Japan Buys CO2 Rights From Ukraine

Date: 19-Mar-09

Country: JAPAN

Author: Risa Maeda

TOKYO - Japan on Wednesday sealed a deal to buy emissions rights from Ukraine, marking its first deal via a government-to-government trading scheme under the Kyoto Protocol and paving the way for another similar deal soon.

Kiev will deliver 30 million tonnes of so-called Assigned Amount Units (AAUs) to Japan, with the sale's proceeds earmarked for six specific environmental measures in Ukraine, including renewable energy projects, the Japanese government said in a statement.

The other five areas are energy conservation, utilisation of coal bed methane, shift to cleaner fuels, pollution reduction and reduction of other greenhouse gases than carbon dioxide.

The value of the deal was not disclosed.

Japan has said it hopes to complete another government-to-government deal in April with a different eastern European country, also estimated to involve tens of millions of tonnes, to help it meet its emissions target under Kyoto.

Under Kyoto, industrialized countries comfortably under their emissions reduction targets can sell emissions rights, or AAUs, to other governments.

The number of AAUs held by each nation is calculated with reference to emissions levels in 1990, Kyoto's baseline year. Each AAU represents a tonne of carbon dioxide (CO2) equivalent.

Several former Soviet bloc countries have an excess of AAUs after their heavy industries collapsed in the 1990s, and are offering to sell them to those nations well above their Kyoto targets, including Japan.

After Japan's second AAU deal is announced, the Japanese government will have secured the majority of the 100 million tonnes of CO2 offset credits it planned to buy during the 2008-2012 Kyoto period, a government source has said.

A second Japanese government source told Reuters on Monday that talks with Poland and Hungary had been delayed, increasing the prospect of a deal with the Czech Republic.

A Czech government official said on February 17 that the country is on track to sell around half of its AAUs to Japan.

TRANSPARENCY

AAUs are often cheaper than European Union emissions permits, seen as the market's benchmark, as critics say there is a lack of accountability and transparency over where the proceeds are spent.

The statement said the two governments agreed that Ukraine's National Environmental Investment Agency would play a key role to manage the proceeds and monitor the usage of the pooled money on the specific environmental activities.

Further details on the environment technology transfer from Japan are to be decided later, said an official at the New Energy and Industrial Technology Development Organization (NEDO), the Japanese government's emission offset purchasing agency.

Japan, the world's fifth-biggest greenhouse gas emitter, saw emissions rise to a record 1.37 billion tonnes in the year to March 2008, compared with its Kyoto commitments to cut them to 1.19 million tonnes on average in the five years to March 2013.

Apart from the government, Japan's utility and steel companies are buying offsets to help them meet voluntary emissions targets.

Japanese trading companies are also involved in early stage investments in clean energy projects in developing countries like India and China under Kyoto's Clean Development Mechanism emissions trading scheme.

Japanese industry's voluntary emissions reductions are a core part of Japan's plan to meet its Kyoto target.

(Editing by Michael Szabo and Anthony Barker)

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