Tokyo cuts CO₂ emissions but hoards credits

by Maya Kaneko

Kyodo

About four years after Asia’s first mandatory greenhouse gas emissions-reduction scheme was launched by the Tokyo Metropolitan Government, businesses in the capital have succeeded in drastically cutting carbon dioxide emissions without depending on emissions credit trading.

Due mainly to the March 2011 Fukushima nuclear crisis, which reduced utilities’ electricity supplies and triggered legal curbs on power consumption by large-lot customers that year, Tokyo offices and factories covered by the cap-and-trade system have been able to easily meet their carbon dioxide reduction targets, a metropolitan government official said.

The program, which started in April 2010, caps energy-related emissions of around 1,400 offices, commercial buildings and factories that consume more than 1,500 kiloliters of energy in crude oil equivalent terms and allows for trading of emissions credits earned via reductions of more than obligatory levels.

In the first phase, lasting from fiscal 2010 to 2014, such offices and factories are required to trim total carbon dioxide emissions by 6 to 8 percent from base-year levels. In the fiscal 2015-2019 second phase, the reduction must be 15 to 17 percent. Factories face less stringent targets than offices.

Base-year levels are calculated from average emissions over three consecutive years between fiscal 2002 and 2007.

The program was introduced to help Tokyo, which consumes around the same amount of energy as entire Norther European countries like Norway, achieve its goal of slashing carbon dioxide and other heat-trapping gas emissions by 25 percent by 2020 compared with 2000 levels.

So far, more than 90 percent of offices and factories covered by the system have achieved the 6 to 8 percent targets, and 70 percent of the facilities have already met the 15 to 17 percent goals, said Yuki Arata, director of the metropolitan government’s emissions cap-and-trade section.

In fiscal 2012, which ended on March 31, 2013, offices and factories covered by the scheme achieved a 22 percent reduction in emissions compared with their base-year levels.

As of last December, emissions credit transactions in Tokyo only amounted to 22 cases, with most of the businesses covered by the scheme believed to retain credits earned through their own emissions-cutting efforts.

“Emissions credit transactions have so far been inactive as many businesses have managed to sharply slash emissions on their own,” Arata said. “Those who want to sell the credits to secure funding for future energy-saving investments are still monitoring the situation.”

Because these credits can be carried over to the second phase, businesses are apparently in no hurry to make a move. There is no bourse for carbon trading, and emissions credits are basically exchanged on a negotiation basis, often through brokers, with the price varying on anything from the timing to supply and demand conditions.

Arata said the metropolitan government doesn’t view the scarce transactions under the cap-and-trade system as a problem, since the city encourages businesses to carry out energy conservation measures rather than depend on emissions credits purchases to meet their reduction goals.

To promote emissions-cutting endeavors among offices and factories, officials have offered advice during on-site inspections and shared know-how gleaned from the advanced efforts being taken by the front-runners, she said.

Energy-saving measures proven effective at office and commercial buildings include updating to energy-efficient LED bulbs, decreasing the brightness of lights and adjusting thermostats, Arata added.

Mitsubishi Estate Co. and Mori Building Co., whose properties in Tokyo have been recognized by the metropolitan government as low-emission buildings, said they have urged tenants to take power-saving steps, as they account for up to 80 percent of the all electricity used at their properties.

The two companies said they have organized energy conservation seminars to raise awareness and exchange information among tenants, and prodded them to introduce lights-out times and replace fluorescent lights and desktop computers with energy-saving LED bulbs and notebook computers.

As a way of “visualizing” their energy use, Mitsubishi Estate and Mori Building also have launched Internet-based services that allow tenants to view their hourly power consumption.

At present, Mitsubishi Estate acquires almost all of the electricity consumed at its 38-story Shin Marunouchi Building in front of Tokyo Station from renewable energy sources. Mori Building uses an efficient gas-powered electricity-heat cogeneration system for its 54-story Roppongi Hills commercial complex.

The owners of the buildings said they do not intend to sell credits earned through energy conservation efforts for now because the carbon market is stagnant and they need to brace for potential difficulties in cutting emissions further in the second phase.

“If emissions by our tenants do not sharply increase from current levels, we are expected to achieve the target in the second period,” said Osamu Nishio, deputy general manager of Mitsubishi Estate’s property management department. “But emissions could rise with the tenants’ economic activities stimulated toward the 2020 Tokyo Olympics.”

Shigeru Tomita, a senior manager in the building management department of Mori Building, was not overly optimistic about continuing to pursue substantial reductions, saying energy efficiency will only be enhanced slightly each year in the second phase.

“We aim to achieve the 17 percent cut by the end of fiscal 2014, but after that we will face an uphill battle. We can greatly improve energy efficiency only when old buildings are renovated and measures such as LED bulb introduction are implemented,” Tomita said.

Although Tokyo’s cap-and-trade system was originally considered a precursor to a nationwide emissions trading scheme, work by the central government to introduce such a system has stalled because of the Fukushima disaster, which shook Japan’s energy policy to its foundations.

Both Nishio and Tomita expressed hope that if a nationwide emissions trading scheme is to be launched, the central and Tokyo governments will coordinate with each other so as not to increase the paperwork for businesses covered by both systems.

According to Naoyuki Yamagishi, climate and energy group leader at the environmental group WWF Japan, the Tokyo cap-and-trade system targeting office and commercial buildings is similar to Britain’s energy-efficiency scheme. Pilot projects that recently began in Chinese cities including Beijing, Shanghai and Shenzhen also cover such buildings.

Meanwhile, existing schemes in the European Union, California and a regional initiative involving New York and other U.S. northeastern states mainly target heavy users of energy, such as thermal power plants and steel plants.

The metropolitan government’s Arata said that in addition to Chinese cities, Taiwan, South Korea and Thailand are eager to learn from Tokyo’s carbon trading experiences and that local officials have shared their know-how with them.

Arata said, however, that the Tokyo government at present does not envision its cap-and-trade system being linked with carbon markets in other countries for international emissions trading, because the price of credits earned from emissions reductions in Japan is much higher.

“It would be difficult to connect carbon markets globally as price gaps exist and participants would flock to markets where credits are available at a cheaper price,” the WWF’s Yamagishi said.

At the United Nations climate change talks, the world body has yet to reach an accord on its role in handling credits generated by various emissions offset mechanisms, he added.