Strategic Options for Clean Development Mechanism

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Since the third Conference of the Parties to the United Nations Convention on the Climate Change (COPS) in 1997, it has become clear that: (1) Japan will be the biggest buyer of the carbon credit in Asia; (2) Asian countries will be the big suppliers of the credit; (3) energy and environmental issues will be the restraining factors for sustainable development in almost all Asian countries; (4) risk sharing between the Japanese government and businesses is necessary considering the amount of the uncertainty entailed by the Kyoto Protocol; (S) it is important to collaborate internationally to reduce transaction costs and to minimize Japan's costs of complying with the Kyoto Protocol, and (6) usage of public funds by Japan will have a big impact on global society due to its volume and Japan's responsible role in terms of development aid. To secure economic efficiency and control of carbon credits price, it is essential for the Japanese government that it quickly establishes a transparent and economically-efficient system for the four credit mechanisms: Clean Development Mechanism (CDM), Joint Implementation (JI), excess emission allowance (hot air) trade with Russia, and domestic greenhouse gas emission reduction project (“unilateral JI”) in Japan with a special budget (carbon account) for credit purchase which is additional to current ODA flow to comply with the requirement of the Kyoto protocol. Therefore, for CDM and JI, a possible option is the establishment of a system similar to Netherlands' Emission Reduction Units Purchase Tender (ERUPT)/ Certified Emission Reduction Units Purchase Tender (CERUPT) program. For emission allowance trade with Russia, it could use the Green Investment Scheme (GIS), which invests revenues from assigned amount sales in domestic climate policy measures in Russia. Except for the credits from “unilateral JI” which has a positive influence on the domestic employment in Japan, the international market prices can be a principal index of the credits purchase tender. The author prefers more aggressive strategy for Japan, such as to offer incentives for developing countries by setting “target zone with upper limit and lower limit” for credit prices and volume, while avoiding Japan's overburdens for the compliance to the Kyoto commitments and global environmental risks derived from the over-generation of the cheap carbon credits.

Original languageEnglish
Pages (from-to)522-526
Number of pages5
JournalMacro Review
Issue number1
Publication statusPublished - 2003 Jan 1

ASJC Scopus subject areas

  • Food Science
  • Agronomy and Crop Science
  • Industrial and Manufacturing Engineering


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