By Lindsay Beck BEIJING, Nov 29 (Reuters) - The European Investment Bank hopes its loan to China to help it fight climate change will have a "demonstration effect" that could spur more greenhouse gas-reducing projects, the bank's president said on Thursday. The 500-million-euro loan was signed at EU-China meetings in Beijing this week that concluded with an agreement to set up a dialogue to tackle a range of issues, from climate change to growing trade friction and the value of China's currency. "It's a financial help, but this can be also a demonstration effect," EIB president Philippe Maystadt said of the loan. "If we can show that really these kind of projects work and generate indeed interesting results in terms of reductions of CO2 emissions, I think this can be quite useful," he told a news conference. China is set to surpass the United States as the world's top emitter of carbon dioxide, as its coal-reliant energy sector booms to keep pace with its rapid economic growth. The EIB loan will fund 10 projects jointly agreed by the bank and the Chinese government that would result in a significant reduction of greenhouse gas emissions, improve energy efficency and have the potential to generate carbon credits under the Clean Development Mechanism (CDM). This is a part of the Kyoto Protocol that allows polluters in rich nations to fund emission-cutting projects in the developing world in return for credits to put towards domestic quotas. China levies a fee on all CDM projects, with some attracting a tariff as high as 65 percent. Maystadt said such tariffs, which Beijing says it will use to support activities that tackle climate change, would not prevent the EIB from finding projects in China that generate adequate returns. "We have no doubt we can find very good projects that will generate a sufficient economic rate of return with this arrangement," he said. Maystadt added that he was hopeful some of the projects would use EU technology. China has made technology transfers a key plank of its negotiating position going into international talks in Bali opening next week that are aimed at finding a successor to Kyoto, the first phase of which ends in 2012. China says it will not agree to fixed targets on its emissions, and rich countries should instead bear the brunt of emissions reductions and help poorer nations by transferring energy-saving technologies. But Maystadt said the conditions for such transfers would have to be discussed separately between each European company in question and the Chinese projects. He also shot down suggestions from Chinese officials that intellectual property protection on energy-saving technology should be relaxed in order to put their costs within reach. "This has to be discussed in this high-level working group," he said. "But in comparison with the present situation, it's clear that the European Union will ask for better protection." (Editing by Roger Crabb)
