Carbon Offset, Emissions Reduction, Japan

Japanese Firms to Lift CER Purchases

October 11, 2007 (Bloomberg, IHT) Japanese power and steel companies have signaled a 100-million-tonne rise in the volume of Kyoto carbon credits they will buy as their contribution to meeting the country’s emissions reduction target under the Kyoto Protocol. Like many of the 36 developed countries signed up to the Kyoto Protocol, Japan will not be able to meet its 6 per cent reduction target by reducing domestic emissions alone. The government has promised new measures by next March to rein in greenhouse gas emissions, but has so far rejected the idea of mandatory emissions caps being applied to businesses. It will also need to buy carbon offset credits, CERs and ERUs, for emission reducing activities in the developing world to get there.

According to government information, ten major power generators say they are increasing their purchase plans fourfold, from 30 to 120 million tonnes of offsets. Sixty iron and steel manufacturers have raised their projected purchases from 28 to 44 million tonnes. Meanwhile, the oil industry says it will increase its own emissions reduction target from 10 to 13 per cent below 1990 levels by 2010. This may further boost carbon credit demand by Japanese industry.

Most of the credits to be bought are expected to be CERs from Kyoto’s Clean Development Mechanism (CDM), although ERUs from the less-advanced Joint Implementation scheme may also provide some of the volume. Japanese financial houses are already heavily involved in financing projects in the developing world to generate CER credits over the coming five years of the Kyoto commitment period.

The latest official report from the trade and environment ministries on climate change and emissions reduction progress reveals that in the year to March 2006, Japan’s greenhouse gas emissions were 7.8 per cent above 1990 levels, or 175 million tonnes over target.

Government estimates suggest, however, that reduction measures will reduce the overshoot to 2.1 per cent above 1990 levels by 2010, or 100 million tonnes over target. To reduce emissions by the further 8 percentage points needed to reach the -6 per cent target would require purchases of offset credits and emission allowances, or AAUs, from other industrialised nations.

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