The project is part of the China-EU Partnership on Climate Change launched two years ago.
Nicholas Costello, First Counselor of the Delegation of the European Commission to China and Mongolia, says the EU strongly backs the project.
"The EU and China have a common interest in limiting climate change. With this project we'll be able to facilitate the implementation of the Clean Development Mechanism, to exchange information on CDM projects, and to encourage EU companies to engage in CDM projects in China."
Set up under the Kyoto Protocol designed to address climate change, the mechanism allows industrialized countries to achieve part of their emission reduction goals by investing in emission-saving projects in developing countries and counting the reductions achieved toward their own commitments.
Gao Guangsheng, Director General of the National Coordination Committee on Climate Change, says such a mechanism helps balance economic growth against protecting the environment.
"The key objective of the Clean Development Mechanism is to promote the sustainable development of developing countries while enabling developed countries to fulfill their emission reduction commitments to the Kyoto Protocol at a lower cost. It's been proved in practice that the mechanism has attracted an increasing number of people and companies to participate in the activities of combating climate change."
As China is undergoing fast growth, Gao Guangsheng says it means big opportunities for developing mechanism-related projects.
"China is seeing a lot of infrastructure under construction. The country's fundamental industry has reached a considerable scale. But some of the technologies adopted in these fields are relatively out-dated. Therefore there is huge potential for energy saving. Moreover, China is promoting the use of renewable energy resources. It has set a goal to increase the proportion of energy produced from renewable sources to 10 percent of the total. These constitute the internal foundation for us to develop clean development mechanism projects. So the China-EU CDM Facilitation Project is very helpful."
The EU-funded project has a total budget of nearly 2.9 million euros between 2007 and 2010.
Mark Sanctuary with one of the project partners, the Swedish Environmental Research Institute, outlines their objectives.
"Namely, to strengthen capacity, introduce European and international standard in quality management of the CDM process, and increase awareness of CDM opportunities in China."
The two sides will have a 2-year program to strengthen China's National Clean Development Mechanism Centre. There's also an 18-month training program for Chinese designated businesses.
While China has approved a few hundred clean development mechanism projects, less than one fifth of them have the approval of the United Nations CDM Executive Board. Gao Guangsheng says problem is with the designated group in charge of checking the projects.
"Those entities are unable to validate all the projects in application. Their capacity falls short of demand. China needs more of them."
An approved group is required to validate the credibility and conditions of all aspects in a project. If those judges consider the proposed project is valid, it will submit a registration request and report to the Clean Development Mechanism Executive Board.
Moreover, an approval letter from the certified national authority is also required before submitting a project to the Executive Board for registration.
"In addition, the ability of China's CDM Project Management Center also needs to be boosted with respect to project implementation, follow-up and control."
While the mechanism has been widely acknowledged as dealing with the climate change problem, some people have cast doubts as to whether developing countries are making money through the mechanism.
Gao Guangsheng disagrees.
"The capital invested in the mechanism projects by developed countries is indeed limited."
Around seventy percent of the clean development mechanism projects in China involve renewable energy, such as water, solar and geothermal energy.
Gao Guangsheng cites wind power as one example.
If a project generates energy using wind power instead of burning coal, it can save tonnes of carbon dioxide each year. Developed countries can purchase the credits generated from the carbon dioxide reductions to meet their emission reduction goals.
"The price for the credits received from such a project is 10 US dollars per ton of carbon dioxide reduced. It translates into 5 RMB cents for every kilowatt-hour of electricity generated. The cost of every kilowatt-hour of electricity generated from a wind power plant is 30 RMB cents higher than that from a thermal power plant.
That means the money spent by developed countries on a wind power plant makes up for only one sixth of the extra cost for setting up the wind power plant to replace a thermal power plant.
"Such projects are more meaningful in that they help promote the implementation of relative policies."
And as developed countries have transferred many of their resource-intensive and polluting industries to developing nations, their spending on clean development mechanism projects is regarded necessary for the world's sustainable development. Mark Sanctuary from the Swedish Environmental Research Institute.
"If you look at the volume of the credits that China is making available, it's enormous compared to what's going on in the rest of the world. I think this alone is implementation of a common policy that's negotiated years ago. And I think this is a very positive thing. I don't think because China is benefiting from CDM, this is a bad thing. It's a redistribution of wealth. This is necessary in order for sustainable development to happen."
Beijing unveiled its first national program on climate change three weeks ago to control greenhouse gas emissions.
By last Thursday, China had approved more than 500 clean development mechanism projects, sufficient to generate some 180 million tons of emission reduction credits annually. Foreign partners in these projects are mainly from European countries including Britain, and Germany Italy, and Japan in Asia.