Japan - The rising sun for carbon markets: part II

In the first part of my comment on Japan’s carbon management developments I made the case that Japan is exhibiting a remarkable ‘sense of common purpose’ by sticking resolutely (for now) to its goal of reducing national GHG emissions by 25 per cent (ref 1990) by 2020, despite Kyoto and the Clean Development Mechanism not working as well as planned. The last blog looked at its progress in bilateral trade agreements with SE Asian countries. This one reviews the way in which Japan is using domestic offsetting to engage Japan’s civic society and business sector in a unique and comprehensive national offset programme.

How it works

Japan’s national carbon offsetting system provides third-party certification standards for measuring, reducing, and offsetting carbon emissions; funds a variety of pilot carbon offset projects in Japan; oversees carbon offset providers; and verifies the carbon credits produced by domestic offset projects through the groundbreaking Japan Verified Emission Reduction (J-Ver) Scheme.

Credits from forestry projects account for more than three-quarters of the ~100,000 tonnes of carbon emissions reductions credits issued against almost 150 projects upto May 2011 – with sustainable forest management projects the most common sub-group. This positions the J-Ver Scheme as a valuable model for the evolving international regulatory system for REDD+ (Reduced Emissions from Deforestation and Degradation) offset projects.

Instead of measuring additionality on a project-by-project basis as in the CDM (which is complicated, expensive, and time-consuming) the J-Ver Scheme first creates a “positive list” of project types to promote as a matter of government policy. This novel approach provides a valuable example of how domestic offsets may be included in Nationally Appropriate Mitigation Actions favoured by many seeking to improve Kyoto mechanisms.

J-Ver credits are voluntary and prices have ranged from ¥5,000 to ¥30,000” (US$64 – $388; £40 – £243). Japan makes no bones about the fact that actions under the domestic scheme are on behalf of the nation’s efforts to reduce emissions. The scheme is designed to ensure that voluntary offsetting complements and extends regulation rather than competing with it.

Participating companies have offset the emissions of over a thousand separate products, services, and events in Japan. For example, for the past two years, Japan Post Holdings Company offered a carbon offset New Year’s card, with the proceeds going towards purchasing and retiring carbon credits within the nation’s carbon account. Japan’s ability to harness public and business support in this way is exceptional, and likely reflects heightened public concern about the impact of climate change on the country. A recent Gallup poll reported that 98 per cent of Japanese adults are aware of climate change, and of these, more than three-quarters consider it a serious, personal threat to themselves and their families.

Governance

The domestic programme exists within a well defined, if somewhat byzantine collection of Ministries, Agencies and initiatives. That said, taken together the constituent parts provide for a comprehensively designed platform that has the integrity and delivery capacity to achieve its objectives.

The Ministry of the Environment and the Overseas Environmental Cooperation Centre oversee two major agencies. The first is Certification Centre on Climate Change, Japan (4CJ), which looks after the J-Ver scheme, the Carbon Offset Providers’ Disclosure Programme, and the certification scheme. The second is The Japan Carbon Offset Forum (J-COF) which plays a more advisory role by offering a wide range of consultation and support for 4CJ’s work, especially for the J-Ver Scheme.

The Ministry of the Environment also works closely with the Japan Carbon Action Platform (JCAP), a cooperative network of central and local government entities, and the Carbon Offset Network, Japan (CO-Net), a network of businesses which promotes carbon offsetting and other market mechanisms. These provide valuable feedback and allow the platform to evolve in response to market needs.

In sharp contrast to the UK

In September 2009, I chaired a meeting organised by industry ICROA and CMIA in which representatives from Australia, France, Germany, Japan, The Netherlands, UK, and USA described how they were supporting the development of voluntary carbon offsetting. Japanese representatives at that meeting set the bar high, and they are executing on their plans.

At that meeting, a representative from the UK Department of Energy and Climate Change described the UK’s Offset Quality Assurance Scheme which was launched in the February 2009. Wanting to avoid the vexed ‘double counting’ issue, and intent on hitching the voluntary offsetting horse to the UK’s Kyoto and EU ETS cart, it turned a deaf ear to the majority voice of business and set up a scheme which was light on governance, restricted offsets to regulated instruments under the EU ETS and Kyoto, and excluded domestic offsetting. It was no surprise that the Scheme was closed down in 2011, and accounted for well less than 5 per cent of the UK’s voluntary offsetting.

ICROA and CMIA are planning a second meeting later this year to review how the voluntary market is fairing in the same countries and many others that have become active. Many of the concerns expressed in the first meeting have been addressed by the development of high quality offset standards, and progressive schemes like that in Japan. So I hope we will hear about a ground-swell of support for voluntary offsetting based on international and domestic standards as a sound and much needed complement to regulation.

Rising sun spreads rays of inspiration

When Japan presents its findings from the initial stages of its offset system at the UN negotiations in Durban this December, other governments are well advised to tune in.

While Japan’s status as an Annex I country will probably prevent foreign companies from investing in J-Ver credits while the Kyoto Protocol is in place, the J-Ver Scheme may gain traction in the uncertain regulatory environment that will result if this year’s climate change negotiations fail to establish a successor to the Kyoto system. In a broader sense, though, the Japanese government’s dedicated outreach programme is already helping to boost the role of market mechanisms in other Asian countries, and Japan has provided the global carbon market with a valuable model of an integrated national offset system.

Jonathan Shopley is managing director of UK-based The CarbonNeutral Company. Read more CarbonNeutral blogs here.

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