1

Voluntary Carbon Offset

in Japan, FY2013

March, 2014 Office of Market Mechanisms

Climate Change Policy Division, Global Environment Bureau Ministry of the Environment, Japan

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Table of Contents

Introduction ........................................................................................................................................... 3

Chapter 1 Overview of Carbon Offset ................................................................................................. 4

(1) What is Carbon Offset? ............................................................................................................ 4

(2) Three Steps of Carbon Offsetting Efforts ................................................................................. 4

(3) Significance and Effect of Carbon Offset Activities .................................................................. 5

(4) Carbon Neutral ......................................................................................................................... 6

(5) Highly Reliable Carbon Offset .................................................................................................. 6

(6) Credits used for Carbon Offset ................................................................................................. 6

Chapter 2 Status of Carbon Offsetting Efforts in Japan ....................................................................... 9

1. Overview of Carbon Offsetting Efforts in Japan ............................................................................ 9

(1) Awareness and Understanding of Carbon Offset..................................................................... 9

(2) Number of Carbon Offset Efforts and Their Trend ................................................................ 10

(3) Dissemination of Carbon Offsetting Information ................................................................... 14

2. Carbon Offsetting Scheme in Japan............................................................................................. 18

(1) Carbon Offsetting Scheme ..................................................................................................... 18

(2) Offset Credit (J-VER) Scheme ................................................................................................. 19

(3) Domestic Credit Scheme ........................................................................................................ 22

(4) J-Credit Scheme ...................................................................................................................... 23

(5) Joint Crediting Mechanism ..................................................................................................... 24

Chapter 3 Global Carbon Offset Trends............................................................................................. 26

1. World Carbon Market Overview ................................................................................................. 26

(1) Overall Trends in the Carbon Market ..................................................................................... 26

(2) Trends in Voluntary Markets .................................................................................................. 26

2 Global Carbon Offset Related Schemes ....................................................................................... 29

(1) Overview of Global Warming Measures and Legal Systems .................................................. 29

(2) Voluntary Carbon Offset Schemes ......................................................................................... 34

(3) City’s GHG Emissions Calculation Efforts ............................................................................... 35

(4) Global Credit Creation Schemes ............................................................................................. 37

Conclusion: The Outlook for Carbon Offset ........................................................................................ 41

3

Introduction

Recently, occurrences of abnormal weather that are attributed to global warming, and their impact and damage caused have been reported all over the globe, from events such as sudden increases in crop price due to drought damage in North America to Typhoon Haiyan that caused extensive damage in the Philippines. In 2013, the daily mean concentration of carbon dioxide in the atmosphere of Mauna Loa in Hawaii was observed to exceed 400 ppm for the first time. This led to the Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC) to proclaim, "We have crossed an historic threshold and entered a new danger zone." Furthermore, the Working Group I Report of the Fifth Assessment Report from the Intergovernmental Panel on Climate Change (IPCC) states that more evidence related to the impact of human activity on the climate has been detected since the Fourth Assessment Report, and recent global warming is extremely likely to have been brought about by human activity such as the burning of fossil fuels. In addition, it reports that a major and sustainable reduction in greenhouse gas emissions, which are currently increasing globally, is required. Japan’s Global Warming Prevention Plan calls for a reduction in greenhouse gas emissions by 2020 of 3.8% below 2005 levels, and sets the longer term goal of an 80% reduction by 2050. Japan seeks to develop international leadership by working toward building a low-carbon society. Because global warming is intimately related to economic activity and to the people’s lifestyle in general, measures against global warming must be promoted through effective use of various policy means for all actors that constitute society, including citizens, corporations, NPOs/NGOs, local authorities, and government. Outside of Japan, information disclosure pertaining to greenhouse gas emissions and emissions trading by legally binding regulations are progressing, but Japan's "Carbon Offset" is a method that promotes proactive emission reduction not based on legally binding regulations such as emissions trading, and is one of various initiatives that drive further measures against global warming in the future. The purpose of this report is to provide an accurate description and to disseminate information on Carbon Offset. Chapter 1 introduces the definition and importance of carbon offset and the general situation for carbon offset; Chapter 2 gives on overview on carbon offset in Japan; and Chapter 3 introduces trends in global carbon offset. Finally, the outlook of carbon offset is discussed in the conclusion.

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Chapter 1 Overview of Carbon Offset (1) What is Carbon Offset? “Carbon offset” is an action to partially or entirely offset emissions generated from certain activities through constituent members of society (e.g. citizens, businesses, NPOs/NGOs, and local or national governments) through (1) recognizing the amount of their own GHG emissions, (2) proactively making efforts to reduce their GHG emissions; and (3) compensating for unavoidable emissions by purchasing GHG emission reduction/sinking generated elsewhere (hereafter referred to as “credits1”) or by implementing projects/activities that lead to achieving reduction/sinking elsewhere2.

Figure 1: Overview of Carbon Offset

Various activities can be the targets for carbon offset activities, such as citizens’ daily electricity use, companies’ production/distribution/sales, local and national governments’ holding of meetings, and corporate activities themselves. Any of these GHG emitting activities can be considered as targets of carbon offsetting efforts.

