TOKYO (Reuters) - Japan watered down legislation to fight climate change Thursday after weeks of wrangling within the government over plans for an emissions trading system that has met stiff resistance from industry.
The proposed climate bill, set to be enacted in parliament by mid-June, left room for the trading scheme to set caps on emissions per unit of production, which would allow rises in emissions when output grows.
The government had earlier pledged a “cap-and-trade” scheme setting absolute volume caps on emissions as part of its drive for greener policies.
But companies, worried about volume caps restricting growth, called for the bill to drop the phrase cap-and-trade when referring to the planned scheme.
The bill, which will be approved by the cabinet Friday before being submitted to parliament, called for the government to set volume caps in principle but also “consider carbon intensity,” Environment Minister Sakihito Ozawa told reporters.
“We wanted climate policy to be compatible with growth, to take out factors that may slow growth, while at the same time control overall carbon dioxide emissions,” Ozawa said after a meeting of cabinet ministers.
The government will spend the next year drafting separate legislation to design the trading scheme, Ozawa said, adding that it was not clear if carbon intensity targets would be applied for some industries or if they would simply be used as a tool to set volume caps.
The ruling Democratic Party, its ratings slipping ahead of an election for parliament’s upper house likely in July, wants to look proactive on fighting climate change, but is also under pressure to allay fears that new policies will hurt the economy.
Depending on the design, a national scheme that sets targets on greenhouse gas emissions could be a major boost for the carbon market in Japan, where emissions totaled 1.29 billion tonnes in the fiscal year to March 2009.
Japan, the world’s fifth largest emitter, has only a voluntary carbon market based on companies’ pledged emissions at the national level, although Tokyo city will launch a cap-and-trade market from April.
The climate bill also includes Japan’s goal to cut greenhouse gas emissions by 25 percent by 2020 from 1990 levels on condition a global climate deal is reached, along with its plan to consider imposing an environment tax from 2011.
The bill is expected to clear parliament by the time the current session ends on June 16 given the ruling coalition’s majority in both houses of parliament.
Japan will also aim to boost renewable energy sources to 10 percent of primary energy supply by 2020, the bill said.
Reporting by Chisa Fujioka; Editing by Alex Richardson