The Environment Ministry is planning a test trial to trade carbon dioxide emission rights in fiscal 2003, beginning April 1, ministry officials said Sunday.

The ministry’s plan will set emission quotas for companies but allow firms to increase their quotas by trading for emission rights with firms under quota.

The ministry plans to institute a trading market for carbon dioxide and other greenhouse gases to meet Japan’s reduction target set under the 1997 Kyoto Protocol on global warming, according to the officials.

The ministry will work out trading rules and research problems during the test’s first two years.

Some 30 companies interested in trading emissions will be asked to join the trial. Each company will work to achieve a self-determined target to reduce carbon dioxide emissions by the end of fiscal 2004.

Using a formula developed by the ministry, these companies will compute expected emission volumes. Estimated differences between their targets and emission volumes will be traded among the companies in the market.

Prices for trading emission rights or credits will be determined by market forces, according to the ministry.

The protocol calls for Japan and the 15-member European Union to cut greenhouse gas emissions by 6 percent and 8 percent, respectively, below their 1990 levels. These targets must be met on an average basis for the years 2008 to 2012.

The protocol allows industrial nations to trade emission credits among themselves or between companies across borders.

The Environment Ministry is planning to start cross-border trade after domestic trading gets into full swing.

Earlier this month, the ministry, in conjunction with Mie Prefecture, started experiments on emission trading among companies in the central Japan prefecture.

Emission trading has already been conducted in Britain and Denmark. The EU is planning to start trading within its borders in 2005.

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