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Carbon rights a 'power game'


The climate change talks in Bangkok, Thailand last week was one of the latest international efforts to combat global warming.

Last month, the environment and energy ministers meeting of members of the G-20 intergovernmental forum concluded in Chiba, Japan.

As part of preparations for this year's G8 summit, the meeting reached consensus on a greenhouse gas reduction framework, but failed to agree on specifics. The result could affect Japan's efforts to become a leader in maintaining world climate order.

Greenhouse gas emissions are closely linked to human activities. Developed countries, which have stayed ahead of the rest of the world in industrialization for more than a century, naturally should take the lead in helping our planet "cool down".

In 1997, 175 countries and regions passed the Kyoto Protocol at the third meeting of signatory parties to the UN Framework Agreement on Climate Change, requiring major industrialized countries to fulfill their greenhouse gas emission reduction quotas between 2008 and 2012.

There are many ways to reduce carbon dioxide emissions and the Kyoto Protocol puts them in two categories - "technological reduction" and "marketed reduction".

"Technological reduction" works through technological innovations that raise the efficiency of burning fossil energy sources to cut down greenhouse gas emissions, or developing "renewable energy" to ultimately "replace" fossil fuel, such as using alcohol made from corn to fuel automobiles.

"Marketed reduction" follows the "clean development mechanism" (CDM) and allows countries with technological capabilities to help developing countries reduce harmful emissions by providing technological assistance in return for "carbon dioxide emission rights".

This is a basic trading system that allows a country to trade its emission rights for reduction technology from another country.

The EU started the world's first "carbon dioxide emission rights exchange" based on this system in 2005 and exceeded $30 billion in trading value the next year.

Japanese enterprises have been actively trading technology for emission rights with China, India and Southeast Asian countries in recent years. The Japanese government on its part has used its financial reserves to buy emission rights from enterprises holding them.

It has also decided to set up a "carbon (emission) rights fund" with a working capital of almost 2 trillion yen ($20 billion) drawn from foreign trade insurance interest earnings.

The fund will work together with official development assistance (ODA) in emission rights trading to acquire more carbon emission rights. Japan's government-run financial institutions, meanwhile, are busy preparing for the establishment of the "Tokyo Carbon Emission Rights Exchange".


The world order entered a period of "tectonic plate realignment" after the Cold War ended. Developed nations other than the US began using the G8 summit as a platform to vie for a lead role in controlling world order.

After the signing of the Kyoto Protocol in 2005, the first-phase (2008-2012) of carbon emission reduction target will soon have its weight felt worldwide, and the environment will become a new dominating theme in world affairs.

Britain, Germany and Japan, host nations of G8 summit meetings and related gatherings this year, are all poised to seize this opportunity to grab the steering wheel of the world climate order vehicle.

Japan will host the G8 summit this July and has launched a campaign to capitalize on the event. It has chosen the picturesque Toyako resort in Hokkaido to highlight its reputation as a leader in environmental protection.

It has also fixed its aim at Asia, providing know-how on environment law through personnel exchange and export of related legal standards in a bid to standardize the environment law and enforcement mechanism in Asia.

The US has opened its own bag of "counter tricks" in response. The Bush administration is trying to force other countries to follow its example by introducing a new energy law that favors such alternative energy sources as corn and nuclear power, with access to its huge energy market as an incentive.

Another measure taken by Washington is pushing for the integration of international grain, petroleum and natural gas futures markets into a "comprehensive fuel market" so as to control energy prices throughout the world and maintain the domination of the US dollar.

It has signed a nuclear power cooperation agreement with Japan to promote the "civilian use of nuclear power", forcing Japan to act as its salesman. Its latest step is the establishment of a uranium futures market, designed to ensure the polarization of nuclear energy for civilian use. If successful, these measures will no doubt defeat the "carbon rights" strategy of the EU and Japan.

What is worrying is that the political game play between the US, Japan and the EU has put China and other emerging markets in its strategic target range.

The US has stated the prevention of climate change cannot be implemented without the inclusion of developing nations such as China in the emission reduction framework; while Japan and the EU have gotten China and some other developing countries onboard the "post Kyodo Protocol" bandwagon as a bet against Washington.

The problem is that the indigenous manufacturing industries of China and other emerging markets still lag far behind developed countries and the high standard of emission reduction quotas will surely perpetuate the gap between the two worlds and even expand it.

It is obvious the US, Japan and the EU are all focused on their own interests in the carbon rights game and have overlooked the overriding determinant of political inspiration. The carbon rights game theory of the US, Japan and the EU will ultimately establish their leading positions in the industry and the "retention of relative advantage" by making sure the productivity gap remains in the future.

The late comers in manufacturing will thus be kept at a strategic disadvantage by the major players in this "power game" and again denied a crucial means for economic development. We need to think thoroughly about the direction of our country's environmental protection and work out a set of market standards specifically suited to our own environment.

 

Author:Liu Junhong
Source:Xinhua
Date:Apr 09,2008