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4 Japan banks on energy,
environment By Hisane Masaki
present. By extending loans and increasing
involvement in the reconstruction process, Tokyo
is hoping it can acquire a good share of these
massive oil reserves.
Rush for CDM
projects The Kyoto Protocol came into force
in February 2005, more than seven years after it
was adopted at the third Conference of Parties to
the United Nations Framework Convention on Climate
Change,
or
COP3, in the ancient Japanese capital in late
1997.
Under the protocol, industrialized
countries must reduce their emissions of several
greenhouse gases by an average of 5.2% from 1990
levels during the first commitment period of
2008-12. The protocol sets separate gas-reduction
targets for individual industrialized countries -
6% in Japan's case.
Despite its firm
commitment to the Kyoto Protocol, however, Japan's
emissions have actually risen by about 8% from
1990.
Japan has made strenuous
energy-saving efforts and technological
innovations since the two oil crises of the 1970s.
The country is now the most energy-efficient in
the industrialized world and faces great
difficulties making further dents in
greenhouse-gas emissions through domestic measures
alone, such as further energy-saving efforts and
carbon "sink" plantation projects. According to
one estimate, it costs Japan about $110 to
eliminate a ton of carbon dioxide, compared with
about $80 for Europe and $50 for the US, on
average.
Although the Environment Ministry
has tenaciously pushed for the introduction of an
environment tax on fossil fuels - which would be
equivalent to 1.5 yen (about 1.3 cents) per liter
in the case of gasoline - the Ministry of Economy,
Trade and Industry (METI) and domestic industry
have opposed the idea, claiming that any such
extra tax burden would erode corporate Japan's
international competitiveness. Therefore, the
government and businesses are increasingly turning
to the so-called Kyoto mechanisms as attractive
means of achieving the reduction target at a lower
cost while maintaining international
competitiveness.
The "credits" firms earn
in return for gas-reduction investments in
developing countries can be counted as cuts for
their own emissions - and in turn, for Japan -
under CDM, one of the three mechanisms introduced
under the Kyoto Protocol to help industrialized
countries meet their reduction targets. Developing
nations that take part can receive technology
transfers from their industrialized partners. The
two other mechanisms are Joint Implementation (JI)
and international emissions trading. JI is a
scheme similar to CDM but it covers gas-reduction
projects in industrialized countries that can
afford to cut more gases than required by the
protocol, such as Russia and some former Soviet
republics. In international emissions trading,
greenhouse-gas emission credits are traded.
At an international conference in Montreal
last December, delegates finalized a rule book for
implementing the Kyoto Protocol, including CDM and
other mechanisms, formally making it fully
operational after years of negotiations and
ratification. Taking their cue from the agreements
reached at the Montreal conference, Japanese firms
have begun to step up investment in CDM projects.
METI and the Environment Ministry have
supported CDM projects conducted by Japanese
companies and approved by the government. As of
last Friday, the government had approved a total
of 95 CDM and JI projects since the end of 2002;
almost all the approved projects are in the CDM
category. The number of CDM projects approved by
the government has been rising sharply since the
Kyoto Protocol came into force nearly two years
ago. And the number has been growing at an
accelerated pace in recent months. Of the 95
projects approved by the government, 76 have been
approved since October last year, many of them CDM
projects in Asian countries. Some of the projects
approved so far by the government have already
been registered with the United Nations' CDM
executive board, which screens and approves CDM
projects.
Japan's CDM projects in China
are rising sharply, reflecting the fact that
Japanese firms are becoming increasingly
interested in implementing CDM projects in the
world's second-largest carbon-dioxide emitter
after the US. Of the 46 CDM projects approved in
the past six months since June, 20 are in China.
Many Japanese companies not only feel the
necessity to hedge against future risks but also
see new - and potentially lucrative - business
opportunities in CDM, since demand for the right
to emit greenhouse gases is growing. Firms that
earn greenhouse-gas emission credits through CDM
projects abroad can count them in their reduction
efforts, and surplus credits can be sold through
an emissions transaction on the market. Firms that
buy cheap credits only to sell them off for a
higher price would reap profits.
Energy-related firms such as electricity,
oil and gas companies are not alone in rushing to
gas-reduction projects abroad. Major Japanese
trading firms are also intent on cashing in on the
new business bonanza.
The Japanese
government began to make full-scale use of the CDM
and other Kyoto mechanisms starting in the current
2006 fiscal year. The government-affiliated New
Energy and Industrial Technology Development
Organization (NEDO) began to acquire
greenhouse-gas emission credits. The
credit-purchase expenses
