Tokyo carbon market raises prospect of round-the-clock trading

Expansion of carbon market into Asian time zone would result in stronger price signals for European traders

The reputation of carbon credits as tradable commodity could take a major leap forward if the Tokyo Stock Exchange presses ahead with plans to create Japan's first greenhouse gas emissions trading market next year.

The Exchange announced yesterday that it had formally launched a new Carbon Market Study Group "to gather practical advice from experts and other concerned parties on the creation of a carbon market".

The company said the group would begin work next month and would aim to deliver recommendations on the types of products and trading, settlement and clearance methods that should be used by the new market by the end of the year.

Henrik Hasselknippe, director of emissions trading analysis at researcher Point Carbon, said that the creation of a market in Tokyo capable of trading EU Allowances (EUAs) and UN-backed certified emission reduction (CER) credits would further bolster the credibility of the global carbon market.

"With the Nymex now operating a carbon market in the US, a Tokyo market would expand the time zones where carbon trading can take place," he explained. "It would mean you would receive a stronger price signal for carbon as European markets open. Currently, traders have to play catch-up with developments in oil prices and other energy commodities each morning, so it would help to have the [carbon] market fully aligned with other related markets."

However, he added that the long-term significance of a new Tokyo exchange could be as a precursor to a Japanese cap-and-trade scheme. "The government is looking at it and if it did go ahead with a scheme we would see a big expansion in the market," he said.

The news comes as a new UN report argued that increased investment in renewables and energy efficiency could save the Asia Pacific region $700bn (£350bn) by 2030.

The report from the UN Economic and Social Commission for Asia and the Pacific said that government programmes to enhance energy efficiency across the region could cut energy use by 40 per cent by 2050.