BEIJING, July 26 -- In a bid to meet pollution targets, China is launching a trial program to contract out work to desulfurize coal-fired electricity generators.

    The nation's five largest state-owned power producing groups are asked to select two projects for a pilot run, according to a circular from the National Development and Reform Commission and the State Environmental Protection Administration.

    Specialist firms will be commissioned to install desulfurizing equipment in coal-fired generators. They will be responsible for the operation and maintenance, and in return will enjoy tax benefits and collect a subsidy of 15 yuan (US$2) per megawatt-hour from the government.

    "Contracting out desulfurization projects will improve quality and the take-up rate, as well as accelerate technological progress," the circular said.

    China has a nationwide target to cut sulfur dioxide emissions and other major pollutants by 10 percent in the five years to 2010.

    But growth-driven local officials and industries ignored the target last year. Instead, sulfur dioxide output grew by 1.8 percent year on year.

    Pollutant

    Sulfur dioxide, which causes acid rain, can damage crops and threaten food security.

    As one of the major contributors of sulfur dioxide emissions, coal-burning power plants are urged and required to install equipment to capture the contaminants before they can be released.

    In March, the NDRC, the country's top industry planner, said China would cut sulfur dioxide emissions at coal-fired power plants by 61.4 percent to 5.02 million tons in 2010, from 13 million tons in 2005. This will be achieved by shutting aging generators, using cleaner coal and boosting energy efficiency.

    A total capacity of 137,000 megawatts at existing plants would need desulfurization equipment in that period, according to the planner.

    However, about half of China's coal-fired power plants haven't installed the pollution-reducing equipment, and some don't use it even if they have installed a system because of high construction and running costs.

    The current cost of desulfurization equipment for each megawatt of generating capacity is between 200,000 yuan and 250,000 yuan. The cost used to be up to one million yuan per megawatt, when China had to rely on imported equipment.

    According to Guotai Jun'an Securities analyst Wang Zhen, competition in the desulfurization sector is fierce, and the technological barriers are no longer so high.

 Market benefits

    "The new program may be a chance to boost the desulfurization market and benefit leading players," Wang said.

    The latest circular said the market environment, industry policy and technological development are all in place for power firms to hire contractors for desulfurization projects. It said the trial will run for three years.

    In other efforts, the government has said it would punish firms that let equipment stand idle, while plants that have pollution-reducing equipment will also be given favored access to the electricity grid.