(2) Three Steps of Carbon Offsetting Efforts Carbon offsetting efforts are carried out through the following three steps of “recognize, reduce, and offset.”

Three Step of Carbon Offsetting

2

Recognize １

２

３Offsetting

Reduce

Calculate CO2 Emissions

Make efforts to reduce CO2

Offset unavoidable emissions by purchasing credits generated from GHG reductions/sink projects.

Figure 2: Three Steps of Carbon Offset (Source: Dissemination Tool of Carbon Offset Forum (J-COF))

(1) STEP1 Recognize:

Recognize the amount of greenhouse gas (GHG) emissions from houses, offices, events, factories (in manufacturing processes), travel and transport.

1 Credits are also called offset credits, carbon credits, emission rights, etc. 2 MOE “Guidelines for Carbon Offsetting in Japan” (February 2008) (in Japanese)

(http://www.env.go.jp/earth/ondanka/mechanism/carbon_offset/guideline/guideline080207.pdf) (in Japanese)

Three Steps of Carbon Offsetting

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(2) STEP2 Reduce:

Reduce GHG emissions through introducing energy saving equipment, practice energy saving activities or using transportation with low environmental burdens, etc.

(3) STEP3 Offset:

Offset unavoidable emissions with credits created by implementing GHG emission reduction/sinking projects elsewhere.

In general, one can find out how much GHG is emitted from one’s own activities by “Amount of activity x Emission factor”3 (STEP 1). “Amount of activity” is how much GHG emitting activities were conducted, such as electricity use, water use, etc. Emission factor is the emission amount per unit of activity. In most cases, the amount announced by public agencies can be used as the emission factor4. On the Internet, there are various tools that can help calculate how much GHG is emitted from a general household by inputting the amount written on the utility bills (electricity, water, etc.) For Step 2, that is to reduce emissions as much as possible, there are various emission reduction methods, such as efforts to turn off lights after every use, to put on Cool Biz clothing, as well as various efforts introduced by public agencies. Then, to offset (Step 3), credits created by emission reduction/sinking projects in and out of Japan are used. In order to make carbon offset efforts more reliable, it is essential to use highly reliable credits, that is to use credits such as the Kyoto Mechanism credits5 and J-credits (P23). There are also credits from verified emission reduction (VER) schemes that satisfy certain criteria.

(3) Significance and Effect of Carbon Offset Activities Carbon offset activities are the global warming preventive measures that each constituent of society can participate in according to their social status and role. In other words, these activities provide people with opportunities to proactively participate in the global warming preventive measures of one’s choice, such as through purchasing products or participating in events. Furthermore, these activities give those who had no previous interest in global warming a chance to think about the issue. Recognizing one’s own GHG emission amounts and identifying the areas he/she can reduce emissions would further motivate them to reduce emissions. Furthermore, by purchasing credits, one can recognize the fact that the GHG emission is actually the cost, which would lead them to continue their emission reduction efforts. Carbon offset activities will lead to investment in GHG emission reduction/sinking projects implemented in and out of Japan, providing opportunities to contribute financially to the implementation of these projects. Projects in developing countries, in particular, can also expect additional effects of improvements in natural resources or pollution issues, as well as community revitalization, since use of credits created domestically would bring about money flow in the country, which in turn leads to promotion of domestic investment and more job opportunities.

3 “Amount of activity x Unit heat emission x Emission factor” can also be used. 4 There are cases when the amount calculated by the emitter itself is to be used. 5 Kyoto Mechanism Information Platform (http://www.kyomecha.org/e/index.html)

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Figure 3: Money Flow of Carbon Offset Activities While businesses can improve their energy efficiency and cut costs by calculating their GHG emissions, they can also demonstrate their carbon offsetting efforts to gain certificated Carbon Offsetting certification labels as part of their CSR activities through information provision in PR activities and by making the appeal to the public that they are environmentally highly motivated to stop global warming together with citizens. Citizens and businesses’ carbon offsetting activities are expected to create jobs and help drive local economies in the long run, which in turn will bring about great benefits to their economies as a whole.

(4) Carbon Neutral Carbon neutral consists of the following two parts: 1) constituents of society recognize their emissions within the scope that they should be responsible for those emissions from an objective point of view, and positively make efforts to reduce those emissions; and 2) for the part that they cannot reduce, they offset that remaining amount through the purchase of credits or implementation of emission reduction/sinking projects elsewhere.

(5) Highly Reliable Carbon Offset Highly reliable carbon offsets satisfy the following criteria: 1) Amounts of GHG emitted from the activities subject to carbon offset are calculated with certain accuracy. 2) Highly reliable credits (see the following) are used to offset. In order to further raise the reliability of carbon offset efforts, it is desirable to have a third party, etc. to verify the projects. To ensure the reliability, there are various standards and institutions established and in operation in and out of Japan6.

