2008 is over.

Now is a good opportunity to look at Japan’s voluntary ETS (announced late 2008). Not to forget – also in 2008, the former Prime Minister of Japan, Yasuo Fukuda outlined the “Fukuda Vision” initiative for a long-term target of 60-80 percent reduction from current emission levels by 2050.

The pilot ETS scheme proposed by the current Japanese Government led by Taro Aso will integrate two voluntary schemes already in place in Japan: 1) Voluntary Action Plan (VAP) administered by Japan’s powerful business federation, Nippon Keidanren; 2) Japan’s Voluntary Emissions Trading Scheme (JVETS), administered by the Ministry of Environment (MOE).

JVETS

Current Status of JVETS:  It was implemented in April 2005 with 31 entities on board with emission targets of 273 000 tCO2 in Round 1. This increased to 58 entities in 2006 in Round 2. Both rounds are running concurrently.

How has the JVETS helped the Japanese for the pilot ETS? Yasuo Takahashi, Director, Office of Market Mechanisms at Climate Change Policy Division, MOE argues the JVETS has been a good learning excercise thus far, and could aid the pilot ETS as a model for –

1. Forming an efficient and accurate verification systems

2. Establishing Monitoring and Reporting Guidelines

3. Developing and maintenance of emissions reporting

4. Eastablishing registry systems for accurate accounting of
allowances


VAP

VAP devised by the Nippon Keidanren (Japan Business Federation) in 1997. It includes 35 industries – energy, mining, manufacturing, construction – that pollute over 50% of the emissions in Japan.  VAP’s aim is to stablize CO2 emissions at 1990 level by 2010. Targets are selected by the 35 industries individually and then bundled as a single target. However there is NO explicit guarantee whether any targets would be met, albeit these targets are considered easy and environmental groups have protested against such relaxed voluntary schemes.

Pilot ETS’ current status

With only 501 firms on board at the end of 2008, the minimal support looks worrying for the pilot ETS. The Japanese Government hoped for more than 1000 firms. Japanese Government failed to reach the 1000 entity goal to due several factors. This looks worse when it is considered most of JTES firms and more than 90% of firms of VAP applied. The problem lies a lot with VAP firms that would be subject to firm-level emission targets, and not industry-wide agreed targets as in VAP. Companies like steelmaker Nippon Steel has refused to sign up as a result, “arguing that carbon trading is not an effective means of cutting emissions,” reports BusinessGreen.

Looking at the bigger picture, Japan’s pilot ETS could lay the foundation for a mandatory cap-and-trade scheme that could be in place post-2012.

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