By Yuko Inoue
TOKYO (Reuters) - A slowdown in the United Nations' approval process for carbon emission-reduction projects could derail Japanese plans to buy Kyoto credits to offset the country's greenhouse gas emissions.
Investing in clean energy projects in developing countries in return for credits called CERs to offset domestic emissions is a major plank of Japanese climate policy under the Kyoto Protocol.
But tighter regulation standards at the UN and a recent slowdown in project verification and registration means there is a substantial downside risk for future CER supply.
"A delay in project delivery means investors receive less CERs," said Tsuneo Takahashi, representative director at Natsource Japan Co, a carbon trading company.
"The Japanese government and electric power companies may have to buy more credits to make up for fewer-than-expected CERs they receive from projects they have secured," he told Reuters as part of the Reuters Environment Summit.
Mitsubishi Corp (8058.T: Quote, Profile, Research, Stock Buzz), Japan's top trading house, expects the UN to approve credits worth up to 2.2 billion tonnes in carbon dioxide equivalent by the end of 2012, much less than the forecast global demand of up to 2.7 billion. It expects demand from Japan to account for up to 800 million tonnes.
The Japanese government and power companies such as Tokyo Electric Power Co (9501.T: Quote, Profile, Research, Stock Buzz) (TEPCO), are seen as some of the world's most active CER buyers to offset their emissions.
CUT IN TARGET?
Mitsubishi, now the world's third-biggest project developer and holder of CO2 emission credits, said the company may cut its target for building 100 UN-approved projects through 2012.
"We are seriously worried by the delay," said Tsuyoshi Nakamura, deputy general manager at Mitsubishi.
"Frequent changes in UN rules make it difficult to predict whether the projects will be accepted. We are also worried that we may have to abandon registration of some of our projects," he said.
Japanese trading houses invest in clean energy projects in developing countries and then sell them on.
Mitsubishi now has some 69 projects in the pipeline, which could produce more than 100 million tonnes of emissions credits by 2012. But it only has nine of the projects registered, generating only 65 million CERs.
Marubeni Corp (8002.T: Quote, Profile, Research, Stock Buzz), Japan's fifth-biggest trading company, said there was a delay in registration of about three to six months in 30 to 50 percent of its projects, but it would stick to its target of acquiring 100 million tonnes of credits by 2012.
A government official said the delay in the UN process was a worry but the government is hoping to buy credits from former communist countries under the UN schemes called Joint Implementation (JI) and Green Investment Scheme (GIS). Continued...
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