Japan Rift Risks Watering Down Climate Bill
Author: Chisa Fujioka
A rift within Japan's government over legislation to fight climate change has raised the risk of it watering down plans for an emissions trading system that is at the core of its drive for greener policies.
In its latest draft for a climate bill expected to be submitted to parliament next Friday, the environment ministry is vague on details of how the scheme would set emission limits and when trading would start.
The environment ministry has favored setting volume caps on emissions. But the Ministry of Economy, Trade and Industry (METI) has called for caps per unit of production, which would allow emissions to rise when businesses increase output.
METI is under pressure from companies worried about limits on greenhouse gas emissions restricting growth.
"We are not ruling out volume caps, but considering the need for economic growth, carbon intensity targets should also be included in the scheme," METI minister Masayuki Naoshima told a news conference on Friday.
A national scheme that sets tough targets on greenhouse gas emissions could be a major boost for the carbon market, depending on the design.
Greenhouse gas emissions in Japan, the world's fifth biggest emitter, totaled 1.29 billion metric tons in the fiscal year to March 2009.
Since the Democratic Party won power in an election last August, Japan has pushed for tougher climate policies including a "cap-and-trade" scheme setting mandatory caps on emissions.
But companies, worried about volume caps, have called for the bill to drop the phrase cap-and-trade when referring to the trading scheme.
The government is also likely to be mindful of the failure of the administration of U.S. President Barack Obama to win support in the Senate for a sweeping climate bill that would also include a national cap-and-trade market.
The idea of cap-and-trade is to set a limit on emissions that becomes tougher over time. This forces companies to invest in steps to cut their carbon pollution or face having to buy permits for every metric ton of emissions that they are over their target.
The latest draft makes no mention of cap-and-trade, merely citing the government would implement separate legislation to introduce a domestic emissions trading system.
A deadline for legal steps was still under discussion, according to the draft. Environment Minister Sakihito Ozawa has hoped to launch the trading system next year, but has said more time may be needed to design the scheme.
The draft 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 ruling Democratic Party, its ratings slipping ahead of an election for parliament's upper house likely in July, is under pressure to look proactive on tackling climate change while allaying fears of new policies that would hurt the economy.
The climate bill is set to clear parliament by the time the current session ends on June 16 given the ruling coalition's majority in both houses of parliament, but a carbon market expert worried about the lack of details.
"If details are omitted, as media reports have suggested, then there are worries and questions about how the absolute volume will be regulated," said Tsuneo Takahashi, representative director at Natsource Japan Co, a joint venture of a New York-based carbon trader, Mitsubishi Corp. and Tokyo Tanshi Co.
"Carbon intensity cannot be measured until a year later, meaning trading will not take off until then. So that raises questions about how active actual trading will be."
Others said the bill was merely meant to set a direction for policy while leaving details for later, but the wording on emissions trading risked creating a system that would not lead to a significant drop in emissions.
"There is no reason for the government to avoid referring to the trading scheme as being cap-and-trade," said Naoyuki Yamagishi, climate change program leader for WWF Japan.
"So leaving that wording vague could clear the way for a system using carbon intensity targets, and that would be a problem."
(Additional reporting by Chikako Mogi; Editing by David Fogarty)