Japan to spend $1.7 billion to develop cleaner cars

TOKYO (Reuters) - Japan plans to spend more than 200 billion yen ($1.7 billion) over the next five years to help companies develop cheaper hybrid cars and cleaner fuels in order to cut the use of fossil fuels and greenhouse gas emissions, the Trade Ministry said on Monday.

The plan follows a proposal by Prime Minister Shinzo Abe last week to halve global emissions by 2050, but the ministry did not specify a target for Japan's own emission reductions.

The government plans to subsidize the development of batteries for electric cars by spending 4.9 billion yen a year to help make the cars affordable to consumers, Satoshi Kusakabe, the director of the Automobile Division of the Trade Ministry, said.

"Cost burdens on consumers should not exceed those of current gasoline cars," Kusakabe told reporters.

Through the investment, the government aims to help bring the retail price of an electricity car to 3 million yen ($24,660) by 2010 and 2 million yen ($16,440) by 2020.

Mitsubishi Motors Corp. and Fuji Heavy Industries Ltd. are currently developing electric cars.

The government will spend another 32 billion yen a year to help develop cheaper hybrid and hydrogen-powered cars, which are now produced by Honda Motor Co. and Toyota Motor Corp..

It aims to spend another 24 billion yen over the five-year period to develop cleaner gas-to-liquid (GTL) diesel and cars that can run on the fuel.

GTL diesel is made by compressing natural gas to a liquid state. The fuel emits less greenhouse gas than other fossil transportation fuels, but it is not currently available in Japan.

Japan last year set a target of reducing its transportation sector's dependency on fossil fuels such as gasoline and diesel to 80 percent by 2030 from nearly 100 percent now.

European nations, unlike Japan, have set numerical targets to cut greenhouse gas emissions beyond 2012, when the Kyoto Protocol on carbon emissions is set to expire.

Abe said last week a post-Kyoto framework should include all major emitters such as the United States, China and India, although critics said his proposal was ineffective because it avoided binding targets or concrete steps.

Japan's greenhouse gas emission volumes in the year to March 2006 were 14 percent above the Kyoto target and were up 8.1 percent from the benchmark year of 1990. Under the pact, Japan must reduce its emissions by 6 percent from the 1990 level by the 2008-2012 period.