Arreon Carbon UK Ltd and Credit Suisse International signed a deal at the weekend with two subsidiaries of Shanghai Baosteel to buy emission reduction credits worth an estimated 94 million euros (US$138.9 million).

The two firms inked the deal with Baoshan Iron and Steel Co, the listing arm of Shanghai Baosteel, to buy an expected eight million carbon dioxide emission reduction credits.

The emission reduction originated from Baoshan Iron's blast furnace gas-fired power generation project. The Shanghai-based project will utilize waste blast furnace gas generated in an iron-smelting factory to generate electricity. The project can help cut carbon dioxide emission by 1.6 million tons a year.

Arreon Carbon and Credit Suisse bought the five-year emission reduction volume. The transaction value is estimated at about 70 million euros.

The two firms also signed a similar pact with Baosteel's subsidiary Xinjiang Bayi Steel Corp to buy four-year emission reduction credits valued at nearly 24 million euros.

The project, located in western China's Xinjiang Uygur Autonomous Region, is estimated to reduce the emission of about 600,000 tons of carbon dioxide annually.

The two projects are implemented under a Kyoto Protocol scheme called the Clean Development Mechanism.

The Kyoto Protocol, an international treaty aimed at reducing worldwide greenhouse gas emissions, set up a mechanism to encourage investment in greenhouse gas reducing projects in developing countries.

Arreon Carbon and Credit Suisse can sell the purchased carbon reduction credit to developed countries.