(6) Credits used for Carbon Offset Credits used for carbon offset Credits used for carbon offset are GHG emission reduction/sinking realized by others and used for “compensation” in carbon offset activities. While there are various types of credits, those primarily used for carbon offset can be classified into two types. One of them is the credit called the Verified Emission Reduction (VER). Generally, a credit trading market for voluntary carbon offset activities is called a voluntary market, and VER credits are developed to be traded in such markets by national governments or private organizations based on their specific standards.

6 See Chapter 2 and after for details.

Sales paid to business for offset products/services are used to generate carbon credits under the carbon offset

mechanisms, leading to encouraging greater reduction/sinking of greenhouse gas emissions.

Consumers,

businesses, etc.

Manufactures,

retailers, etc.

Offset

providers

Those carrying

out offsets

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The other is the Kyoto units designated by the Kyoto Mechanisms. There are 4 types of Kyoto units: Assigned Amount Units (AAU), Emission Reduction Units (ERU), CER, and Removal Units (RMU). CER issued under CDM, in particular, is also widely used for voluntary carbon offset activities. Those that carry out carbon offset can freely choose which type of credit to use for the part not determined in the certification schemes, taking into consideration the contents of their offsetting efforts. Reliability of Credits In order to ensure reliability of credits, it is necessary for credit generation mechanisms to comply with the following standards. 1) Reduction/sinking resulting from projects that offer credits as offsets must be secure (ensure certainty) 2) It must ensure that emissions that have been offset through reduction/sinking realized under a project would

not have otherwise been offset by other existing measures (ensure additionality). And it must be ensured that once emissions have been sunk, they are not going to be released again into the atmosphere (ensure permanence).

3) The same credits must not be used multiple times (avoid double counting). Regarding 1) and 2), in a project of a forest sink, for example, it is necessary to consider the possibility of CO2 absorbed and fixed in trees being released again in the atmosphere due to natural disasters or inappropriate forest management. Measures to address these issues are crucial. Regarding 3), to avoid double counting of credits, the compilation of credits registered and implementation of proper invalidation of credits must be carried out appropriately. Two Credit Generation Approaches 1) Baseline & credits approach The gap between GHG emissions that would have occurred without a GHG reduction/sinking project and the emissions that occur when a reduction/sinking project is carried out is defined as a credit. They include CER issued by CDM, VER such as J-VER, etc. Credits under the Baseline & Credits Scheme have two types of credits: reduction credits and sink credits. Reduction credits are those generated by GHG emissions reduction projects, such as upgrading facilities with poor energy efficiency to the ones with higher efficiency, replacing fossil fuels with renewable energy, etc. On the other hand, sink credits are generated by CO2 sink projects that absorb and fix CO2 through promoting an appropriate forest-thinning and tree planting.

Figure 4: Image of Credits Creating Method under Baseline & Credits Scheme

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2) Cap & trade approach A regulator sets an upper limit of GHG emissions, and then allots emission allowances (quota) to emitting parties. A party whose emission falls below its allowance can trade the remainder. Those include EU Allowance Units (EAU) traded in the European Union Emission Trading Scheme (EU-ETS, P29)7 and those generated through the Tokyo Metropolitan Government’s Cap-and-Trade Program8, etc. Allowances generated by a Cap & Trade Scheme are intended to be used in the cap and trade system and, in principle, are not intended to be used for voluntary carbon offset. Therefore, for voluntary activities, it is common to use reduction emissions credits generated from a baseline & credits scheme.

Figure 5: Image of Credits Creating Method under Cap & Trade Scheme

7 EU-ETS (http://ec.europa.eu/clima/policies/ets/index_en.htm) 8 Bureau of Environment, Metropolitan Tokyo Government - Tokyo Cap and Trade

(http://www.kankyo.metro.tokyo.jp/en/climate/cap_and_trade.html) This effort of Metropolitan Tokyo Government was awarded the Finance and Economic Development Award at the City Climate Leadership Awards

sponsored by C40 (see Chapter 3) in 2013.

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Chapter 2 Status of Carbon Offsetting Efforts in Japan

1. Overview of Carbon Offsetting Efforts in Japan (1) Awareness and Understanding of Carbon Offset According to the survey on awareness of carbon offset conducted at the Eco Products Exhibition 2013 held in December 20139, around 79% knew the phrase “carbon offset.” Compared to the results of a similar survey conducted in 201210, 2013 results showed a rise in the level of awareness.

Figure 6: Carbon Offset Awareness Survey 2013

(Conducted by J-COF)

Figure 7: Carbon Offset Awareness

(Comparison between 2012 and 2013)11

On the other hand, in the Carbon Offset Awareness survey conducted at the “Eco Life Fair 2013” held in June 201312, those who knew the phrase “carbon offset”, remained at about 57% (Figure 8).

9 Those 1,170 people that visited the MOE/Carbon Offset Forum (J-COF) booth were surveyed. 10 Those 826 people that visited the MOE/Carbon Offset Forum (J-COF) booth were surveyed. 11 In the Figure, “No Answer” (3%) is excluded from the 2013 results. 12 Those 424 people that visited the MOE’s Carbon Offset booth were surveyed.

