London Asia Capital, the Asia-focussed investment bank, is paying £1.9m for a 10% stake in China CDM Exchange Centre, a company that specialises in one of China's most recent export successes -- carbon credits.

China is the largest seller of so-called carbon development mechanism (CDM) credits, a mechanism introduced by the Kyoto Protocol to allow businesses in signatory countries to meet their emission reduction targets by funding "green" projects such as wind farms in developing countries.

China has thus become the target for many of the carbon credit funds created in the last 18 months seeking to buy carbon credits. CCEC was founded earlier this year to exploit this new opportunity.

As well as providing advice to projects which generate carbon credits, its acts as an emissions broker and maintains its own carbon trading portfolio. It claims to manage the only on-line platform for environmental commodity transactions in China.CCEC is working on 26 projects with aggregate annual CO₂ emissions of approximately 30m tons.

Kang Zheng, chief executive of the company, says that he plans to list the business on the UK's Plus market, previously known as Ofex, in the near future. London Asia is investing in CCEC through its £50m London Asia Private Equity Fund, which is quoted on London's Aim market.

As well as investing in the company, London Asia will help CCEC get its Plus listing, which should provide greater visibility of the important role that carbon credits are already playing in helping to clean up China.

CCEC is not the only western company hoping to profit from the CDM mechanism. Earlier this month EngagingChina wrote about Aim-listed Camco which claims to have brokered one of China's largest CDM projects with a steelworks.

Meanwhile, China's regional governments are also doing their bit to attract CDM funds. For example, Hubei province recently set up a CDM project management office to help companies in the province develop CDM projects and apply for credits.

Full details on China's CDM projects can be found on this surprisingly accessible official website -- in English!

More on CDM in China in this earlier EngagingChina story.

Separately, another of London Asia's investments, China New Energy, has issued a trading update (pdf) which reports "considerable progress" in expanding its ethanol business. It has signed three contracts with a combined value of £9.9m: two are to build ethanol plants in China and a third contract is for a bio-ethanol plant in Romania. The company is now exploring export opportunities in countries like Indonesia and Pakistan. Its total sales order book is now worth over £21m.

China New Energy is listed on Plus and is the holding company for Guangdong-based Zhongke Tianyuan New Energy Technology.