TEPCO plans to stop buying CO2 credits: Japan

The tsunami-crippled Tokyo Electric Power Co (TEPCO)'s Fukushima Daiichi nuclear power plant is seen in Fukushima prefecture February 28, 2012.

Tokyo Electric Power Co. plans to give up purchasing carbon dioxide emissions credits in the next 10 years, a step that would be a serious setback to the country's efforts to address global warming, according to sources.

The company is expected to incorporate the decision in its comprehensive special business plan to be completed by the end of this month.

TEPCO, which supplies about 30 per cent of domestic power, is the country's largest CO2 emitter.

The utility has been purchasing the emission credits as part of its efforts to tackle global warming. But the firm apparently found it difficult to continue due to financial strain in the wake of the crisis at its Fukushima No. 1 nuclear power plant.

Businesses and countries are allowed to trade emissions credits for greenhouse gas reduction. Companies that cannot meet their reduction targets can buy credits from companies that have managed to reduce emissions beyond their own targets.

Since TEPCO began buying emissions credits in fiscal 2007, the utility bought 41.7 million tons of credits, or about 40 per cent of its annual CO2 emissions, during the four years up to fiscal 2010, spending 61.5 billion yen.

The company set a target of reducing CO2 emissions to 0.304 kilograms per kilowatt hour or lower, but it failed to achieve the target for three consecutive years beginning in fiscal 2008.

Though the firm had planned to buy emission credits worth about 10 billion yen in fiscal 2011, it has not announced whether it has purchased any since the March 11 disaster.

CO2 emissions generated in the country have increased since the Great East Japan Earthquake. The country's nuclear power plants, which emit no CO2 in generating power, have significantly decreased operations following the March 11 disaster. This has resulted in increased dependence on thermal power plants.

TEPCO's decision to give up the purchase of emissions credits may further increase the volume of CO2 emissions in the country, observers say.

Under the Kyoto Protocol, which took effect in 2005, Japan is obliged to cut greenhouse gas emissions by an average of 6 per cent between fiscal 2008 and 2012, compared with fiscal 1990 levels.

Industries in the country set up voluntary targets for CO2 cuts. Though no penalties are imposed on companies if they fail to meet the goals, businesses that cannot achieve the goals on their own purchase emissions credits from other countries.

Last year, countries agreed to extend the Kyoto Protocol at the 17th Conference of the Parties to the UN Framework Convention on Climate Change in South Africa. Under the agreement, Japan will have no obligation from fiscal 2013 and will make voluntary efforts by setting a numerical target.

The government plans to revise its goal of cutting greenhouse gas emissions by 25 per cent by 2020 from the 1990 levels.

Observers say, however, TEPCO's plan to stop the purchase of emission credits is likely to have a significant impact on future discussions on Japan's energy and global warming policies.