Know carbon offset

Don’t know carbon offset

No answer (3%) Know the phrase and its system very well (18%)

Know the phrase, carbon offset (79%)

Knew the

phrase some (34%)

Knew or heard the phrase before (27%)

Didn’t know

(18%)

10

Figure 8: Results of Awareness Survey at the Eco Life Fair 2013

One of the reasons for this big difference in these two survey results is the participants’ interest in environmental issues. Those at the Eco Products Exhibition are probably highly conscious about the issues, while those at the Eco Life Fair, which took place at Yoyogi Park, an easily accessed park for anyone, do not necessarily have keen interest in environmental issues. So it is highly probable to say that these survey results show that the awareness of people in general is lagging behind the level of awareness of those interested in the issues. In order to further disseminate the efforts of carbon offset, it is important for those not only interested in environmental issues but also people in general to understand the meaning and significance of those efforts. Information provision in easily understandable forms to raise awareness in the environment, and promotion of participation in carbon offset activities shall be continued. It is also essential to study the mechanism and framework that make it easy for everyone to participate in carbon offset efforts.

(2) Number of Carbon Offset Efforts and Their Trend According to the media report, the accumulated total of domestic carbon offset efforts is about 1,255 (December 2007-the end of December 2013) (see Figure 9). One of the reasons for the leveling off of the numbers of reported efforts since 2012 is the fall in the numbers in manufacturing, sales, and service industries that had led the efforts around 2008-2010 (Figure 10). It is likely that companies carried out voluntary carbon offset efforts as part of their CSR efforts (see Chapter 3), and that after the Lehman Fall in 2009, due to Japan’s economy’s slow recovery and recessionary trend13, companies weren’t financially able to spend money on their CSR activities. Also, while carbon offset efforts introduced at the Toyako Summit in Hokkaido in 2008 (G8 Summit) and others during Japan’s initial stage of these efforts were likely to be covered by the media for their novelty, after many efforts were carried out and a certain level of expansion of these efforts were seen in Japan, media coverage itself had decreased.

13The Research Institute of Economy, Trade and Industry (RIETI) (http://www.rieti.go.jp/jp/columns/s14_0006.html) (in Japanese)

Know carbon offset (57%)

Know the phrase and its system very well (7%)

Know the system some (17%) Don’t know

(43%)

Know or heard the phrase before (33%)

11

Figure 9: Number of Carbon Offset Efforts in Japan by Type14

Figure 10: Changes in the Number of Carbon Offsetting Activities by Industry with Many Such Activities (Source: Mass Media)

Domestically, Type I-1, efforts to offset products/services, accounted for the highest media coverage (54% of all efforts), followed by Type I-2, which offsets conferences and events, and Type I-3, which offsets one’s own activities, at about the same level. Type II, efforts to support offsetting one’s own activities, is being covered in the media far less (5%) than the other types.

14Types of carbon offset efforts: TypeI-1: to offset products/services, Type I-2: to offset meetings/events, Type I-3: to offset one’s own activities, and Type II: to support offsetting

one’s own activities.

-2006 2007 2008 2009 2010 2011 2012 2013

Type II

Type I-3

Type I-2

Type I-1

-2006 2007 2008 2009 2010 2011 2012 2013

Manufacturing

Wholesale, retail

Finance, insurance

Other services

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Figure 11: Carbon Offset Efforts in Japan by Type (Cumulative Total) (%) (Media Coverage)

Figure 12: Carbon Offset Certification by Type (%)

Among efforts that received carbon offset certification (P18) in the MOE’s Carbon Offset Scheme, Type I-1 efforts that offset products/services accounted for the highest share (48%), as was seen in the case of media coverage results, Type I-2 that offsets conferences/events and Type II to offset activities to supports offsetting one’s own activities were at the same level (19%), and Type I-3 that offsets one’s own activities were the lowest (Figure 12). One of the reasons for Type I-1 and Type II efforts related to offsetting products/services being high both in media coverage and certification receiving efforts is that products/services have higher chances of being seen by the general public compared to events and business activities. Consumers’ environmental awareness and environment friendly behaviors are increasing every year15, and it is likely that businesses carry out carbon offset efforts of products/services in order to appeal to consumers. Furthermore, products/services themselves work as a media to publicize companies’ efforts, leading to heightened corporate image in addition to the pure advertisement purposes of products/services. Among the number of domestic carbon offset efforts covered in the media, that of the manufacturing industry accounted for the highest share at around 25% (307 among 1,255 reports), followed by service and wholesale/retail industries at about the same rate (15% and 14%, respectively), then the financial industry (12%)

15 Dentsu Green Consumer Survey 2013 (http://www.dentsu.co.jp/news/release/2013/pdf/2013048-0411.pdf) (in Japanese)

Type II 5%

Type I-3 20%

Type I-2 21%

Type I-1 54%

Type I-2 19%

Type I-3 14%

Type I-1 48%

Type II 19%

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(see Figure 13). Unlike the results of carbon offset certified efforts by industry, there are many reports on the financial industry’s efforts. Many of them covered efforts by banks to offset their users’ daily activities and to offset GHG at the time of bankbook issuance.

