Japan Proposes $4B to Cut Emissions

Japan proposed on Wednesday to spend 433 billion yen ($4 billion) in the next fiscal year on measures to cut greenhouse gas emissions, a 27 percent budget increase for a country already struggling to comply with the Kyoto Protocol.

The country's Ministry of Economy, Trade and Industry provided a budget outline that included money for nuclear plants, electric cars, solar power and technology to capture and store carbon dioxide emissions from industrial plants, Bloomberg reported.

Prime Minister Yasuo Fukudo has touted a set of emissions-reduction measures in recent months, of which the Ministry has now announced its financial support. However, the ministry's budget will still need to go through other regulatory processes and receive approval from the legislature before taking effect in the new fiscal year, beginning in April 2009.

In June, Fukuda pledged to cut Japan's greenhouse gas emissions by between 60 percent and 80 percent from the country's current levels by 2050.

The prime minister's master plan includes a carbon-emissions-trading program, in which companies that can't meet emissions limits can buy credits from those who have lower emissions. The number of permits is lowered over time, which is supposed to cap the overall emissions by various industries that are covered by the program. This type of program is already in place in other parts of the world.

The European Union has a carbon-trading program in place and sets carbon emissions caps for different industries. A consortium of 10 states in the eastern United States plans to enact a carbon-trading program on January 1, 2009 (see NYMEX to Trade Carbon-Emission Allowances and Are More Climate Exchanges Good for the Industry).

Although Fukuda is setting his sights on curbing emissions by mid-century, he needs to meet a much more pressing deadline. Under the 1997 Kyoto Protocol, Japan is committed to cut its emissions to 6 percent below the 1990 levels by 2012. By the end of the previous fiscal year that ended March 2007, Japan's emissions had already risen by 6.2 percent since 1990.

Under the spending plan unveiled by the Japanese government Wednesday, the country would spend 18.2 billion yen ($165.84 million), up from the 14.9 billion yen ($135.77 million) that has been set aside for this fiscal year, to buy carbon-emission credits from projects in developing countries that aim to reduce greenhouse gas emissions.

These types of purchases are part of the measures established by the Kyoto Protocol to promote cleantech investments in the developing world while enabling investing countries to offset their emissions.

The ministry also proposed to spend 9.1 billion yen ($82.91 million) to develop nuclear reactors next year, a 42 percent jump from the current budget.

The government also intends to bring back solar power subsidies. Government officials have considered the move vital not only for the promotion of renewable energy at home, but also for supporting Japanese solar companies that have seen their businesses taken away from competitors in Germany and elsewhere in the world (see Japan Wants to Resurrect Solar Incentives).

Incidentally, Mitsubishi Electric Corp. said on Wednesday that it plans to spend 50 billion yen ($456 million) to quadruple its annual solar cell production from the current 150 megawatts to 600 megawatts by the 2012 fiscal year, which will end in March 2012. The Japanese company had previously planned to boost production to 500 megawatts by the 2013 fiscal year.

Mitsubishi also plans to build a second factory for producing silicon solar cells. The construction is scheduled for completion in December 2009.

The solar incentives, worth 23.8 billion yen ($216.85 million), would provide tax breaks and other assistance to families and businesses for installing solar power systems. A similar program was in place between 1994 and 2005, when the government gave up to 70,000 yen to each household for installing solar panels.

The proposed spending plan also includes 954 billion yen ($8.69 billion) for developing and purchasing raw materials and other sources for energy production. The ministry proposed to spend the money, an increase from the 818 billion yen ($7.45 billion) for the current year, on projects for securing natural gas, coal, uranium and others.