 40 million hectares (400,000 square km) from 2005 to 2020, an area bigger than Japan's total land mass.
But verifying emission cuts from forestry projects is notoriously difficult, and has hampered project development in the U.N. carbon markets.
China must develop rigid and credible rules for forestry projects if its market is to fare better, according to Yu Tianfei, vice director at the Zhonglin Green Carbon Asset Management Centre of China's Academy of Forestry.
"There are questions around how these projects will be monitored and measured," Yu told Reuters.
The National Development and Reform Commission has approved two methodologies for tree planting projects, but according to Yu there is political uncertainty around how the local governments operating the carbon markets will implement these.
"There should be standardised registration procedures and nationally recognised technical methods to ensure the credibility of forestry projects," said Yu.
According to government data, China increased its forest coverage by 46 percent from 1992 to 2012, and plans to add another 13 percent to 2012 levels by the end of the decade.
But critics say much of the growth achieved so far has been unsustainable, as local governments have often opted for planting foreign tree species, which has disrupted biodiversity and depleted already limited water resources in arid and semi-arid areas.
(Reporting by Kathy Chen and Stian Reklev; Editing by Michael Urquhart)