Figure 13: Carbon Offset Efforts Covered in the Media by Industry (%)

Looking at carbon offset certified businesses by industry (Figure 14) the number is the highest with the manufacturing industry, as was the case with media coverage results, followed by the service industry. Unlike the results of media coverage rates, there are many industries that are difficult to classify. This is due to various actors of community promotion receiving carbon offset certification, such as councils and promotion associations.

Figure 14: Carbon Offset Certified Businesses by Industry

Based on the results of media coverage, among various credits used for carbon offset, CER was the highest (56%),

Construction 4%

Manufacturing 25%

Other services 15%

Public agency 4%

Electricity, infrastructure 1%

Information technology 5%

Education 1%

Transportation, postal 4%

Wholesale, retail 14%

Finance, insurance 12%

Real estate, leasing

4%

Academic research 4%

Hotels, restaurants 2%

Life, recreation 5%

Education 1% Medical, welfare 2% Finance, insurance 2% Real estate, leasing 2% Information technology 2% Hotels, restaurants 2% Public agency 3% Agriculture, forestry 4% Academic research 4% Life, recreation 4%

Manufacturing 29%

Other services

13% Those unable to classify

10%

Construction 9%

Wholesale, retail 7%

Transportation, postal 5%

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then J-VER (15%) and domestic credits (8%) (Figure 15). Note that these results do not include efforts that did not use credits to offset. Among the credits used for carbon offset certification, J-VER was at the highest (72%) and CER remained low at 14% (Figure 16).

Figure 15: Credits Used for Carbon Offset Efforts Figure 16: Credits Used for

(Media Coverage) Carbon Offset Certification

Businesses that try to receive carbon offset certification are those that have a strong intention of appealing to their consumers through their efforts, as mentioned above. So they tend to place importance on the type of credits they use (of which projects these credits were created) or to seek value engagements. As a result, they often used J-VER from domestic products with strong appeal to consumers, especially those created from forest projects (Figure 17)16.

Figure 17: Sources of J-VER Used for Carbon Offset Certification by Type

(3) Dissemination of Carbon Offsetting Information MOE provides carbon offset information and promotes collaboration between various networks so that anyone can participate in the carbon offset efforts. By raising people’s awareness for carbon offset efforts and promoting efforts and equitable market formation, MOE tries to promote actors of society to proactively engage in emission reduction efforts as well as to support emission reduction/sinking projects in and out of Japan.

16As shown in Figure 27, for 37 months between September 2010 and November 2013, J-VER from forests projects were traded at the price about

1,400 yen/t-CO2 higher in average than the J-VER of reduction projects.

Combined 4%

Reduction 13%

Forestry sink 83%

Unknown 18% Combined

2%

Domestic credit 8%

Prefectural J-VER 1%

JVER 15%

J-Credits

Prefectural J-VER 2%

Combined

9%

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Figure 18: Collaboration between MOE and Organizations Responsible for Promoting Carbon Offset [Carbon Offset Forum (J-COF)] To build a low-carbon society, the Carbon Offset Forum (J-COF) was established on April 1, 2008 to gather/provide information, disseminate, and provide consultation and support on carbon offset initiatives. J-COF serves as an integrated contact point for providing online information, creating and providing tools to generate public awareness on carbon offset, and managing and exhibiting at events and seminars. One such event to promote carbon offset is the Carbon Market EXPO, which provides the latest information and educational activities on global warming measures through consultation booths provided by businesses and local governments working on carbon offset and producing J-VER credits, and holds exhibition of eco-friendly products and presentations by businesses and local governments. A total of 87 groups participated in the Carbon Market EXPO held in March 2014.

Figure 19: Carbon Market EXPO2014 Brocher Figure 20: Carbon Market EXPO2014 [Carbon Offset Promotion Network (CO-Net)] The Carbon Offset Promotion Network (CO-Net) established in April 2009 is a voluntary organization in which companies, NPOs and local governments participate for the purpose of the realization of a low carbon society through carbon offsetting. Their activities include planning seminars and study sessions, planning and implementing carbon offsetting lectures, and presenting the Carbon Offset Award.

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Table 1: Winners of Minister’s Prize in the Third Carbon Offset Award

Award Winner’s Name Content of Award

Award by Minister of the Environment

NIPPONKOA Insurance Co. Ltd.

Protecting forests to connect customers and disaster-hit-areas, use of disaster-hit-area J-VER

Award by Minister of Economy, Trade and Industry

Osaka Gas, Hanshin Tigers, Hanshin Koshien Stadium, Cerezo Osaka, Yanmar Co. Ltd.

Kansai area’s small-to-medium sized companies’ energy savings, and carbon offset activities by local sports teams

Award by Minister of Agriculture, Forestry and Fisheries

Kanegasaki Farmers Union

Value added agricultural products and community revitalization projects by Kanegasaki Farmers Union

Table 2: Carbon Offset Course Textbook

Part 1: For Coordinators

Part 1 aims to build a certain level of understanding about carbon offset. Significance and effects of offset are also explained.

