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Mori Hamada & Matsumoto
Current Situation of Emissions Trading in Japan Overview of Acts against Global Warming in Japan
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lthough the first commitment period of the Kyoto Protocol commenced this year, in which Japan is obliged to reduce greenhouse gas emissions by six percent from 1990 levels, Japan does not have and has not yet decided to implement any domestic emissions trading system (ETS) or “capand-trade” system at this time. Instead, the Japanese government depends heavily on voluntary action by the industry. For example, the Federation of Economic Organizations (Keidanren) adopted a “Voluntary Action Plan” where each industry segment sets voluntary reduction targets. Many of the governmental organizations have independently introduced policies to assist voluntary action by the private sector. For example, the Ministry of Economy, Trade and Industry (METI) will soon start a voluntary scheme called “domestic CDM.” The Ministry of the Environment (MOE) has established a scheme called “emissions trading system by voluntary participation” where a participant commits to engage in greenhouse gas reduction in exchange for subsidies. These policy measures are based on voluntary action by the private sector and are managed by a specific governmental organization through little coordination with other policy measures managed by different organizations.
Emissions Trading in Japan Despite the absence of a domestic ETS, the Kyoto Mechanism has shown a rapid growth in Japan. With respect to the public sector, the New Energy and Industrial Technology Development Organization (NEDO), an independent administrative agency, has begun to purchase Kyoto credits on behalf of the Japanese government. The private sector, especially the power and steel industry, is also very active in Kyoto Mechanism because it intends to donate Kyoto credits to the government in the event that it fails to comply with its Voluntary Action Plan. According to a published report, the Japanese
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industry, as a whole, will purchase 300 million tons of Kyoto credits to comply with the Voluntary Action Plan. Over the years, the increased use of the Kyoto Mechanism pushed the government to establish a legal and technological framework for the Kyoto Mechanism. In 2006, the Law Concerning the Promotion of Measures to Cope with Global Warming was revised and it established a Japanese national registry required for the Kyoto Mechanism. The revised law also sets clear rules for the Kyoto credits transaction. For example, the assignment of Kyoto credits becomes effective only upon the transfer of records in the registry and bona-fide purchase of Kyoto credits will be protected. From a technological viewpoint, in November 2007 the Japanese national registry established a connection with the international transaction log, which enables Kyoto credits transactions to be carried out. As a result of these infrastructure developments, the transaction volume of Kyoto credits continues to increase.
Recent Development Recently, the Japanese government has begun to seriously consider the introduction of the domestic cap-and-trade system. A committee organized by the MOE has published an interim report which sets out the actual and realistic plans for the Japanese ETS . A committee organized by METI, who has and continues to strongly oppose the introduction of the ETS, has published a report that lists considerations to be taken into account if the ETS is introduced. In March 2008, a council of advisers to the Prime Minister, Mr. Yasuo Fukuda, was formed to consider the introduction of the ETS.1 As a result of a series of serious discussions, the Prime Minister made a speech entitled “In pursuit of “Japan as a Low-carbon Society2“” on June 9 2008. In this speech, he showed his willingness to the introduction of ETS. However, he did not manifest the introduction of a mandatory ETS, but rather, he proposed an “experimental introduction of an integrated domestic market of emissions
trading” from autumn this year. It is not yet certain whether the mandatory ETS will be introduced after the experimental ETS.
Our Activity in This Field Mori Hamada & Matsumoto is very active in the global warming practice field. We regularly advise foreign and domestic clients on almost every aspect of this field. Our clients include manufactures, power companies, financial institutions and governmental organizations. Our advice ranges from the CDM projects, secondary market transactions, regulatory advice and development of financial products to rule making for emissions trading. In particular, we are very active in the infrastructure development of emissions trading. For example, I am a member of an advisory committee established by the MOE and METI. We also assist the Tokyo Stock Exchange in establishing a CER market. We will continue to assist our clients in their efforts to combat global warming. Takeshi Mukawa is a partner of Mori Hamada & Matsumoto, a full-service law firm based in Tokyo. His practice focuses on financial transactions, environment and global-warming practices. He is a member of the advisory committee on the emissions trading scheme by the Ministry of the Environment, advisory committee on the infrastructure development of Kyoto credits transactions by the Ministry of Economy, Trade and Industry. Takeshi was educated at the University of Tokyo (B.Ag.) and University of California, Davis School of Law (LL.M.).
By Takeshi Mukawa, Partner of Mori Hamada & Matsumoto Marunouchi Kitaguchi Building, 1-6-5, Marunouchi Chiyoda-ku, Tokyo 100-8222 Japan tel: +81 3 5223 7763 email: takeshi.mukawa@mhmjapan.com website: www.mhmjapan.com
1 http://www.env.go.jp/en/earth/cc/ajets-ir-080520.pdf 2 http://www.kantei.go.jp/foreign/hukudaspeech/2008/06/09speech_e.html
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