FEATURE: Japanese trade group sees expanded JCM as good for business

Quantum Commodity Intelligence – Japan has long seen carbon credits as a necessity for it to meet its greenhouse gas reduction goals, having signed its first deals under the Joint Crediting Mechanism (JCM) – which involves partnerships with developing countries whereby Japan finances emission reduction projects in exchange for carbon credits – back in 2013.

Japan has currently signed JCM agreements with 28 countries and aims to secure international carbon credits equivalent to approximately 100 million tonnes of carbon dioxide by the 2030 financial year, which starts in April 2030.

By the summer of this year, some 228 projects were in motion across 27 countries (an agreement with the 28th, Kazakhstan, was signed last week), with 145 already operating. Thailand, Indonesia and Vietnam – 51, 49 and 44, respectively – accounted for the majority, with the Philippines next with 14.

But, if Japan's largest and most influential business group, Keidanren, gets its way the number of projects and countries could jump considerably.

Beyond developing nations

Earlier this week, the Keidanren called on Japan's government to "significantly expand" the JCM and include countries beyond developing and emerging economies because many "with high potential for JCM utilisation" are currently excluded from the scheme. This, the business group argued, would help meet Japan's and global decarbonisation goals.

"Japanese companies are requesting help from countries and regions other than their current partner countries to develop hydrogen, ammonia, biomass, cogeneration, waste incineration power generation, boilers, gas turbines, fuel conversion, electricity storage, seawater desalination, and manufacturing processes," the business group said.

"There is a growing need to form and implement a wide range of JCM projects, including energy and resource conservation, CCS/CCUS [carbon, capture and storage/CC utilisation and storage], solar power generation, hydroelectric power generation, forest conservation, and agriculture," it added.

The trade group wants agreements "as soon as possible" with India, Malaysia, Brazil, Turkey, Australia, Taiwan, Egypt and South Africa, as well as with "regions where Japanese companies have high business needs", without elaborating on where or what these regions are. And it did not stop there.

The business group added that it is hopeful JCM agreements could soon also be signed with several other countries including the US, China, Singapore, Brunei, Pakistan, Qatar, Kuwait, Oman, Jordan, Turkmenistan, Tanzania, Ghana, Mozambique and Peru.

And it is not just territorial expansion of the JCM programme that the Keidanren would like to see. It also called for improved and expanded government financial support for JCM that would help boost private sector involvement.

In March, Japan's Ministry of Environment and Ministry of Economy, Trade and Industry issued new guidance for participation in the JCM to allow project developers to take part in the scheme without applying for government support.

But, the Keidanren said, take-up has been low because of time, effort and financial cost needed by companies to generate carbon credits. "In order to expand private JCM, the Japanese government needs to take various institutional measures with the governments of partner countries," it said.

Attracting the private sector

The Japanese private sector would find the scheme more attractive if the government expanded the project types that could be used to generate credits to include "fields and technologies where Japanese companies have international competitiveness".

Examples of these included the production and use of synthetic fuels such as hydrogen, ammonia, e-fuel and e-methane, the business group said. Added to this, it said, should be revisions to the project approval and carbon credit issuance process, such as reducing the "monitoring burden" by having a shorter monitoring period, and having a more flexible project selection schedule.

The reasoning clearly goes beyond just cutting GHG emissions, and it seems the Keidanren are honest enough to say that they see the JCM as good for Japanese business.

"By deploying Japan's superior technologies, products, and services overseas, we can contribute to carbon neutrality on a global scale, capture strong overseas green demand, and link this to Japan's economic growth," the business group said.