TOKYO (Reuters) - Japan is forging ahead with developing an alternative to the U.N.’s complex carbon market, recruiting firms to study the viability of investing in bilateral emissions cutting projects abroad.
Japan, the world’s fifth largest greenhouse gas emitter, wants to encourage the use of home-grown technologies in projects that cut greenhouse gas emissions in developing countries, investments that could be worth billions of dollars.
In return, the offsets could be used to help Japan meet a pledge to cut its emissions by 25 percent from 1990 levels by 2020. A senior government official has said domestic measures alone would make it very hard to meet the target.
Japan’s trade ministry said on Thursday is it is recruiting up to 10 firms to study the feasibility of emission-cutting projects abroad.
The country is also looking at launching a national emissions trading scheme from 2012 and is a major buyer of offsets from the U.N.’s Clean Development Mechanism (CDM) to help it meet its 2008-12 emission reduction target under the Kyoto Protocol.
Japan’s Bank for International Cooperation (JBIC) last month issued guidelines for assessing the effectiveness of bilateral projects that could make it easier for the country to source offsets.
The state-run bank has set up its own rules for measurement, reporting and verification (MRV) of emissions cuts in a bid to gain international acceptance for them and to encourage private banks to invest in clean-technology projects overseas.
The rules, to be supported by a 500 billion yen ($5.6 billion) loan facility, could provide a more investor-friendly alternative to the CDM, the rules of which many investors find rigid and inefficient.
The firms to be recruited will study how to transfer Japan’s clean-energy technology to developing countries, how to gauge the scheme’s effectiveness in cutting emissions and how to finance it.
No firms have so far applied but the ministry expected many applications by next Tuesday’s deadline.
The government has not decided if bilateral offsets will only be accepted in Japan’s future emissions trading scheme or if they can be traded internationally.
The move to bilateral clean-energy and offset projects is seen as an alternative to the CDM in case stalled global climate talks fail to agree to a successor to the Kyoto, whose first phase ends in 2012.
Europe, whose emissions trading scheme dominates the global carbon market, is also looking at the possibility of bilateral offset deals.
($1 = 87.75 Yen)
Reporting by Risa Maeda; Editing by David Fogarty