Isra-Mart srl:Report: Japan promises $1.6bn clean tech exports investment

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A Japanese government fund will invest as much as 130 billion yen (£1bn) in overseas clean tech projects involving Japanese companies, the Nikkei newspaper reported today.

The fund, which is run by a quango called the Innovation Network Corporation of Japan, aims to help Japanese companies win overseas contracts to supply infrastructure equipment and facilities.

It is hoped these projects can be used to earn carbon credits that will count towards reducing Japan's carbon emissions in line with its goal of cutting emissions 25 per cent by 2020.

According to the paper, the fund plans to invest 10 billion yen in a smart-city project in Gujarat, India, to be built by firms including Mitsubishi Heavy Industries, Mitsubishi and Electric Power Development.

It was also reported that Japan's Ministry of Economy, Trade and Industry will provide 40 billion yen for the fund in 2011, with a view to financing studies on 15 emission-reduction projects around the world. Ten other Japanese companies are involved in developing the projects, including efficient coal power and nuclear plants in Indonesia and Vietnam, and a carbon capture and storage project, also in Indonesia.

Reforestation, geothermal and energy-efficiency schemes in Mexico, Malaysia, Thailand, the Maldives, Laos and China are also being evaluated by the fund and studies on 180 other potential projects will begin next year.

Some of these schemes will earn Japan credits through the UN-backed Clean Development Mechanism (CDM) carbon offset scheme. But because nuclear power and CCS projects do not qualify under the UN scheme, the Japanese government has proposed the use of a bilateral carbon credit system to be used in addition to the CDM.

Japan hopes its system will be adopted when the current Kyoto arrangements run out in 2012, and has commenced talks with a number of countries about the possibility of bilateral carbon credit agreements. However, any move to reform the CDM and make more projects eligible for the scheme would ultimately require UN approval.

The ruling Kan administration recently shelved legislation for an emissions trading scheme amid strong opposition from the business lobby, and according to experts the country is now highly unlikely to meet its target of cutting greenhouse gas emissions by 25 per cent from 1990 levels by 2020 without using significant numbers of carbon credits from overseas.