TOKYO (Reuters) - Japan is set to seal a deal with the Czech Republic next week to buy 40 million metric tons of emissions rights from the east European country via a government-to-government trading scheme under the Kyoto Protocol, a government source familiar with the deal said on Wednesday.
The deal would help Tokyo to near its target to buy 100 million metric tons of offsets from abroad over the five-year Kyoto period to supplement Japan’s domestic efforts to cut greenhouse gas emissions.
Japan signed its first such deal last week, agreeing to buy 30 million metric tons of emissions rights from Ukraine.
Japan will pay about 50 billion yen ($512 million) to the Czech Republic, the source told Reuters in a telephone interview, adding that the price per metric ton was almost the same as that of its deal with Ukraine.
Asked if the value for the Czech deal was about 50 billion yen, the source said: “It’s somewhere around that level ... The (unit) price was about the same as that in the deal with Ukraine.”
In the two years through March 2008, the Japanese government had made contracts to buy 23.1 million metric tons from abroad, all of which are certified emission reductions (CERs), or offsets generated by clean-energy projects in developing countries under Kyoto’s Clean Development Mechanism scheme.
The Czech Republic is set to deliver half of the 40 million metric tons of so-called Assigned Amount Units (AAUs) in the Japanese fiscal year to March 2010 and the other half the following year, the source said.
Tokyo said on Tuesday it had signed with Prague a guideline on how the eastern European country will use the proceeds from its AAU sale, which included capacity building for environment technology transfer from Japan to the Czech Republic.
Under Kyoto, all 37 industrialized countries that have committed to meet emissions curbs issue emissions credits called AAUs, which can be traded to other governments.
The number of AAUs are calculated with reference to a nation’s emissions against Kyoto’s 1990 baseline year. Each AAU represents a metric ton of CO2-equivalent.
Many former Soviet bloc countries have an excess of AAUs after an industrial collapse in the 1990s and some have been selling these to nations well above their Kyoto targets to help them meet their emissions reduction obligations.
AAUs are often cheaper than European Union emissions permits, seen as the market’s benchmark, as critics say there is a lack of accountability and transparency over whether the proceeds are spent in ways to cut greenhouse gas emissions.
Despite Tokyo’s steady buying of offsets from abroad, there is speculation that emission cuts in Japan may prove insufficient, resulting in additional buying from abroad toward the end of the Kyoto period.
Also, the Japanese government may have to buy more if actual delivery of CERs falls short of initially plans.
Japan, the world’s fifth-biggest emitter, saw emissions rise to a record 1.37 billion metric tons in the year to March 2008 due partly to a halt of its biggest nuclear power plant after a July 2007 earthquake.
Japan’s Kyoto commitments are to cut emissions to 1.19 billion metric tons on average in the five years to March 2013.
Editing by Michael Urquhart