Carbon Credits, Climate Change, Japan

Japan Considers Creating Carbon-credit System

August 9, 2007 (Yomiuri Shimbun) TOKYO — The government is set to begin discussions on a system that would allow domestic firms to buy and sell greenhouse-gas-emission credits, the Yomiuri Shimbun has learned. At a meeting of the foreign minister, environment minister, economy, trade and industry minister and chief cabinet secretary scheduled to be held in mid-August, the Environment Ministry is expected to submit a report prepared in conjunction with the Economy, Trade and Industry Ministry stating that there is a high likelihood a domestic credit-transfer system will be introduced in Australia and the United States, sources said.

The European Union adopted the system in 2005.

The sources said the ministry also is expected to propose introducing the mechanism, arguing that Japan should follow the global trend.

At next year’s summit meeting of the Group of Eight major nations to be held in Toyakocho in Hokkaido, Prime Minister Shinzo Abe will aim to construct a post-Kyoto Protocol system that would see all major greenhouse gas-emitting countries work together from 2013 to cut gas emissions.

The group, comprising the four ministers, was set up in March to discuss and clarify the government’s stance on the formulation of a post-Kyoto Protocol system.

In the United States, 10 bills related to controlling greenhouse-gas emissions have been submitted to Congress so far, all of which assume a trading mechanism will be introduced as a part of measures to achieve a specific gas-reduction target. In September, another bill is scheduled to be submitted to Congress.

Therefore, the Environment Ministry sees it as almost certain that the bills would be passed no later than 2010 and that the system would be introduced in the near future, sources said.

Under the EU system, which targets power plants, steel plants and other firms that consume large amounts of energy, member countries allocate an emission ceiling to each of these companies.

Each company is required to report its emissions to its national government every year. If a firm emits gases beyond its allocated ceiling, it is obligated to purchase credits, corresponding to the amount it exceeded in its limit, through the trading system.

The Japan Business Federation (Nippon Keidanren) has strongly opposed introduction of the system here, claiming that it is impossible to fairly allocate emission credits to each industry and each firm. It has also said that the system would lead to increased bureaucratization of the business sector.

An international mechanism for the trade of greenhouse-gas credits is included in the Kyoto Protocol. Under the international trading mechanism, industrialized nations that exceed their greenhouse gas-emission targets are obliged to purchase credits from other countries to achieve them.

The domestic version of the scheme would aim at encouraging greenhouse-gas cuts at a national level.

If all major greenhouse gas-emitting countries introduce the system, it would provide for the creation of an international market to exchange credits. Therefore, without a domestic mechanism, Japan would not be able to participate in the international market.

An Environment Ministry official said, “We believe we have to start discussions on a domestic trading mechanism to be able to introduce it in the near future; otherwise we will fall behind (the global trend).”

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