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Tokyo Carbon Trading Likely to Be Nationwide Model (Update1)
2010-10-01 07:13:29.161 GMT
(Updates with new climate change bill in seventh paragraph.)
By Stuart Biggs and Michio Nakayama
Oct. 1 (Bloomberg) -- Tokyo's carbon trading market, the
first of its kind in Asia, could be a model for a national
system as local governments show interest in the program, said
Masanori Eto, a director at Japan Climate Exchange Corp.
The first carbon credits in Tokyo's system were sold in
August on an online marketplace operated by Japan Climate
Exchange, a joint venture between Smart Energy Co. and CoalinQ
Corp., a subsidiary of trading house Sojitz Corp.
The adjoining prefectures of Saitama, Chiba and Kanagawa
are discussing how to participate in Tokyo's carbon market,
suggesting nationwide trade will develop, Eto said in an
interview this week. Europe's cap-and-trade system is the
world's largest, covering 12,000 installations, and the
cornerstone of the European Union's plan to reduce emissions
this decade by 20 percent from 1990 levels.
"Tokyo is ahead of Japan's government and as more regions
join, it becomes more likely that the Tokyo program is adopted
as the national system," Eto said. "Eventually we anticipate
the creation of an Asian and American market to match Europe,
but it will take time," Eto said.
Cap-and-trade puts a price on carbon by setting limits on
the amount of emissions polluters can produce. Those producing
more than the limit must buy credits to offset their emissions,
while those that emit less can sell their balance in the carbon
market.
Japan's capital started its cap-and-trade program in April
as national government talks on a countrywide carbon trading
program bogged down. The resignation of Prime Minister Yukio
Hatoyama in June further delayed progress.
Prime Minister Naoto Kan told parliament today he plans to
submit a new climate change bill this session. He didn't say
whether it would include national emissions trading.
Price on Carbon
As part of Tokyo Governor Shintaro Ishihara's plan to cut
the capital's greenhouse gas emissions by 25 percent this decade,
the program requires 1,400 companies to reduce emissions by 6
percent by the end of 2014 in the initial compliance phase.
Saitama has expressed its intention to join the system,
while the prefectures of Kanagawa and Chiba, as well as cities
around the capital including Kawasaki, will meet Tokyo officials
in November to discuss a single carbon market, Kouji Miyazawa,
director of cap-and-trade at Tokyo's Metropolitan Government,
said in a telephone interview.
If those prefectures and cities join, the Tokyo system
would cover the world's largest urban area with more than 31
million people, official statistics show.
'Japan Price'
The Tokyo market had its first trade in August when Ginga
Energy Japan Co. bought 22 tons of carbon dioxide units backed
by an energy-saving project for 12,000 yen ($142) a ton, Sojitz
said in a statement. That compares with a spot price of 15.32
euros ($20.62) a ton for United Nations-backed carbon offsets on
the European Climate Exchange in London, according to Bloomberg
data.
The cost difference between London and Tokyo stems from
lack of market liquidity as well as a "Japan price" for
reducing emissions, Eto said.
The so-called Japan price reflects that the country has
already invested heavily in energy efficiency, so future
emission reductions will be more expensive than in less
efficient countries, he said.
Tokyo credits are likely to sell from 10,000 yen to 15,000
yen, Eto said.
"If the city needs to cut emissions by 6 or 8 percent,
that is going to require a lot of investment," Eto said. "If
carbon traded units only cost 1,000 yen, companies aren't going
to take it seriously."
Japan's energy intensity, or energy consumed per unit of
GDP, has decreased 65 percent since 1973 as Japan invested in
energy-saving technologies following the global oil crisis that
year, according to Japan's Institute of Energy Economics.
Compliance
Japan Climate Exchange aims to handle 800,000 tons of
domestic carbon dioxide by 2015 and 1.3 million tons by 2020 for
a 33 percent market share in the country, Eto said. Demand is
expected to be light before spiking near the end of the first
compliance period in the Tokyo program in 2014.
"For two years, companies will try to reduce emissions by
themselves, and then they'll consider whether to buy credits,"
he said. "So trade volumes will probably increase."
Offsets backed by domestic projects that reduce emissions
are eligible under the Tokyo system, while foreign projects,
including those earning UN Certified Emissions Reduction credits,
aren't included. All Tokyo businesses that use energy equivalent
to 1,500 kiloliters (400,000 gallons) of oil a year must
participate or face fines of 500,000 yen per facility.
Former Prime Minister Hatoyama pledged to cut Japan's
emissions of greenhouse gases by 25 percent from 1990 levels by
2020, before his resignation ended deliberations on a bill that
would have introduced a national cap-and-trade system.
A panel under the Ministry of Environment last month
recommended starting national emissions trading in 2013.
For Related News and Information:
Climate-change news: NI CLIMATE <GO>
Most-read environmental news: MNI ENV <GO>
Most-read renewable-energy news: MNI ALTNRG <GO>
--Editors: Peter Langan, Teo Chian Wei.
To contact the reporters on this story:
Stuart Biggs in Tokyo at +81-3-3201-3093 or
sbiggs3@bloomberg.net;
Michio Nakayama in Tokyo at +81-3-3201-2177 or
mnakayama4@bloomberg.net.
To contact the editor responsible for this story:
Reed Landberg at +44-20-7330-7862 or landberg@bloomberg.net.
