Japan to buy China rights on emissions / ODA projects to help fulfill Kyoto targets

The Yomiuri Shimbun

The Japanese and Chinese governments reached a basic agreement Wednesday under which the Japanese government and domestic firms would purchase a portion of China's greenhouse gas emissions quotas that fall under reductions achieved by the country through Japanese yen-loan projects, The Yomiuri Shimbun has learned.
The two nations will seek formal agreement on the matter during Chinese President Hu Jintao's visit to Japan, scheduled for late March. The move is seen as a major boost for Japan's efforts to meet its emissions targets under the Kyoto Protocol.
The envisaged scheme is part of the clean development Mechanism (CDM), under which industrialized countries are able to use their own technologies and funds for projects based in developing countries to cut greenhouse gas emissions and offset these reductions against their own output.
On the issue of emissions trading involving Japan's official development assistance, a senior official of the Chinese National Development and Reform Commission unofficially suggested that Beijing would, in principle, accept the scheme during the 13th session of the Conference of the Parties to Climate Change Convention (COP13) held in December in Bali, Indonesia.
The commission is responsible for deciding whether to accept yen-loans.
After reaching a formal agreement, the two governments will select the yen-loan projects for which the emissions trading scheme would apply, after which the CDM board of directors will screen the selected projects for approval.
Among Japan's yen-loan projects, which started in fiscal 1980, 100, or about 30 percent of the total, are environment-related projects.
Six future yen-loan projects agreed for China in the current fiscal year include a project in Lanzhou, Gansu Province, that will replace existing small boilers with concentrated facilities for supplying heat, in an effort to improve air quality.
Such projects are expected to reduce greenhouse gas emissions, with the government estimating the six projects could make it possible to trade emissions quotas totaling 10 million tons to 15 million tons over the next five years.
Although prices for greenhouse gas emission credits have not been disclosed, they were traded for between 5 dollars and 20 dollars, or between 585 yen and 2,340 yen, per ton, in 2005 in the European Union.
The electric generation and steel industries, which emit large amounts of green house gases, have been asked to substantially increase emissions cuts.
The Kyoto Protocol to the U.N. Framework Convention on Climate Change obliges Japan to cut greenhouse gas emissions by an average 6 percent, or about 76 million tons, from the level in 1990 for the period between 2008 and 2012. The government is considering purchasing emission credits from overseas through CDM-based schemes and others, which are equivalent to 20 million tons a year.
(Jan. 3, 2008)