Japan – The rising sun for carbon markets

Japan has exemplary carbon credentials. It is amongst the most energy and carbon efficient economies in the world, and one of its most beautiful cities gave its name to the UN’s Kyoto Protocol. Despite extraordinarily difficult economic and political circumstances, Japan is quietly forging ahead with initiatives that speak volumes about its dismay and disaffection for the UN-led process to deliver a global deal after the flawed Kyoto Protocol ends in 2012. Is Japan leading the way with a model that will inspire other nations to set their own courses of action, or, is it plotting a cunning escape from the bleeding edge of the UN process?

The shift in interest from the Kyoto CDM mechanism to bilateral alternatives is born out of frustration with the cumbersome and unpredictable Clean Development Mechanism (CDM) process of the Kyoto Protocol, and fuelled by a desire to export low-cost, clean technology in return for carbon credits that could help Japan meet its reductions goal. The Japanese government is seeking to promote project types not yet recognised under the CDM, such as nuclear power plants and clean coal, as these will tee-up its industrial giants for export of low-carbon kit and expertise and increase its influence specifically in the South East Asian region. It will wait to see whether December’s U.N. negotiations in Durban deliver a legally binding deal or resort again to ineffectual voluntary pledges before cranking up this bilateral approach. However, it is doing the groundwork already with three SE Asian countries.

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apan’s national carbon offsetting system provides third-party certification standards for measuring, reducing, and offsetting carbon emissions; funds a variety of pilot carbon offset projects in Japan; oversees carbon offset providers; and verifies the carbon credits produced by domestic offset projects through the groundbreaking Japan Verified Emission Reduction (J-Ver) Scheme.

Credits from forestry projects account for more than three-quarters of the ~100,000 tonnes of carbon emissions reductions credits issued against almost 150 projects upto May 2011 – with sustainable forest management projects the most common sub-group. This positions the J-Ver Scheme as a valuable model for the evolving international regulatory system for REDD+ (Reduced Emissions from Deforestation and Degradation) offset projects.

Instead of measuring additionality on a project-by-project basis as in the CDM (which is complicated, expensive, and time-consuming) the J-Ver Scheme first creates a “positive list” of project types to promote as a matter of government policy. This novel approach provides a valuable example of how domestic offsets may be included in Nationally Appropriate Mitigation Actions favoured by many seeking to improve Kyoto mechanisms.

J-Ver credits are voluntary and prices have ranged from ¥5,000 to ¥30,000” (US$64 – $388; £40 – £243).

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