Japan Inc needs cap on CO2 -business

TOKYO (Reuters) - Japan should set a compulsory cap on greenhouse gas emissions by companies to make them accelerate their cuts if Tokyo commits itself to a tough limit beyond 2012, the head of a business lobby said on Wednesday.

The comment reflects a rift in views between companies on climate change and its impact on the world's No.2 economy, but suggests an increasing chance for Japan to introduce an emissions trading scheme like EU's since Tokyo's incoming government is more aggressive in fighting global warming.

Japanese companies currently use voluntary goals for emission cuts, and big emitters oppose any compulsory limits being set by the government.

Prime Minister-elect Yukio Hatoyama, who is expected to take office on September 16, said this week he would forge ahead with a 25 percent cut in emissions by 2020 from the 1990 level as countries are stepping up their efforts to agree a broader climate framework beyond 2012, when the first phase of the Kyoto Protocol ends.

"Assuming that Japan commits itself to a compulsory volume target, industry will need to be bound to compulsory targets," Masamitsu Sakurai, chairman of Keizai Doyukai (Japan Association of Corporate Executives) said in an interview for a Reuters Global Climate and Alternative Energy Summit.

Sakurai, who is also chairman of office equipment maker Ricoh Co (7752.T), also said Hatoyama's government must explain thoroughly to the public a strategy to enable Japan, the world's fifth-largest greenhouse gas emitter, meet the 25 percent goal on emission cuts, saying it would be difficult to achieve.

DIFFERENT FROM KEIDANREN

Currently, each industry sector has a voluntary emissions target to meet over the five business years to March 2013, crafted by rival business lobby Nippon Keidanren.

These targets, albeit without any legal binding, containing the country's main emitters including power and steel companies, are meant to help Japan meet its commitments for Kyoto's 2008-2012 period to cut emissions 6 percent below 1990.

Emissions from manufacturers account for 40 percent of Japanese greenhouse gas emissions, followed by 20 percent each from transport and offices and 15 percent from households.

Companies have since an oil shock in the 1970s been cutting energy costs to stay competitive in resource-poor Japan, which is now one of the most energy efficient countries in the world.

There are concerns about further spending on efficiency and expensive alternative energy sources by recession-hit company managers and doubts over the government's ability to allocate emissions limits fairly enough to avoid an exodus of heavy emitters to countries with lax emission rules.

Sakurai dismissed such arguments and said global warming, whose impact on the environment looks so subtle for now, is in fact an urgent issue unavoidable for any business.

"It is a medium- to long-term agenda and such type of an issue is often considered as one to address later. Having said that, now is the time to make a start and take action," Sakurai said, referring to scientific findings which urge deep emission cuts as early as possible by the United Nation's climate panel, Intergovernmental Panel on Climate Change (IPCC).

"(A compulsory cap) is a constructive solution and is a way to complete a mission," he said.

Sakurai also said Japanese companies have cutting-edge technology in several green business areas and will be able to contribute to emission cuts in fast-growing countries and poorer countries as well as in Japan.

"New economies are responsible for the future of the globe.... That means they should come up with some sort of plans to achieve an energy efficient economy," he said, referring to the U.N.-led climate talks aiming to conclude in Copenhagen in December.

"I hope the road to Copenhagen will make clear their responsibility, as well," he said.

Keizai Doyukai earlier this year proposed a target to cut emissions by 7 percent from the 1990 level by 2020, a deeper cut than Keidanren's.