Part 2: For Advisors

Part 2 describes points to keep in mind when planning products and events utilizing carbon offset, and describes domestic global warming measures and systems.

[Japan Carbon Action Platform (JCAP)] To promote policy measures to prevent global warming in Japan, the Japan Carbon Action Platform (JCAP) was established in June 2008 by the Japanese government along with local governments much interested in tackling the issue of global warming in Japan. JCAP helps members seek for greater collaboration and cooperation on specific measures through sharing information and exchanging opinions on various initiatives that make use of market mechanisms.

17

Figure 21: Overview of the Japan Carbon Action Platform (JCAP)

[Specified Area Carbon Offset Council] The Specified Area Council consists of entities that create credits in the area and local government/businesses that conduct carbon offset activities. In order to promote carbon offset activities and matching of those who sell/purchase J-credits, etc., the council disseminates information and raises awareness regarding carbon offset and J-credit mechanisms, as well as provides advice and consultations for specific carbon offset efforts.

Table 3: FY2013 Specified Area Carbon Offset Council

Hokkaido Area Carbon Offset Promotion Network Chugoku Area Carbon Offset Promotion Network

Tohoku Area Carbon Offset Promotion Network Kochi Area Carbon Offset Promotion Network

“TOKYO” Area Carbon Offset Promotion Network Kyushu Area Carbon Offset Promotion Council

KANAGAWA Area Carbon Offset Promotion Network

Ariake Sea Related Prefectures Area Carbon Offset Promotion Network

Chubu Area Carbon Offset Promotion Network Okinawa/Islands Area Carbon Offset Promotion Network

Kinki Area Carbon Offset Promotion Network

[Certification Center on Climate Change, Japan (CCCCJ or 4CJ)] Aiming for the realization of a low carbon society, the Certification Center on Climate Change, Japan (CCCCJ) was established on October 24, 2008, of which office located within the “Overseas Environmental Cooperation Center, Japan (OECC)”. CCCCJ has been working to improve the transparency and reliability of climate change projects and is involved in the Carbon Offsetting Scheme as the secretariat and in the Offset Credit (J-VER) Scheme as well.

Concrete carbon offsetting actions by / between entities

Japan Carbon Action Platform (JCAP): MOERegular meetings, information provision and dissemination using websiteDistribute

information to outside

parties

Carbon Offsetting Issuing carbon credits

Local public agencies・certification and implementation of emission

reduction / sink projects ・Carbon offsetting at organized event・Legally binding local mission trading scheme

Local private groups・carbon offsetting at organized

events・ implementation of emission

reduction / sink projects

Local companies・Planning and distribution of cabon offsetting

products・intermediacy of carbon credits・ implementation of emission reduction /sink

projects ・verification of emission reduction / sink projects

Information sharing and opinion exchange

J-COFInformation center, consulting business

regarding carbon offsetting, etc.

Scheme SecretariatJ-Credit SchemeJ-VER SchemeCarbon Offset

Scheme

Japan Carbon Action Platform（JCAP）

Responding to MOE’s call, JCAP was established mainly with local governments to share and exchange ideas on various initiatives using market mechanisms, and to explore collaboration/cooperation for specific projects. Regular meetings, website, mail magazines, etc. are utilized to exchange and disseminate information. In collaboration with J-COF, JCAP seeks smooth implementation of specific carbon actions.

Provide Information on carbon

related actions (carbon offset,

domestic emissions

trading schemes, etc)

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2. Carbon Offsetting Scheme in Japan (1) Carbon Offsetting Scheme Initiated by the government of Japan, the Carbon Offsetting Scheme17 was launched in Japan as of May 2012 to certify Carbon Offset activities. This scheme consists of the Third-Party Certification Program and the Carbon Offset Provider Program. [Carbon Offsetting Scheme Management Structure] The Carbon Offsetting Scheme consists of three independent committees; the Carbon Offsetting Scheme Steering Committee, the Registration and Certification Committee, the Monitoring Committee. The Steering Committee is in place to deliberate on establishment, revision or abolishment of standards, etc. necessary to carry out the scheme. The Registration and Certification Committee is responsible for the registration of verification and certification bodies as well as the approval of “Carbon Neutral Certification”. The Monitoring Committee checks the conflicts or fairness of the Committees, the violations against the standard by applicants who have been given “Carbon Offset / Carbon Neutral Certification,” etc. and illegal use of certification labels by others than those certified under the Third Party Certification Program.

