Carbon trading scheme boosts Japanese technology investments

Sensemaking / Carbon trading scheme boosts Japanese technology investments

Agreement will turn Indonesian emissions cuts into Japanese carbon credits and tech investments.

By Jon Turney / 04 Oct 2013

An agreement between Japan and Indonesia is one of the first fruits of a new carbon trading scheme designed to promote transfer of Japanese technologies to other countries.

The Joint Crediting Mechanism (JCM), agreed in August, will allow reduced carbon emissions in Indonesia to be counted as part of Japan’s own target reductions under the United Nations Framework Convention on Climate Change. It offers an alternative to the centrally coordinated Clean Development Mechanism. Japan will enter two country agreements, and monitor them using its own measurement and verification methods.

Greenhouse gas emissions cuts achieved in Indonesia will be converted into non-tradable carbon credits for Japan. The Japanese government is supporting emissions reductions projects, with a budget of £24 million in 2013, to demonstrate its methodology for verifying carbon credits.

The scheme is intended to increase overseas investments in Japanese technology companies, by boosting demand for low-energy technologies in foreign markets. It is part of a broader ‘Japanese Green New Deal’, with the combined goals of reducing emissions and creating jobs.

In 2012, Japan undertook 54 feasibility studies in partner countries, of which Indonesia had the largest share. Pilot projects in Indonesia included a hybrid (solar-diesel) renewable energy system, wind and solar energy installations, the refurbishment of hydro power plants, and more efficient shipping for transporting cement. Further feasibility studies there explore biomass and more efficient refrigeration in stores. Two of Indonesia’s model projects have received further financial support, one reduces air conditioning in a textile factory, another provides energy efficient retrofits of convenience stores.

Further funding from the Japanese Ministry of Economy Trade and Industry will help to build knowledge for emissions reduction and offer training in how to measure and verify cuts.

Hein Oomen, a Manila-based energy analyst, says the approach will benefit both countries. “Japan is a carbon-intensive economy and has limited means to reduce its footprint within its borders. For every Japanese Yen invested in Indonesia, there will be a higher return in carbon credits than from investments in Japan, where energy production and transport is already relatively efficient”. – Jon Turney

Photo credit: Flickr Candida Performa


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