A bigger role must be found for improving energy efficiency in any new U.N. deal aimed at reducing greenhouse gas emissions, a leading China-based project developer said on Thursday.

About 200 countries are negotiating on a replacement for the Kyoto Protocol climate pact, whose first phase expires in 2012, and many are pushing for a new emissions trading scheme that will commit Chinese industries to reduce their energy use.

Oliver Behrend, the general manager of Arreon Carbon, said the U.N.'s Clean Development Mechanism has not done enough to encourage energy efficiency in China, even though the technology already exists to make savings of at least 20 percent.

The CDM allows developed countries to comply with their carbon reduction targets by investing in clean energy projects in poorer nations, which are then granted tradable certified emission reductions (CERs) by a United Nations body.

China has been the most successful nation in the CDM, supplying about 45 percent of the 286 million CERs issued by the U.N. to date. CERs were trading around 12 euros ($16) on the European Climate Exchange on Thursday.

Through the use of U.N.-approved methodologies, a project must demonstrate that it would not be profitable without the income generated by those CERs, but the system is not flexible enough to encourage high-energy consuming industries to cut back on waste.

The methodology for energy efficiency is really complicated to apply, Behrend told Reuters on the sidelines of a conference.

The executive board generally regards energy efficient technologies as already profitable, but there are other considerations.

If the economics are fantastic, why is China so incredibly slow on this? Why is it not being done? There must be other barriers, Behrend said.

Currently, only around 15 percent of China's registered CDM projects involve energy efficiency, according to the latest figures from the Risoe Center, a research group affiliated with the United Nations Environment Program.

Many of these involve waste heat recovery from industrial processes.

I think it is going to come. Post-2012, I think there is going to be a huge focus on energy efficiency because I think there is going to be a sectoral approach (to cutting carbon dioxide emissions), Behrend said.

(Editing by David Fogarty)

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