Global emissions trading under debate. Photo: mhaithaca (flickr)

Last week Prime Minister of Japan Yasuo Fukuda announced on that as part of Japan’s innovative new program to reduce its greenhouse gas emissions 60-80 percent by 2050, Japan will invest in the global emissions trading market.

Yet the success of an emissions’ trading strategy is currently in hot debate.

Emissions trading is where a capped, or limited, amount of greenhouse gas emissions is agreed upon internationally, as in the Kyoto Treaty. Countries are then limited in the amount of pollution they can emit. Those countries emitting more than the cap are permitted to buy "credits" from those producing less. These credits allow the countries buying them to produce more than the agreed upon amount of pollution, and rewards the countries selling them for reducing emissions. The idea is that greenhouse gases will be reduced as time goes on because the allowed amount of gas will become smaller and the credits more expensive.

Yet some argue that because the accounting in emissions trading is not transparent and there is limited accountability, a tax based system would be more effective. Furthermore, recently researchers have found that the result of emissions trading has frequently been exporting carbon-intensive industries into developing countries. President Bush’s chief environmental adviser admits that emissions targets “cause a shift offshore” of pollutive industries. In other words, the U.S. and other developed nations are “saving” their emissions by forcing developing countries to account for them.

As factories in developing nations usually use more energy than those in the developed world, this leads to an overall increase in greenhouse gas emissions. The National Center for Atmospheric Research found that the U.S. ‘saved’ about 3 percent in carbon emissions over seven years by outsourcing to China, while in that same amount of time Chinese CO2 output rose 14 percent.

As a developed country, Japan stands to gain from this dedication to reducing emissions through increasing the emissions trading market. And while cutting their emissions by 60-80 percent is a costly challenge now, in the long run Japan will likely be a major player in establishing rules and norms for carbon trading, and could hugely profit in the future when they sell their credits.