Page 3 of 3 Japan goes on an air spending
spree By
Hisane Masaki
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 tonnes 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 tonnes CO2 equivalent in
total at an undisclosed cost.
The
Environment Ministry and METI are jointly
contributing funds to the Kyoto Mechanisms Credit
Acquisition Program NEDO has been commissioned by
the government to implement. The two ministries
plan to together 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 tonnes
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% from the 1990 levels, the Eastern
European country's emissions are now hovering at
levels more than 100 million tonnes 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 tonnes 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% 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.
In disarray Meanwhile,
debate is heating up within Japan over such
drastic anti-global warming measures as a "cap and
trade" mandatory emissions trading system and an
environment tax levied primarily on fossil fuels
such as oil, gas and coal. But any decision
appears very unlikely anytime soon because of
sharp differences, even within the government.
On the issue of a "cap-and-trade"
mandatory emissions trading system, which has been
in place in the EU, the Environment Ministry is
favoring the introduction of such a system. But
METI and the nation's most-powerful business
lobby, the Japan Business Federation (Nippon
Keidanren), are vehemently opposing the idea.
Among other reasons, the Japan Business
Federation, chaired by Canon Chairman Fujio
Mitarai, cites the difficulty of allotting
emission volumes to business entities fairly and
increased government controls over the economy. It
also argues that the introduction of a mandatory
emissions trading system would restrict growth of
companies.
The Finance Ministry has
recently joined the tug-of-war over a mandatory
emissions trading system, clearly siding with the
Environment Ministry and calling for the
introduction of such a system.
A key
advisory panel to Finance Minister Fukushiro
Nukaga also warned on November 19 of a possible
"huge" public financial burden resulting from the
government's larger-than-expected purchases of GHG
emission credits to reach the nation's Kyoto goal.
The Fiscal System Council, headed by Taizo
Nishimuro, chairman of Tokyo Stock Exchange, made
the unusual warning in a recommendation submitted
to the finance minister. The recommendation serves
as a guideline for the Finance Ministry to draft a
fiscal 2008 government budget in late December.
The warning reflects a growing sense of
crisis among panel members over the
ever-deteriorating fiscal condition of the world's
second-largest economy, which is the worst among
major industrialized countries.
Citing
Finance Ministry estimates made recently, the
advisory panel said in the recommendation that the
government might have to buy GHG emission credits
worth up to 1.2 trillion yen. "Since this huge
burden would not gain the public's understanding,
it is necessary for the nation to surely fulfill
its 6% reduction commitment by mobilizing all
possible domestic measures," the advisory panel
said.
The advisory panel then stressed the
need to take drastic measures to rein in the
continued sharp growth in GHG emissions from
offices and other commercial facilities as well as
from households. "In order to reach the Kyoto
goal, the nation needs to take effective policy
measures appropriately ... without relying
excessively on fiscal measures," the panel said.
Noting various risks involved in emission
credit purchases, including possible higher
purchase costs due to price rises and a weaker yen
against the euro or the US dollar, the panel also
emphasized the need for the government to acquire
emission credits "effectively and steadily" while
gaining full public understanding.
On the
equally controversial issue of an environment tax,
the Environment Ministry has tenaciously pushed
for the introduction of such a tax in recent
years. But METI and the Japan Business Federation
have vehemently opposed the introduction of an
environment tax, claiming that any such extra tax
burden would erode corporate Japan's international
competitiveness.
A recent government
survey shows, however, that those who support the
introduction of an environmental tax to fight
global warming have outnumbered those who oppose
the move for the firs time. Environment groups are
also calling for the introduction as soon as
possible of an environment tax as well as a
mandatory emissions trading system.
Another controversial issue being hotly
debated is daylight saving time. The government
survey shows that 56.8% of the pollees want
daylight saving time to be introduced as part of
efforts to promote energy conservation, up from
51.9% in the previous survey in 2005. In contrast,
29.3% said they are against such a measure, down
from 30.2% in 2005.
On November 21, the
joint council of the Environment Ministry and METI
kicked off a full-scale debate on whether to take
such drastic measures as a "cap-and-trade"
mandatory emissions trading system, an environment
tax and daylight saving time.
Although the
joint council wants to draw some conclusions on
those measures by the end of the year, the odds
are clearly against their proponents. The joint
council appears likely to merely include the pros
and cons of the controversial measures in its
final report, due out in late December.
Hisane Masaki is a Tokyo-based
journalist, commentator and scholar on
international politics and economy. Masaki's email
address is yiu45535@nifty.com)
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