Japan said it won’t help extend the
Kyoto Protocol accord to curb greenhouse-gas emissions after its
targets expire in 2012, urging instead work on a new global
agreement to combat climate change.

The Kyoto treaty is “outdated” because it only regulates
27 percent of global emissions, Kuni Shimada, special adviser to
Japanese Environment Minister Ryu Matsumoto, said yesterday in
an interview at United Nations climate talks in Cancun, Mexico.

Failing to extend Kyoto through a UN-brokered agreement may
put the world’s second-biggest market for emissions credits at
risk of collapse. The organization’s Clean Development
Mechanism, worth $2.7 billion last year, is defined in the Kyoto
accord, and the credits are generated to help polluters
worldwide meet emissions targets laid down in the 1997 treaty.

“This is the firmest Japan has been,” Jake Schmidt,
international climate policy director in Washington at the
Natural Resources Defense Council, said in an interview in
Cancun. “The fate of the Kyoto Protocol is going to cast a
shadow over what we’re trying to do here on all the other
building blocks of a climate agreement.”

The agreement negotiated in Kyoto, Japan, binds 37
developed nations and the European community to cut emissions
from 1990 levels by a collective 5.2 percent in the five years
through 2012. The U.S. never ratified the treaty, and developing
countries such as China aren’t set targets. To avoid a gap in
compliance periods, new targets need to be agreed before 2012 so
nations have time to pass the necessary domestic laws in time.

“There doesn’t seem to be any flexibility when you say
never,” Bernarditas Muller, a delegate from the Philippines
who’s negotiated at UN climate meetings since 1995, said today
in an interview in Cancun.

Japanese officials plan their first press briefing in
Cancun later today.

Traders this year have sold UN credits on concern Kyoto may
not be extended. Even so, with limits still in place in Europe,
companies needing to meet their EU targets on emissions
reductions may still buy UN credits after 2012.

Credit Spread Widening

Credits for 2012 that were created under the UN Clean
Development Mechanism, set up after the Kyoto accord, traded at
4.25 euros ($5.56) less than those in the European Union’s cap-
and-trade program as of Nov. 30. That compares with a 2.39 euro
discount at the start of the year.

Offsets for 2010 gained 0.3 percent today to 11.8 euros a
metric ton, paring their decline to 12.5 percent in the past
three months. EU permits rose 0.1 percent to 14.78 euros.

The value of credits sold by investors in CDM emissions-
reduction projects contracted 59 percent last year to $2.7
billion, according to a World Bank report.

Talks to extend Kyoto’s emission targets to the U.S. and
China, the world’s biggest emitters, failed at the 2008 UN
climate talks in Poznan, Poland.

In Copenhagen last year, negotiators were hoping to write a
global treaty replacing Kyoto. That discussion collapsed over
divisions between developed and developing nations and
differences between the U.S. and China over the scale and
monitoring of emissions cuts.

“China and India want to make sure the Kyoto Protocol is
not dead, and you’ve got Japan and Russia and Canada saying no
chance unless the U.S. and China are onboard,” Schmidt said.
“It’s a Gordian knot.”

The U.S. isn’t likely to be able to agree to binding
targets until at least 2013 because it needs to have domestic
legislation in place first, Shimada said.

Depth of Division

“Without the active participation of the two biggest
emitters, namely China and the United States, it’s not a global
effort,” said Shimada, who was formerly Japan’s lead negotiator
at the talks. “Whatever happens, under any kind of conditions
we do not accept a second commitment period.”

The comments indicate the depths of divisions that have
prevented a new treaty on climate change. UN officials leading
the current round of talks are aiming for more incremental
progress on protecting forests, channeling funds to poor nations
and on verifying reductions in emissions blamed for damaging the
Earth’s atmosphere.

Agreeing to an extension for the Kyoto Protocol is a key
demand by the G77 group of developing countries, China and the
43-nation Alliance of Small Island States.

“This is against the stated position of the G77,” said
Muller of the Philippines, who speaks on behalf of the bloc.
“We don’t want to kill the Kyoto Protocol, so we’re not very
happy about it.”

The 27-nation European Union has said it’s open to a second
commitment period, though it also wants action by the U.S. and
China.

Pershing, Japan Slammed

Jonathan Pershing, chief of the U.S. delegation, said
earlier this week that the Obama administration stands by its
commitment to reduce its emissions of heat-trapping gases by 17
percent for the 15 years through 2020. He said President Barack Obama still thinks legislation is the right approach even after
Congress this year failed to pass a climate change law and
Obama’s Democrats lost control of the House of Representatives.

“We think it may not necessarily only be comprehensive
legislation, but perhaps elements in energy or elements in other
environmental activities that could also move us in that
direction,” Pershing said.

Environmental and non-profit groups slammed Japan’s refusal
to accept a second commitment period.

“It’s shocking that at a time when the whole world is
seeking to strengthen the climate regime, Japan wants to kill
the treaty that bears its name,” Mohamed Adow, senior climate
change adviser at Christian Aid, said in an e-mailed statement.

The collapse of the UN-backed CDM carbon offset market
would impact the source of funding for renewable energy projects
in developing countries in Asia, Haruhiko Kuroda, president of
the Asian Development Bank, said at a briefing today in Tokyo.

“The truth is that the carbon trading market has already
been impacted,” Kuroda said. If the CDM collapses, “a very
important pillar of the financing mechanism for climate change
mitigation efforts in developing countries is going to be
disappearing.”