UPDATE 1-Japan steel sector buys 59 mln tonnes Kyoto offsets

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TOKYO, Oct 28 (Reuters) - The Japan Iron and Steel Federation has bought a third more U.N. carbon offsets, called CERs, than a planned 44 million tonnes for 2008-2012 delivery to help meet the sector's voluntary target with the government to cut carbon dioxide emissions, a federation official said on Tuesday.

The Federation has increased investment in clean energy projects in developing countries and is now set to receive a total of 59 million tonnes of carbon offsets through a market scheme under the United Nations' Kyoto Protocol.

Voluntary emission cuts by the steel sector is a key for Japan to meet its Kyoto commitments to cut greenhouse gas emissions by 6 percent in 2008-2012 from 1990 levels, but as of 2006 its emissions were 6 percent above 1990 levels.

The increase in the federation's holding of credit offsets in exchange for investing in U.N.-approved green projects in developing countries was mainly due to a 3.4 percent rise year-on-year in crude steel production in the year ended March, 2008, the official said.

"(Crude steel) output could fall in line with the ongoing economic conditions," the official said, referring to the financial turmoil hurting economies around the globe.

"But we're not sure if that really happens. Assuming that output may continue at the current levels, we've dealt with it," he said, adding that the Federation reviews its investment plan in Kyoto credits every year.

The Federation has voluntarily agreed with the Japanese government to reduce CO2 emissions to around 186.9 million tonnes a year on average over the five years to March 2013, down 9 percent from 1990/91 levels, by improving the whole sector's energy consumption per production by 10 percent.

The shortfall to its target can be filled with such Kyoto credits. In the year ended in March 2008, the sector's CO2 emissions totalled 201.7 million tonnes, the official said.

Last week, the head of the Federation, Shoji Muneoka, who is also the president of Nippon Steel Corp (5401.T), the world's No.2 steelmaker, said that Japanese steelmakers could soon cut output as demand shows signs of weakening. [ID:nT110423]

The Japanese steel industry as a whole produced 122 million tonnes of crude steel in the year ended March, up from 118 million tonnes a year earlier. (Reporting by Risa Maeda, Editing by Jacqueline Wong)