I、Introduction

　　The Government of China, through the Ministry of Science and Technology (MOST), will undertake a project with the Global Environmental Facility (GEF) and the United Nations Development program (UNDP). This US$ 32 million co-funded project is intended to catalyze the cost-reduction of fuel-cell buses (FCBs) for public transit applications in Chinese cities and stimulate technology transfer activities by supporting significant parallel demonstrations of FCBs and their hydrogen fueling infrastructures in Beijing and Shanghai. The project will be launched at an Inception Workshop in Beijing on March 27, 2003.

　　Fuel cell vehicles hold the prospect for both zero tailpipe emissions and significantly higher fuel efficiency compared to conventional vehicles. Fuel cell bus technology is considered one of the most promising technologies for the development of emission-free public transport vehicles. China's FCB project is part of a three-phase global GEF strategy which is supporting FCB development in the cities of four other developing countries (Brazil, Egypt, India, and Mexico) under the GEF Sustainable Transport Program. The long-term objective of the project is to reduce air pollution and greenhouse gas (GHG) emissions through widespread commercial introduction of fuel cell buses in urban areas of China. This project is included in the Phase II, demonstration portion of the strategy. It is planned that in cooperation with the GEF projects and other similar projects in industrialized countries, the cost of FCB technology can be brought down to levels that will enable their widespread cost-competitive introduction in the mega-cities of many developing countries.

　　The Government of China attaches great importance to the reduction of air pollution in its cities and to the improvement of energy efficiency in relation to climate change. Under the leadership of the MOST, a national Clean Vehicle Action program is being implemented to develop technology, policy and national incentive programs, which will foster the reduction in vehicular emissions. The program involves many cities, research institutions and local auto producers. In preparing to host the 2008 Olympic Games, the Beijing municipal government is making conscientious efforts in upgrading its city infrastructure and facilities, so as to mount the greenest Olympics ever. Similarly, Shanghai will host the World Expo 2010 is also making every effort to reduce emissions from vehicles. Modernizing the public transport system is a top priority for both municipalities.

　　China is the world's largest energy consumer after the United States. In 1998, primary commercial energy consumption in China amounted to 1,360 million TCE. The mix was dominated by fossil fuels with coal at 72%, oil at 20% and natural gas at 2%, and oil consumption is currently growing far faster than the use of coal or natural gas. The transportation sector, which relies almost entirely on oil, is one of the main sources of air pollution in Chinese cities, and vehicle emissions contribute significantly to the environmental degradation and related health problems in Chinese cities. Incidents of respiratory illnesses are increasing, and at least 270 million urban residents are currently experiencing air quality that is below what is considered acceptable by the Chinese air quality standard.

　　Over the coming decades, the projected growth in the vehicle population will put significant pressure on the urban air quality in China. The widespread use of FCBs in major Chinese cities can reduce both urban air pollution and GHG emissions. It is estimated that the potential impact of FCBs in terms of GHG reductions in China is an annual savings of 9.1 million tonnes per year. This estimate is based on the following assumptions: 1) an assumed 5% average annual growth rate of large and medium buses between 2000 and 2030, which would result in a Chinese bus population of about 720,000 in 2030; 2) FCBs becoming cost-competitive with diesel buses on a lifecycle basis before that tie based on the expected cost of mass-produced FCBs in China; and 3) hydrogen is produced from coal in a large-scale process that includes capture of the carbon in the coal and sequestering it as CO2 in depleted natural gas wells.