Japan postpones carbon trading plans as speculation mounts about switch to a carbon tax

Japan, in the closing days of December 2010, postponed the creation of a greenhouse gas emission trading system by a year until in the face of strong opposition from the business lobby, according to news agencies.

The centre-left Kan administration had planned to launch the cap-and-trade scheme in the fiscal year starting in April 2013, and had submitted a climate bill to parliament that would pave the way for the introduction of the scheme.

However, Japan's National Strategy Minister, Koichiro Gemba, who was appointed to review the government's core green policy steps, told Reuters that the trading scheme needed further careful study, indicating that it had effectively been shelved. He stressed, however, that it had not been scrapped entirely.

"Overseas circumstances have changed. Our views on emissions trading schemes have also changed," Gemba said, referring to developments including US and Australian moves since the government approved its draft climate bill in March.

"But we haven't given up on plans to introduce an emissions trading scheme," Gemba told a news conference. Gemba said it was important to get the timing of the launch right, while the design of the scheme would depend in part on businesses' requirements. He said he no longer believed that forcing companies to accept allocated emission caps, as in Europe, would work in Japan.

The Japanese business lobby had warned the government any such move in the current economic climate would result in job losses - a prediction disputed by environmental groups.

The Democratic Party promised to create the emissions trading system as a key part of its manifesto for the 2009 elections. At the time the party said it was the only way to ensure the country meets a target to cut its greenhouse gas emissions by 25 per cent from 1990 levels by 2020. Now, however, Tokyo is expected to seek other ways to bind companies to emissions goals.

Tokyo seems on track to levying a new tax on CO2 in October this year and to expanding a pilot plan floated in 2009 for increased renewable sources of electricity, with related bills to be submitted in the next parliamentary session.

Japan's emissions reduction target, one of the toughest among major emitters, would be virtually impossible to meet without deeper emission cuts by manufacturers, power generators and offices and commercial operations, which together account for 60 percent of the country's emissions.

Japan has long championed the Kyoto Protocol on reducing greenhouse gas emissions, named after its ancient capital, has but opposes its extension calling it unfair because it does not include 70 percent of the world's top polluters such as China and the United States.

Meanwhile neighboring South Korea has also delayed the introduction of its emissions trading laws into parliament until February because of business concerns. In Australia, the opposition has called on Prime Minister Julia Gillard to back off on her pledge to introduce a carbon price in Australia this year amid the moves by Japan, which is a large trade competitor.