Plans to invest directly in poorer nations in return for credits would complement UN’s market mechanism, envoy says

Japanese plans for a bilateral system of carbon offset projects would be more user-friendly than the UN’s existing mechanism and allow developing countries better access to renewable energy technology, one of the country’s senior climate envoy has said.

Japan is developing plans to invest directly in clean energy projects in poorer countries in return for credits to help it meet its domestic emissions reduction targets.

The proposals have attracted criticism from some quarters with commentators warning it could undermine the existing UN-backed Clean Development Mechanism (CDM). But Japanese officials are insistent the new scheme will completement the CDM and expand the number of emission reduction projects that can access finance.

For example, the CDM does not recognise carbon capture and storage (CCS) or nuclear projects, which may be accredited under the Japanese scheme. The CDM has also been widely criticised for its complexity and delays approving new projects, problems that the scheme took steps to address last week.

However, Kenji Hiramatsu, director-general for global issues at Japan’s foreign ministry, told a seminar today that a number of developing countries had expressed interest in the country’s bilateral scheme, which would see developing nations receive direct investment from Japan.

“How it will be connected to the international system, or CDM system, we are in the process of discussing amongst ourselves but I am convinced that some mechanism should be made,” he said, adding that he was happy to discuss how to improve the CDM.

Significantly, he also hinted Japan would engage in negotiations relating to the carbon trading elements included in the Kyoto Protocol. Japan has said it will not support the extension of the Kyoto Protocol, a position that has prompted fears the global carbon market could be disrupted when the current Kyoto commitment period expires in 2012.

However, Hiramatsu said some of the legal frameworks contained in the Kyoto Protocol that cover carbon trading should be maintained. “I understand some of the elements in the Kyoto Protocol should be incorporated in a new framework,” he said. “We are very happy to engage in this kind of discussion, how to improve the CDM, which may incorporate some new ideas such as a bilateral offset mechanism or even a regional sort of mechanism of a carbon trading system.”

Japan is by no means alone in considering bilateral offset deals, with Europe and the US also floating the possibility.

But Christiana Figueres, head of the U.N. climate change secretariat, has questioned whether some countries will be able to overcome the technical difficulties associated with launching marked-based mechanisms outside the CDM. Globally tradable offsets were likely to prove more popular, she added.

“I’m not going to say it’s impossible but I think it’s very complicated to do that,” news agency Reuters reported her saying in Tokyo this week, where she is attending an informal meeting of climate envoys. “It probably unnecessarily complicates the life of those countries. I don’t know if there would be political will either.”