Japan to launch cap-and-trade trial in October

The Japanese government yesterday agreed plans to introduce a trial emissions cap-and-trade as early as this October as it seeks to deliver on its recent commitment to cut carbon emissions by between 60 and 80 per cent by mid-century.

The move was agreed at a cabinet meeting which also saw ministers endorse plans for new research into carbon capture and storage technologies, a 10-fold increase in solar capacity by 2020 and the building of nine more nuclear reactors by 2018.

Speaking at the cabinet meeting, prime minister Yasuo Fukuda said that the introduction of carbon pricing through the cap-and-trade mechanisms would represent the "first concrete step" toward building a low carbon economy.

Precise details of which firms would be covered by the trading scheme, what level the caps will be set at and how carbon credits will be distributed or auctioned were not released. However, Hiroshi Kamagata, director for the cabinet secretariat at the Cabinet Office, told reporters that the rules for the trial scheme would be set down in September with a view to the scheme getting underway a month later.

The scheme is likely to face stiff opposition from some Japanese businesses, however, with many energy firms and heavy manufacturers having already complained that the proposals could stifle their competitiveness.

With both US presidential hopefuls also pledging to introduce a carbon cap-and-trade scheme, the introduction of a carbon trading market in Asia takes on major significance. Supporters of carbon trading claim that with formal schemes established in the US, Asia and Europe the liquidity of the global market will be able to operate 24 hours a day, putting carbon more effectively on a par with traditional commodities.