Tokyo exchange eager to trade CO2, awaits policy

By Risa Maeda

TOKYO (Reuters) - The world's second-largest stock market is poised to invest hundreds of millions of dollars on a carbon trading platform but is awaiting a clear policy on emissions trading from the Japanese government.

Yutaka Ito, the Tokyo Stock Exchange's senior officer in the corporate strategy department, cited competition from other exchanges as a major reason to invest in carbon trading.

But he also said the TSE was holding back until the Japanese government sorted out its policy on curbing emissions. Japan is the world's fifth-biggest emitter of greenhouse gases.

The government has set an ambitious goal to cut emissions by 60-80 percent from current levels by 2050 but still hasn't decided how to achieve this. The environment ministry has said it could be through a carbon tax, an emissions cap-and-trade scheme similar to Europe's, or both.

But big business is opposed to a mandatory cap-and-trade system, saying it would hurt their competitiveness, further clouding the picture.

"We're studying details so that we'll get ready to go at any time from next year," Ito said in an interview for Reuters' global environment summit.

"Beyond that, we'll make a business judgment, taking into account of market circumstances at that time," he said, noting the current financial crisis was a factor to consider.

He said it was crucial for the TSE to meet the competition head on, citing an estimate by Patrick Birley, head of the European Climate Exchange, that the global CO2 market would likely grow to $3 trillion a year by 2020 from more than $60 billion in 2007.

"We should be ahead of rivals in the same time zone," Ito said. Other regional centers, including Tianjin of China, are preparing to take advantage of one of the fastest-growing markets.

British carbon credit exchange operator Climate Exchange said in July it had signed a pact with Chinese National Petroleum Corp. Assets Management and Tianjin City to begin an emissions trading business in China.

For the moment, though, the TSE needed a clearer signal from the government on how it will fight emissions in the next decade.

UNDER PRESSURE

Japan is coming under pressure from developing nations in U.N.-led climate talks to do more to curb its greenhouse gas emissions, not least because it is above its Kyoto target.

Negotiations reach a climax in Copenhagen, Denmark, at the end of next year aimed at agreeing a replacement for the Kyoto Protocol that would hopefully bind all nations to emissions curbs from 2013.

At present, Japan is only one of 37 industrialized nations that are bound under Kyoto to meet emissions curbs from 2008 to 2012, when the pact's first phase ends. Developing nations are excluded and have said it was unfair for them to commit to emissions curbs from 2013 unless rich nations pledge to do more.  Continued...