Japan, Mexico sign carbon trade deal

July 28 Mon Jul 28, 2014 7:35am EDT

July 28 (Reuters) - Japan and Mexico have signed a deal for Japanese companies to earn carbon credits by investing in technology to cut greenhouse gas emissions in Mexico - in Japan's 12th bilateral carbon agreement.

The programme, known as the Joint Crediting Mechanism (JCM), lets companies in Japan, the world's fifth-biggest greenhouse gas emitter, use lower-cost emission cuts abroad to help meet domestic targets.

"The objective ... is to establish the basis through which the participants will promote the investment and the use of technologies, products, systems, services and infrastructure in order to reach a low carbon growth in Mexico," the Embassy of Japan in Mexico and Mexico's Ministry of Environment and Natural Resources said in a joint statement on Monday.

Japan has been increasingly relying on fossil fuels to generate electricity after idling all 48 of its nuclear plants in the aftermath of the 2011 Fukushima disaster, and that has make it hard to rein in carbon emissions.

As a result, Tokyo last year weakened its 2020 emissions target, saying it would restrict its greenhouse gas output to a level that is 3 percent above 1990 emissions by the end of the decade, instead of cutting them by a quarter during that period.

Bilateral offset carbon deals let Japan meet a share of its target by paying for emission cuts in developing countries, where emission reductions are usually less costly.

The rules on monitoring and enforcing emission cuts under Japan's deal with Mexico and its other bilateral agreements have yet to be recognised by the United Nations, while negotiations are underway on a global climate pact, including an international framework for such deals.

Mexico has already made use of foreign funding under separate U.N.-led initiatives to help developing nations reduce their carbon footprint and has pledged that by 2020 it will reduce greenhouse gas emissions by 30 percent from the level forecast in 2010.

Mexico already has several projects registered under the U.N.'s Clean Development Mechanism (CDM), which allows investors in emission reduction projects located in poor nations to earn credits that governments and companies elsewhere can use to offset emissions.

Mexico also received the first grant from Britain's and Germany's U.N.-backed NAMA Facility, getting 14 million euros last year for a programme to cut energy use in homes by introducing energy efficiency standards across all new housing stock.

The statement said any participants in the JCM will not be able to use projects registered under any other international emission reduction schemes.

Japan's Hokuriku Electric and Panasonic will launch energy-saving initiatives in Mexico as part of the JCM scheme, the Nikkei news agency reported on Monday.

Hokuriku Electric will distribute smart meters to retail stores and auto parts factories in Mexico to track their power consumption and encourage them to replace inefficient equipment with new Panasonic models, the news agency said.

Japan's previous JCM partners include Costa Rica, Ethiopia, Indonesia, Kenya, Mongolia and Vietnam. (editing by Jane Baird)