13 August 2002 – The Japanese Economy, Trade and Industry Ministry is considering setting up a commodity exchange-like market for private businesses to trade the right to emit quantities of carbon dioxide as early as autumn this year, ministry sources said Friday.

The ministry plan is intended to help the nation attain its greenhouse reduction target under the Kyoto Protocol, which was adopted at the Third Conference of the Parties to the UN Framework Convention on Climate Change held in 1997, the sources said.

According to the ministry plan, the government will inaugurate a system for settling funds that change hands as a result of trading CO2 emission credits among companies by assigning the management of such transactions to commodity exchanges and other market mechanisms, the sources said. Specific transactions of emission credits will be closely monitored and recorded.

Under the plan, a company that falls short of its target can purchase CO2 emission credits from another that exceeds its target at a price set by the market like any other commodity, fluctuating according to supply and demand.

The plan, if implemented, will be the nation’s first market mechanism for trading CO2 emission credits. The UK allocated emission credits in April in order to kick off its trading scheme and the EU plans to start its own emissions trading market in 2005.

Initially, the ministry will select about 20 private businesses in various industries whose CO2 emission reductions far exceed the targets each has voluntarily imposed on itself, the sources said.

The selected companies then will be requested to map out and submit a comprehensive midterm CO2 reduction plan effective up to the end of 2007, including plans for curbing energy consumption and facility renovations, to the ministry.

In fiscal 2003, the ministry will award a total of 1bn yen in subsidies to all such companies relative to the amount of its reduction target each company has achieved.

The successful companies will then also be eligible to sell their excess emission rights to other companies.