Japan Boosts Carbon Credits Investment in Emerging Markets

This week the government of Japan inked an agreement with the southeast Asian nation of Laos that will permit Japanese firms to earn carbon credits and assist the landlocked country of 6.2 million with the reduction its carbon dioxide emissions. This is the seventh such agreement under the Joint Crediting Mechanism (JDM) between Japan and a developing country.

Curiously, the country that hosted the Kyoto climate talks over twenty years ago and sparked the eponymous protocol is now launching carbon credit programs on its own. Compared to the Clean Development Mechanism (CDM), which emanated from the Kyoto Protocol, JDM programs are solely between the two governments: Japan’s and the other country with whom such an agreement is signed. One complaint of the CDM program is that companies wishing to launch carbon credit programs must go through a lengthy and layered process under the auspices of the United Nations—Japan’s program, on the other hand, skips such steps entirely.

So why would Japan venture on its own with its own low-carbon scheme?

First of all, Japan’s carbon emissions have surged since the Fukushima Daiichi nuclear disaster in the wake of the 2011 earthquake and tsunami. Japan’s nuclear energy sector has remained largely shuttered: out of the country’s 50 nuclear reactors, only two are currently in operation as many have been closed or shut down for safety inspections. As a result, Japan has had to import more fossil fuels to pick up the slack—and has seen CO2 emissions rise as a result. Indeed, the Japanese have been aggressive about energy conservation, including the iconic and very brightly lit Ginza district in Tokyo (pictured above right). Turning off the lights at night, however, has not stopped the increased flow of oil and greenhouse gas emissions. Hence opportunities abound for Japanese companies to invest low-carbon technologies in nations that have set emission reduction targets but lack the capacity to tackle such goals. Such products and services will therefore end up in new markets, and in theory will boost sustainable development efforts abroad. In the Ministry of Environment Japan’s words, such actions in those countries will contribute to “those emission reductions or removals to achieve emission reduction targets of the developed countries.”

Even before Fukushima, Japan was one of the world’s largest greenhouse gas emitters in the world, and according to Reuters, government officials realized domestic measures alone would not help the country reach a 25 percent emissions reduction target from 1990 levels by 2030. Therefore the government began considering a bilateral emissions program as far back as 2010.

In turn, after a generation of stagnation and then the Fukushima disaster’s aftermath, Japan’s economy is recovering. Many of the Japanese economy’s fundamentals are still worrisome, but amongst the world’s seven largest economies, Japan’s is currently growing at the most rapid pace. Japan’s business community, including the clean technology sector, enjoys a level of confidence unseen in years. As more nations look to ways in which they can reduce carbon emissions, Japanese companies’ efforts in Laos and beyond are a path to show leadership in a market most likely to experience further growth. In the end, such close financial, technological and capacity building support is a way for Japan to flex its diplomatic and international aid muscles after two decades of relative silence.

Based in Fresno, California, Leon Kaye is the editor of GreenGoPost.com and frequently writes about business sustainability strategy. Leon also contributes to Guardian Sustainable Business; his work has also appeared on Sustainable Brands, Inhabitat and Earth911. You can follow Leon and ask him questions on Twitter or Instagram (greengopost).