Figure 22: Japan Carbon Offsetting Scheme Management Structure

[Third Party Certification Program] The Third Party Certification Program for Carbon Offset consists of two categories: Carbon Offset Certification for carbon offset activities and Carbon Neutral Certification/Plan Registration for carbon neutral activities. Carbon Offset Certification A certification body certifies whether a carbon offsetting initiative meets the Third Party Certification Standards for Carbon Offset. Currently, six certification bodies have been registered. Applicants for carbon offset certification must have their projects reviewed by a certification body. Under the Carbon Offset Certification, all the GHG emitting sources do not necessarily be subject to emission calculations and reduction efforts are evaluated in a qualitative way, making it easier to obtain certification even for those carrying out carbon offset activities for the first time. Once Carbon Offset Certification is obtained, applicants are allowed to display the certification labels and widely demonstrate that their efforts have acquired the Carbon Offset Certification based on the criteria of the Ministry of the Environment, Japan, and are also allowed to use the labels in sales promotions or CSR activities to show that the carbon offsetting effort is reliable. Among the 97 cases that have been certified, many of them are in the products/services18 (48 cases) (as of the end of January 2014).

17 The Carbon Offsetting Scheme was launched as a succeeding scheme of the Carbon offsetting Certification Scheme started in 2008 and Carbon

Neutral Certification Scheme in 2011. 18 List of Carbon Offset Certification Projects (http://www.jcs.go.jp/companylist.html) (in Japanese)

19

Figure 23: Carbon Offset Certification Label Design Carbon Neutral Certification/Plan Registration For Carbon Neutral Certification, verification bodies verify whether the carbon neutral activities of organizations meet the Third Party Certification Standards for Carbon Offset and then the Registration and Certification Committee certifies those activities to be carbon neutral. In addition, “Carbon Neutral Plan Registration” is established to register activities with plans to be carbon neutral in the future. For carbon neutral certification, scope 1 and 2 emissions19 are essential boundaries (scope 3 is voluntary). A base year must be determined, and quantitative analysis must be carried out. Also, overall efforts must be verified. In other words, carbon neutral certification is more severely judged than the carbon offsetting certification. Since the standards are set in compliance with the ISO 14061s, applicants can make an appeal in and out of Japan that their efforts are recognized as being in compliance with international standards. Moreover, since GHG emissions from the entire operation are quantified, the organization can find out the potentials for emissions reduction and operation cost saving.

Figure 24: Carbon Neutral Certification Labels

[Carbon Offset Provider Program] The Carbon Offset Provider Program is an information disclosure program designed for those who use offset providers when carrying out carbon offset to check their reliability and transparency. Offset providers applying for the program are examined (preliminary screening) for their ongoing handling of emission credits to see whether their reliability and transparency fulfill a certain criterion. Then, after being validated by the Registration and Certification Committee, they are listed on the carbon offsetting scheme website as offset providers in the Offset Provider Program.

(2) Offset Credit (J-VER) Scheme This scheme was established by MOE in November 2008. It had certified emissions reduction/sinking deriving from domestic GHG emissions reduction/sinking projects as credits that could be used for carbon offset and others. This scheme was combined with domestic credit scheme (P22) and is now operated as the J-Credit Scheme.

19 Scope 1: direct emissions related to applicants’ activities or operations, Scope 2: indirect emissions for energy consumption, Scope 3: other

indirect GHG emissions (quoted from carbon offset third party certification standards (http://www.jcs.go.jp/pdf/20120829/20120829.pdf) (in Japanese)).

20

This scheme can be used not only for voluntary carbon offset but also for the GHG Accounting and Reporting Program under the Act on Promotion of Global Warming Countermeasures. The J-VER scheme has been operating as a highly reliable certification scheme that is in accordance with ISO14064s. [Management Structure of the Scheme] The Offset Credit (J-VER) Scheme (hereafter referred to as “J-VER Scheme”) was managed by three committees: the Offset Credit (J-VER) Steering Committee (J-VER Steering Committee), the Technical Subcommittee and the Offset Credit (J-VER) Scheme Certification Committee (J-VER Certification Committee). The J-VER Steering Committee made major decisions on rules, including the determination and revision/abolition of documentation, positive lists and methodologies, and decisions related to the construction and operation of the registry. The Technical Subcommittee established under the J-VER Steering Committee was responsible for the examination of new methodologies for the scheme and the deliberation on the revision/abolition of existing methodologies. The J-VER Certification Committee was responsible for decisions regarding project registration, emissions reduction/sinking certification, and credits issuance. As for receipt of applications, etc., the Certification Center on Climate Change served as the secretariat in the management of the scheme. [Methodology20] Under the J-VER Scheme, based on a review of the current status of implementation and profitability, the J-VER Steering Committee announced the GHG emissions reduction/sinking project methodologies. This was substituted for the testing of each project representative’s additionality claim. 37 methodologies for reduction credits (including 2methodologies for industrial, 2 for agricultural and 2 for livestock breeding sectors) and 3 for forest sink credits were developed. Looking at the numbers (share) of projects registered by methodology type, the emissions reduction methodology accounted for approximately 45 % (113 methodologies) and forest sink 55% (137 methodologies). [Prefectural J-VER21] The Prefectural J-VER Program Certification was a system in which prefectures certify/issue GHG reduction/sinking as credits that had also been certified by the J-VER Certification Committee as being in compliance with the J-VER scheme. With the end of the J-VER Scheme, this program is now being operated as the regional J-Credit Scheme since October 2013. There were Niigata Prefecture Offset Credit Scheme and Kochi Prefecture Offset Credit (Kochi Prefecture J-VER) Certification Program. The credits issued under the Prefectural J-VER Program were managed under the J-VER registry, just as the offset credits of J-VER scheme were certified and issued by the J-VER Scheme Certification Committee. With Niigata Prefecture Offset Credit Scheme, there were 4 projects managed under the registry with 13,286 t-CO2 certified, while with Kochi Prefecture Offset Credit (Kochi Prefecture J-VER) Certification Program, there were 11 projects managed under the registry with 6,634 t-CO2 certified. [Number of Certifications and others] At the end of J-VER Scheme operation, the number of registered cases was 250 and the certified credit amounted to 631,000 t-CO2. J-VER recorded the highest average price for credits traded in the world voluntary markets in 201222.

