February 20, 2008 / 6:33 AM / 11 years ago

UPDATE 1-Japan considers emissions cap and trade system

(Recasts, adds comments)

TOKYO, Feb 20 (Reuters) - Japan is considering compulsory caps on greenhouse gas emissions and a domestic emissions trading scheme for its reluctant companies as it is expected to make tougher commitments in the post-Kyoto Protocol phase, a trade ministry official said on Wednesday.

Japan, the world’s fifth-largest greenhouse gas emitter, currently lets companies set their own targets on emissions and monitor themselves for compliance, and the country’s most powerful business lobby strongly opposes a compulsory scheme.

But the Ministry of Economy, Trade and Industry appears to be breaking ranks with the firms it regulates. The ministry official, who deals with environmental and economic issues, said METI would set up an informal study panel in early March to look into possible initiatives to cut emissions further, including compulsory trading schemes.

“A tough emission trading scheme, like the one in Europe, will be one option to discuss (at a study panel),” the official said.

“As we’ve said before, there’s no sacred cow when we discuss what we can do in post-Kyoto,” he said.

The panel reports to a senior official at the ministry’s technology and environment bureau and will compile its findings by June, he said.

METI will then meet with other ministries and key industries to hammer out the details of a plan that could come into effect from 2013, after the expiry of the Kyoto agreement to tackle global warming.

Japan hosts a meeting of leaders from the Group of Eight industrialised nations in July, where they are expected to discuss 2020 emission targets among other issues.

CAP AND TRADE SCHEME

Japan, the only Asian country with Kyoto reduction responsibilities, has lagged behind its commitments to cut emissions by 6 percent a year on average from 1990 levels over the 2008-2012 period.

But Tokyo argues that voluntary industry cuts and energy conservation by households will allow the country to meet its international obligations under the Kyoto Protocol.

Nevertheless, industrialised nations are expected to bind themselves to further emission cuts after the Kyoto period given that European Union leaders agreed last March to cut greenhouse gas emissions by 20 percent in 2020 from 1990 levels.

Big Japanese manufacturers, such as steel makers, have argued that emissions caps will mean government meddling, unfair distribution of emission permits, restrictions on growth of healthy companies and subsidies for ailing ones.

Under Europe’s flagship Emissions Trading System, member states allocate permits to industries based on their past emissions.

The system, which tends to provide more generous permits to bigger polluters, nearly collapsed when the price of carbon-emission rights crashed in 2006.

But the European Commission last month adopted a new plan in which member states auction most permits to industries instead of handing them out for free.

A METI official has said the revised European scheme would be fair and reasonable in terms of permit allocation.

Top Japanese government spokesman Nobutaka Machimura said last week there was no international or domestic consensus that cap and trade was the best way to cut emissions.

“I have heard some people think it will just be a new way for people in the City to make money,” he said. “This must not happen, so if we are sure it is really an effective way to achieve reductions in carbon dioxide we should think about it seriously.” (Reporting by Risa Maeda in Tokyo and Emma Graham-Harrison in Beijing; Editing by Mike Miller)

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