Top Picks || Arts & Entertainment || Business & Economy || Education & Society || Science & Technology || Sports & Fashion || Search || Back Numbers TRYING TO KEEP COOL: Japanese Firms Move Toward Emission-Rights Trading October 5, 1998 A new form of environmental business aimed at curbing global warming is being born. Following a December 1997 conference held in Kyoto, where participating nations adopted a protocol aimed at reducing emissions of carbon dioxide and other greenhouse gases, companies have been preparing to implement schemes including the trading and sharing of emission quotas. These schemes, if successfully put in place, will see participation by private companies and nongovernmental organizations as well as by governments of developed countries. Using Market Mechanisms to Reduce Greenhouse Gases At the Third Conference of the Parties to the United Nations Framework Convention on Climate Change (COP3), a protocol was adopted with targets for developed countries to control and reduce their greenhouse gas emissions in order to curb global warming. According to this protocol, the industrialized world as a whole will reduce annual emissions by an average 5.2% from 1990 levels during the 2008-2012 period. In particular, the European Union will reduce emissions by 8%, the United States by 7%, and Canada and Japan by 6%; Russia will match its 1990 emission levels. These reduction targets are legally binding under international law. The maximum effort is required of each country in order to meet these targets, but financing and cooperation among countries will also be necessary. Emission-rights trading and joint implementation have been set forth as one potential foundation for such cooperation. Under the rights-trading scheme, developed countries that reduce emissions below target levels would sell emission quota units to other developed nations. Under joint implementation, these countries would share emission reductions gained through energy conservation projects. This attempt is expected to help reduce the emission of greenhouse gases worldwide by using market economy mechanisms. Detailed schemes have yet to be decided, but negotiations between governments are already progressing. In June 1998, nine countries including Japan, Russia, and the United States made a joint proposal regarding emission-rights trading. Some of the points covered by the proposal were: Not only governments, but private enterprises and NGOs as well would be permitted to buy and sell emission quotas; new markets will not be created, but rather existing exchanges will be used for buying and selling; and the quantities of emission quota units traded and received by each country will be monitored by a third party institution like the United Nations Framework Convention on Climate Change Secretariat. International negotiations concerning this proposal will take place in November 1998 at COP4 in Argentina, and at other such conferences. Japanese Firms Aim for Emission Cuts Enterprises around the world have already moved into action in anticipation of the start of these schemes. Japanese firms are paying especially close attention to joint implementation: For instance, a major electric power company and a trading house are promoting a plan together to improve Russian power plants using the latest power generation and energy conservation technology, thereby reducing their emission of carbon dioxide. If this project is actually implemented and carbon dioxide emissions are reduced, the reduced portion would be shared between the Japanese and local Russian enterprises as emission quota units. In addition, a group consisting of a major automobile manufacturer, a paper manufacturer, and a trading company are jointly carrying out an afforestation project in Australia. If this results in absorption of carbon dioxide in the coming years, reducing net emissions in Australia, it could be approved as a joint implementation project. Representatives from all three companies show enthusiasm for joint implementation, calling emission quotas a possible added value to already existing overseas operations. Emission quota units earned by private enterprises may be counted toward the country's reduction targets, but detailed methods and schemes for this system have yet to be determined. Even so, some companies have already begun trading emission rights in anticipation of the future. There is no doubt that the reduction of greenhouse gas emissions will depend greatly on corporate efforts in all the industrialized countries. Back to Main Index Edited by Japan Echo Inc. based on domestic Japanese news sources. Articles presented here are offered for reference purposes and do not necessarily represent the policy or views of the Japanese Government. Ministry of Foreign Affairs   Japan Information Network