Firms in Japan, Korea Oppose $212 Billion Carbon Trade


Firms in Japan, Korea Oppose Start of Carbon Trading (Update1)
2011-01-13 14:07:36.323 GMT

(Adds Orbeo comment in 18th paragraph.)

By Stuart Biggs, Chisaki Watanabe and Mathew Carr
Jan. 13 (Bloomberg) -- Japanese and South Korean companies,
adopting arguments that helped block carbon trading in the U.S.,
are opposing government plans to set up emission markets worth a
potential $212 billion by 2020.
The Federation of Korean Industries said Jan. 11 that
starting emissions trading in 2013 would add to the cost of
doing business and put the country at a disadvantage unless
Japan and China do the same. Keidanren, Japan's largest business
lobby, said 61 of 64 companies that responded to a survey in
September opposed introducing carbon trading.
Japan and South Korea, Asia's third- and-fourth-biggest
polluters, would be critical to the United Nations plan to make
carbon trading a "pillar" of the global effort to slow climate
change. Concerns about costs and competition derailed national
carbon markets in the U.S. and Australia and raised doubts about
so-called cap and trade catching on outside Europe.
"The U.S. reluctance to embrace emissions trading might
easily spread to Asia," said Georgina Edwards, an analyst at
Bloomberg New Energy Finance in London. "They're almost like
dominos at this stage."
The U.S. and China, the world's largest emitters, balked at
legally binding emission targets at last month's climate summit
in Cancun, Mexico. The U.S. won't commit unless China, India and
Brazil are willing to do the same, U.S. negotiator Todd Stern
said last month.

'Reflection Period'

The European Union, which started its cap-and-trade program
in 2005, said yesterday it may need a "reflection period" on
continued participation in the 1997 Kyoto Protocol. Its
emissions market was valued at about 80 billion euros ($104
billion) last year, or 81 percent of the global total, New
Energy Finance said in a Jan. 6 report.
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 market.
The worldwide market could reach 1.7 trillion euros by the
end of the decade if the U.S., Japan and other countries started
"meaningful" cap-and-trade programs, New Energy Finance said.
The Japanese carbon market may be worth 106 billion euros
in 2020, while South Korea's could reach 56 billion euros, New
Energy Finance estimated. The forecasts assume their programs
start in 2013, which is "ambitious," Edwards said.
Japan's Environment Minister Ryu Matsumoto declined to
commit to the 2013 date in a press conference in December after
a meeting to discuss the nation's emissions trading plans. In
August, an environment ministry panel had recommended starting
emission trading in fiscal 2013.

'Extra Burdens'

Japanese companies are more focused on economic recovery
than fighting climate change, said Satoshi Hashimoto, a senior
researcher at the Mitsubishi Research Institute in Tokyo.
"The economic situation has drastically changed and
businesses are strongly opposed to policies that would add extra
burdens on them," Hashimoto said in an interview yesterday.
"There is intensifying competition from emerging countries.
Environment policies had to take a step back."
In the U.S., cap-and-trade opponents stopped President
Barack Obama's proposal for a national carbon market from
passing Congress.
Republicans, who won control of the U.S. House of
Representatives and narrowed Democrats' majority in the Senate
in elections last year, say they will now try to thwart Obama's
back-up plan to use Environmental Protection Agency regulations
to curb greenhouse gases.

Ishihara Leads

Tokyo started a cap-and-trade program confined to the
capital last April as part of Governor Shintaro Ishihara's plan
to cut greenhouse gas emissions by 25 percent this decade. The
Tokyo market had its first emissions trade in August.
In South Korea, the Chamber of Commerce & Industry said
carbon emissions trading will increase costs for domestic
companies and make them less competitive than rivals from Japan
and China.
South Korea's government plans to present its emissions
trading law to parliament next month, according to Jung Do Hyun,
an official on the Presidential Committee on Green Growth, which
oversees climate change policy. The proposal will first be
reviewed by the Regulatory Reform Committee composed of
academics and business groups that can request more lenient
Korea may seek to use carbon trading to win a competitive
advantage, said Emmanuel Fages, the Paris-based head of carbon
research at Orbeo, the emissions-trading venture of Societe
Generale SA and Rhodia SA. "Korean manufacturers are partly
convinced that being green is one way they will manage to
compete," he said yesterday by phone. "They want it to be a
distinctive feature in their products."

Ignoring China

The argument that businesses will face unfair competition
ignores measures China is taking, according to Roger Raufer, an
independent emissions and energy consultant in New Jersey.
"It's hard to make an argument that China is dragging its
feet," Raufer said in a phone interview.
China's government plans pilot programs to cap and trade
emissions in five provinces including Guangdong and Shaanxi, as
well as eight cities including Tianjin, Xiamen and Shenzhen,
Anthony Bailey, a Hong Kong-based China carbon analyst at New
Energy Finance, said in a phone interview.
It also introduced a law in January requiring utilities to
reinvest a percentage of profit into projects to improve energy
efficiency, he said.
"South Korea is looking at China as more of the issue
because a lot of their industry would be at a disadvantage,"
Trevor Sikorski, a London-based analyst at Barclays Capital,
said in a telephone interview. "For Japan, the real issue is
probably not so much China as the U.S.," he said.
"If you saw a robust North American trading scheme, and if
you saw what China's pledging to do brought into a legal
framework, that'd probably be enough for most countries."

For Related News and Information:
Most-read alternative energy stories: MNI ALTNRG <GO>
New Energy Finance news and analysis: BNEF <GO>
Renewable energy, environment page: GREEN <GO>
Top Environment stories: TOP ENV <GO>

--With assistance by Shinhye Kang in Seoul, Ewa Krukowska in
Brussels, and Catherine Airlie and Alex Morales in London.
Editors: Mike Anderson, Todd White, Peter Langan

To contact the reporters on this story:
Stuart Biggs in Tokyo at +81-3-3201-3093 or
Chisaki Watanabe in Tokyo at +81-3-3201-2541 or
Mathew Carr in London at +44-20-7073-3531 or

To contact the editor responsible for this story:
Reed Landberg at +44-20-7330-78624 or