Carbon Credits, Emissions Reduction, Japan

Japan Needs Measures to Avert $10.5 Billion Carbon Credit Cost

Oct. 31 (Bloomberg) – Japan needs to implement measures to lower greenhouse gas emissions and avoid a bill of as much as 1.2 trillion yen ($10.5 billion) to buy carbon credits in global markets, a government report says.

Japan may fail to cut emissions and meet the target set out in the Kyoto Protocol, forcing the government to increase spending on credits to offset higher industrial pollution, the report by the finance ministry’s fiscal system council said. Prime Minister Yasuo Fukuda’s government is reviewing plans to achieve the nation’s goal under the United Nations treaty.

“Our tax payers won’t accept the financial strain,” the finance ministry panel said in the report.

Japan must cut annual emissions during the five years starting April 2008 by 6 percent from the level in 1990. Japan emitted 7.8 percent more of the polluting gases in the year ended March 2006 than in 1990, driven by a 37 percent surge in household output and an 18 percent increase from transport- related sources.

The Japanese government initially planned to spend 200 billion yen in the five years through March 2013 to buy 20 million metric tons worth of the carbon credits annually, the report posted on the ministry’s Web site showed. Growing emissions forced the government to seek an alternative solution.

Additional government spending for carbon-credit purchases is among the possible measures, said Kuniyuki Nishimura, research director of Mitsubishi Research Institute Inc.’s global warming division in Tokyo.

Carbon Tax

“The government may have to introduce a carbon tax to procure the financial resources,” he said.

The environment ministry has proposed imposing a tax of 2,400 yen on each ton of carbon emitted by households using kerosene and liquefied petroleum gas, the main heating and cooking fuels. Under the proposal, the tax will also be levied on the consumption of coal, heavy fuel oil and natural gas, which are used to power boilers and in-house power generators in factories.

Under the 1997 Kyoto treaty’s Clean Development Mechanism, or CDM, polluters in developed nations can buy credits to offset the harmful gases they produce by investing in projects that cut greenhouse gas emissions in developing countries. Polluters are also allowed to buy credits from the project operators.

To contact the reporter for this story: Shigeru Sato in Tokyo at ssato10@bloomberg.net .

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