Tokyo CO2 credit trading plan may become a model

TOKYO (Reuters) - A plan to cut carbon dioxide emissions in the heart of Tokyo, one of the world’s biggest and richest metropolitan areas, may prompt political action on a stalled national effort.

Buildings are silhouetted against the setting sun in front of Mount Fuji in Tokyo December 2, 2009. REUTERS/Gary Hershorn

Tokyo city proper will set emission limits for 1,400 large factories and offices to meet by using technology like solar panels and advanced fuel-saving devices starting in April.

Beating the targets earns credits that can be sold locally to those that fall short. Tokyo, like California which sets its own CO2 policy, often leads national change and the programme will be closely watched.

“This is an epoch-making step. Each company for the first time will have to come up with a strategy to control its emissions and meet a target that is obligatory,” said Naoyuki Yamagishi, climate change programme leader at WWF Japan.

Tokyo prefecture, home to 13 million people, is surrounded by a wealthy metropolitan economy nearly triple that size which ranks as one of the wealthiest and most densely populated areas in the world.


Prime Minister Yukio Hatoyama has pledged to cut national greenhouse gas emissions by 25 percent by 2020 based on 1990 levels of 1.261 billion tonnes, deeper than a minus 6 percent goal over 2008-2012 under the Kyoto Protocol.

Japan has already made strong strides in energy efficiency and combined with an economic slowdown has seen emissions of CO2, the main greenhouse gas, fall 6.5 percent to 1.216 billion tonnes in the most recent fiscal year.

However, drafting of a climate bill Hatoyama aims to submit to parliament in March to cut emissions further to meet the 2020 goal has faced industry opposition on competition concerns and methodology.

“It would be tough to get things ready for the earliest possible start in April next year,” Environment Minister Sakihito Ozawa said of an obligatory national carbon trading scheme in a recent interview, adding that he had not started negotiating with major industries.

But Ozawa said he hopes that the Tokyo cap-and-trade programme could make emitters realize the need to move forward on a national plan that sets emission volume caps like in the EU, a change that could help make Japan a leader in energy efficiency and manufacturing cleaner sources of energy.

Big emitters like power plants, none located in Tokyo, are likely to respond to volume caps by spending on cleaner energy projects rather than relying on solely conservation or buying carbon credits, according to analysts.

“A cap-and-trade would provide a rationale for company managers to invest in cleaner energy,” said Masaki Mita, Japan representative of energy data service Argus Media Ltd.

Japanese power firms, which bind themselves to voluntary 2008-2012 goals, are among the biggest buyers of U.N. approved carbon credits because it is now cheaper to invest in emission cuts in developing countries than cut domestically.

Their current goals are also aimed to make their energy mix less reliant on fossil fuels. But such a carbon intensity goal is not effective enough to cut CO2 when clients demand more power.


Japan, the world’s third largest oil importer, saw consumption fall 6.9 percent to 193 million kilolitres last year, a trend in place since 2006.

Hatoyama’s ruling Democratic Party would indirectly cut reliance on oil imports further by boosting the share of renewable energy used to 10 percent of primary supply by 2020.

That would mean a shift away from fossil fuels of at least 4 percent of the total, or 22 million kilolitres of oil equivalent a year given current primary energy supply levels.

Tokyo’s effort to cut CO2 by 6 and 8 percent by any factory or office that uses 1,500 kilolitres of oil equivalent or more a year, respectively, in the next five years by contrast is a drop in the ocean at less than 500,000 kilolitres of oil equivalent.

Tokyo prefecture’s CO2 emissions account for only 5 percent of the total in Japan and the offices and factories targeted account for 1 only percent.

But if as planned the programme spreads wider nationally and evolves along with variants used elsewhere, it could be a new that thinking brings fresh ideas to global climate talks now stalled because of fierce debates over equity and scale, an academic said.

“It’s the first attempt ever in Asia and there’s a potential it will inspire cities and provinces in China,” said Toru Morotomi, associate professor at Kyoto University’s Graduate School of Economics. ($1=89.31 Yen)

Additional reporting by Kentaro Hamada; Editing by David Fogarty and Ed Lane