The likely shape of a Japanese ETS

Published: 02 Sep 2010 06:43 CET

POINT CARBON ANALYSIS – The Japanese Ministry of the Environment released recommendations for the country’s planned emission trading scheme (ETS) on 31 August. Among three main design options, the most likely appears to be a hybrid system with an absolute cap for industrial and commercial sectors and intensity-based targets for the power sector. No recommendation is made on how to share the reduction burden within the ETS or between ETS and non-ETS sectors. Although the proposed start date is 1 April 2013, as expected, the main barrier for an ETS still seems to be the ability of the governing Democratic Party of Japan to pass the legislative framework for emission trading during the extraordinary autumn session of the Diet.

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02 Sep 10

POINT CARBON ANALYSIS – The Japanese Ministry of the Environment released recommendations for the country’s planned emission trading scheme (ETS) on 31 August. Among three main design options, the most likely appears to be a hybrid system with an absolute cap for industrial and commercial sectors and intensity-based targets for the power sector. No recommendation is made on how to share the reduction burden within the ETS or between ETS and non-ETS sectors. Although the proposed start date is 1 April 2013, as expected, the main barrier for an ETS still seems to be the ability of the governing Democratic Party of Japan to pass the legislative framework for emission trading during the extraordinary autumn session of the Diet.

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27 Aug 10

POINT CARBON ANALYSIS – Japan’s recent international offset initiative is not the first move towards bilateralism in the global carbon market, but is rather a continuation of the existing trend of a development towards a complex mishmash of offsets based on different standards. The value of offsets created through the Japanese scheme will – if it materialises – at least partly be decided by their tradability and usability for compliance outside Japan, which is so far unknown.

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25 Aug 10

POINT CARBON ANALYSIS – The future of the Carbon Pollution Reduction Scheme (CPRS) hangs in the balance as Australian federal elections on 21 August failed to produce a clear winner. This is because a Liberal/National government, which has a roughly 50-50 chance of forming after coalition negotiations, would put the CPRS on ice indefinitely. A Labor-led government is likely to stick to its preferred 2013 introduction date for the CPRS, set by the Labor cabinet earlier this year. When a new cabinet has been formed, which will probably take weeks, we will know more about the likely fate of the CPRS.

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27 Jul 10

POINT CARBON ANALYSIS –The announcement that not even a utility-only cap-and-trade program will be included in this summer’s energy bill lowers our estimated chances of cap-and-trade passing this year to five percent, but carbon caps are not off the table entirely in 2010. Both emission limits and renewable energy requirements may still make it to a vote in the Senate this year, with the latter having greater chances of passage in our view. If time runs out on both proposals, climate bill backers will make another push in 2011.

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13 Jul 10

POINT CARBON ANALYSIS - In a stunning turn of events, the incumbent Democratic Party of Japan (DPJ) incurred substantial losses in the elections for the Upper House of the Diet of Japan on Sunday, 11 July 2010. This development may cause a delay passing a Basic Law on Global Warming and establishing a mandatory nation-wide emissions trading scheme as discussed in the Point Carbon CMA”Can Kan in Japan? Prospects for Japanese Climate Policies and Markets”, published 9 July 2010. There are many votes in the Upper House favoring some sort of Basic Law on global warming, but the DPJ will need to horse-trade with other parties to get the necessary support. Political support for the conditional 25 percent reduction target on 1990 levels by 2020 remains.

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02 Jul 10

POINT CARBON ANALYSIS – Democrats are settling on a strategy for a climate and energy bill building on Bingaman’s bill with a power-only cap-and-trade provision. We expect the push for a bill to continue into the fall but the vote remains a difficult hurdle. A 'no' vote on climate can still be a win for Democrats; they can leverage Republican opposition to climate in the November elections, or they can pass an energy-only bill. We maintain our forecast for passage of a climate bill in 2010 at 20 percent.

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01 Jul 10
Volume down, value up in EUA and CER markets in H1 2010

POINT CARBON ANALYSIS - The EUA and CER markets exchanged 3.6 billion tonnes (Gt) CO2e over the six first months of 2010. The estimated value of these transactions was €48 billion (US$58bn). Total transaction volume in these two segments is down 3 percent on H1 2009. However, due to somewhat higher carbon prices, the total value of these carbon markets in 2010 is estimated to be up 8 percent period-on-period.

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24 Jun 10
Kyoto and credit balances slightly tighter

POINT CARBON ANALYSIS – In our updated CER/ERU balance we estimate an 84 Mt deficit for the Kyoto period. This is 25 Mt shorter compared to our update in March. Increased demand due to higher projected emissions for some countries (~68 Mt) and lower supply (~22 Mt) is to some extent cancelled out by lower forecasted CER/ERU demand due to AAU purchases by the Japanese private sector (73Mt). Moreover, the updated Kyoto balance shows that seven countries are short, up from three in March. Spain, Japan and Italy are still dominating the short side.

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15 Jun 10

POINT CARBON ANALYSIS - The international negotiations over a post-2012 agreement entered a constructive mode when negotiators met in Bonn 31 May to 11 June. Some parts of the package are more or less ready for adoption, such as REDD and adaptation. For other parts, e.g. MRV and financing, significant progress was made in Bonn, but these are still highly controversial issues and it is open whether decision on these can be made in Cancun this year. As for the most controversial parts, such as targets and legal nature, a real discussion was now taking place on how to turn the pledges into Kyoto Protocol commitments, but these will most likely have to wait for the meeting in Johannesburg in 2011, if not later, to be finalised.

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11 Jun 10

POINT CARBON ANALYSIS – Democrats seem ready to move on the energy and climate bill this summer, but politics of the oil spill in the Gulf will largely determine the content and the chances of the bill. We up our forecast for passage of a climate bill this year to 20 percent, and see a higher likelihood, 40 percent, of an energy-only bill.

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