Beyond Neutral

Greenhouse Solutions

Emissions Trading — EU, NZ, Japan and Tokyo

European Union Emissions Trading Scheme

The European Union’s Emissions Trading Scheme (EU ETS) is a company level cap-and-trade scheme designed to include CDM and JI to achieve country level and EU level Kyoto Protocol emission targets. 

During the first trading period (2005−2007), the scheme focused on reducing CO2 from big industrial emitters.  The second trading period (2008–2012) expanded to include nitrous oxide (N2O) with the possibility of aviation being included in 2011 and other industrial sectors and greenhouse gases by 2013. 

Allowances are the commodity traded, with one Allowance equal to tonne of CO2. These are tracked in electronic registries set up by EU Member States and monitored through the Community Independent Transaction Log.

New Zealand Emissions Trading Scheme

The New Zealand Emissions Trading Scheme (NZ ETS), operates within NZ’s emissions allocation established by the Kyoto Protocol for the first commencement period. 

Sectors will be introduced into the scheme over five years and will cover the flowing sectors along with the year they will be introduced;  forestry (2008), liquid fossil fuels/transport (2010), stationary energy (2010), industrial processes (2010), synthetic gases (2011), agriculture (2013) and waste (2011).

The commodity traded in the scheme is the New Zealand Unit (NZU) which is equal to one tonne of CO2e. Corporations can buy emission offsets from international sources.  It is proposed to allocate NZU to pre 1990 forests owners. The Scheme is currently being reviewed by the newly elected NZ Government.

Japan’s Voluntary Emissions Trading Scheme

Japan’s Voluntary Emissions Trading Scheme (J-VETS), launched in May 2005, only covers carbon dioxide (CO2) emissions. 

Under the scheme, Japan’s Ministry of the Environment selects participants through an application process and then provides subsidies for the installation of CO2 emissions reduction equipment.  In exchange, participants must commitment to reducing CO2 emissions below a calculated baseline. 

The scheme creates CO2 emissions quotas, which are traded to meet reduction commitments.  At the end of each trading round, emission reductions are verified before a final round of trading quotas are allowed. 

In the first round, the Ministry selected 34 participants who achieved a reduction of 276 380 tonnes of CO2 and a further 3.8 million tonnes of CO2 over the life of the installed equipment.  An additional 61 participants were selected to join during the second round.

Tokyo Metropolitan Government Trading Scheme

The Tokyo Metropolitan Government has introduced a policy to reduce the local government areas (LGA) carbon dioxide emissions by 25% of 2000 by 2020. 

Tokyo’s Big Change:  The 10 year plan introduced the policy that aims to achieve a ‘Carbon-Minus’ Tokyo through changing the structure of society.  The policy introduces a mandatory cap-and-trade system aimed at the commercial and industrial sectors (J-VETS). 

The scheme will cover companies whose consumption of fuels, heat and electricity is equivalent to 1500 kilolitres of crude oil or greater.  Large companies are also required to  participate in emissions trading with small and medium size companies.  Emissions will be monitored, reported and verified on a yearly basis.  Credits will be recorded in an electronic database, banking of credits is allowed but borrowing of credits is not.  The scheme will start in 2010.