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Japan in a Rush Over Kyoto
[Analysis] Racing against the clock, companies and gov't accelerate emission credit purchases
Hisane Masaki (hmasaki)     Print Article 
Published 2007-12-05 04:54 (KST)   
This is the third part of a four-part article. Read part two.  <Editor's Note>
Japanese companies are racing against the clock and further accelerating their hefty investments in Clean Development Mechanism (CDM) and Joint Implementation (JI) projects abroad. As of Oct. 24, the Japanese government had approved a total of 247 such projects since the end of 2002. Of the 247 projects, 149, or 60 percent, were approved this year alone. China is by far the largest host nation of CDM projects involving Japanese firms, followed by such other major developing countries as Brazil and India.

The electricity and steel industries, two major CO2 emitters, reported to the joint council of the Environment Ministry and the Ministry of Economy, Trade and Industry (METI) in October plans to significantly increase their emission credit purchases, to a total of 164 million tons CO2 equivalent. The electricity industry plans to increase the amount of credit purchases it makes by 2012 to around 120 million tons CO2 equivalent from the previously planned 70 million tons, while the steel industry plans to purchase 44 million tons by 2012, compared with the previously planned 28 million tons.

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Energy-related firms such as electric-power, oil and gas companies, and steelmakers are not alone in rushing to gas-reduction projects abroad. Since firms that buy cheap credits only to sell them off for higher prices could reap profits, major Japanese trading firms are intent on cashing in on the new business bonanza. They have already actively participated in greenhouse gas-reduction projects abroad, acquired emission credits generated from the projects and sold the credits to Japanese clients.

Mitsubishi Corp., Japan's biggest trading house, is by far the most aggressive Japanese investor in CDM and JI projects. Mitsubishi is involved in 44 -- or about 18 percent -- of the 247 such projects approved by the Japanese government as of Oct. 24, either alone or in partnership with other Japanese companies. At present, the total amount of emission credits Mitsubishi has already acquired or plans to acquire through CDM and JI projects is estimated at around 14 million tons CO2 equivalent per annum.

Another major trading house Marubeni Corp. is preparing to launch up to 10 JI projects in Kazakhstan in hopes of acquiring emission credits worth several million tons CO2 equivalent per annum. Kazakhstan is not a signatory to the Kyoto Protocol, but is expected to ratify the treaty in the near future, paving the way for JI projects in the resource-rich Central Asian country.

Marubeni specifically plans to launch between 5 and 10 methane recovery JI projects at Kazakh coal mines and landfills. Methane is one of the six greenhouse gases (GHGs) controlled by the Kyoto Protocol. Marubeni has apparently set its sights on Kazakhstan because new opportunities for large-scale GHG-reduction projects in the current protocol signatory countries are becoming increasingly scarce.

Private companies are not alone in rushing to buy emission credits. The Japanese government is also stepping up credit purchases.

The government began to purchase credits in fiscal 2006 through its affiliated New Energy and Industrial Technology Development Organization (NEDO). In fiscal 2006, the government purchased credits worth a total of 6.38 million tons CO2 equivalent at a total cost of 12.2 billion yen. Since the current fiscal year began in April, the government has so far purchased credits worth at least about 2.2 million tons CO2 equivalent in total at an undisclosed cost.

The Environment Ministry and METI are jointly contributing funds to the Kyoto Mechanisms Credit Acquisition Program that NEDO has been commissioned by the government to implement. The two ministries together plan to contribute about 31.5 billion yen to the program for the next fiscal year starting in April 2008, compared with the 12.9 billion yen earmarked for the current fiscal year.

The government also plans to buy surplus emission credits, dubbed "hot air," from other nations. As a starter, the government plans to buy emission credits, possibly worth up to 10 million tons CO2 equivalent, from Hungary. It will be the first time for the Japanese government to purchase carbon credits directly from a foreign government through emissions trading, one of the Kyoto mechanisms.

Although Hungary is required by the Kyoto Protocol to slash its annual GHG emissions by 6 percent from the 1990 levels, the Eastern European country's emissions are now hovering at levels more than 100 million tons below the target ones because its domestic industries, mainly the heavy chemical industry, have stagnated since the introduction of a market economy.

Hungary is expected to offer around 10 million tons of surplus credits for sale to foreign countries next year. If Japan purchases all the credits, it is estimated that the amount of money paid to Hungary will be around 20 billion yen.

There is strong criticism, especially from environment groups, that unlike investing in GHG-reduction projects, just buying hot air from Hungary and other Eastern European countries as well as Russia will not result in cuts in GHG emissions. But Japan defends its plans to purchase hot air.

A top METI bureaucrat said on Monday that Japan accepted its legally binding target to reduce GHG emissions by 6 percent on condition that each nation can use the three Kyoto mechanisms, including emissions trading. "We believe it [to buy hot air through emissions trading] is our legitimate right," said Takao Kitabata, METI's administrative vice minister.

Kitabata said that the Japanese government will ask Hungary to use the proceeds from the credit sales for domestic environment protection under the so-called Green Investment Scheme (GIS). Kitabata indicated, however, that the Japanese government will not necessarily make similar requests to other potential sellers of hot air. "We have not made any decision to do so as our policy, although it [the GIS] is more desirable," he said.
Hisane Masaki is a Tokyo-based journalist, commentator and scholar on international politics and economy. This is the third part of an article that originally appeared on Asia Times on Nov. 30. The fourth -- and last -- part will come later.
©2007 OhmyNews
Other articles by reporter Hisane Masaki

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