20 List of J-VER Methodologies (http://www.j-ver.go.jp/system_doc/methodology.html) (in Japanese) 21 Prefectural J-VER program certification (http://www.j-ver.go.jp/pref.html) (in Japanese) 22 Ecosystem Marketplace, Developing Dimension: State of the Voluntary Carbon Markets 2012

(http://www.forest-trends.org/documents/files/doc_3164.pdf)

21

Figure 25: Number of J-VER Certified Cases by Region

Figure26: J-VER Certified Amount by Region (t-CO2)

Hokkaido Tohoku Kanto Chubu Kinki Chugoku Shikoku Kyushi

Hokkaido

Tohoku

Kanto

Chubu

Kinki

Chugoku

Shikoku

Kyushu

Multiple areas

22

Emission Reduction J-VER (E)

Forestry Sink J-VER (R)

Figure 27: Trend of J-VER Market Price23

(3) Domestic Credit Scheme As an internal credit mechanism, the Domestic Credit Scheme was launched in October 2008 as an initiative led by the Japanese government (Ministry of the Environment; Ministry of Economy, Trade and Industry; Ministry of Agriculture, Forestry and Fisheries). It was designed to certify GHG emissions reduction generated by small-and-medium size companies using technologies and funds provided by large enterprises, and to be utilized for achieving targets set by voluntary action plans (arranged under Keidanren, Japan Business Federation) and by the trial emissions trading scheme. It has also been extensively used for purposes of CSR activities and carbon offset. This scheme was combined with the J-VER Scheme in April 2013, and is now operated as the J-Credit Scheme.

23 Trend of J-VER price (http://www.j-cof.go.jp/j-ver/credit.html) (in Japanese)

Sale price (reduction)

Purchase price (reduction)

Middle price (reduction)

Sale price (sink)

Purchase price (sink)

Middle price (sink)

No

v.

Sep

t.

July

May

March

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No

v.

Sep

t,

July

May

March

Jan.

No

v.

Sep

t.

July

May

Jan.

No

v.

Sep

t.

2010 2011 2012 2013

No

v.

Sep

t.

July

May

March

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No

v.

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July

May

March

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No

v.

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May

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No

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t.

2010 2011 2012 2013

23

[Management Structure of the Scheme] The Domestic Credits Certification Committee and the Verification Body had administered this scheme. The Domestic Credit Certification Committee operated as a third party certification body composed of experts and was responsible for the operation of the Domestic Credit Scheme. To this end, the committee approved emissions reduction methodologies and projects, and carried out certification/management of emissions reduction. The Verification Body examined the content of emissions reduction projects submitted by project participants and confirmed the amount of reduction after the project implementation. The examination results and confirmation results were submitted to the Committee in a form of an examination report and a confirmation report, respectively. [Methodologies] Under this scheme, 68 emissions reduction methodologies that were approved by the Domestic Credit Certification Committee had been publicized by the end of this scheme’s operation.24 Among them, there were 35 methodologies of which credits had been certified25. [Number and Amount of Certified Credits] By the end of the operation, certified credits amounted to 1,504,000 t-CO2 (1,466 cases). The most used technology was upgrading of boilers, followed by upgrading of air-conditioners26.

Figure 28: Number and Amount of Certified Domestic Credits by Region27

(4) J-Credit Scheme The J-Credit Scheme is the J-VER Scheme and Domestic Credit Scheme combined to seek further progress. It has been in operation since April 2013, administered by MOE, the Ministry of Trade, Economy and Industry, and the Ministry of Agriculture, Forestry and Fisheries.

24 List of Methodologies of Domestic Credit Scheme (http://jcdm.jp/process/methodology.html) (in Japanese) 25 32nd Domestic Credit Certification Committee, Reference Materials (http://jcdm.jp/committee/data/siryou-kouhyou32_v2.pdf) (in Japanese) 26 32nd Domestic Credit Certification Committee, Reference Materials 3 (http://jcdm.jp/committee/data/haifu_32/04_v2.pdf) (in Japanese) 27 Taken from 32nd Domestic Credit Certification Committee (http://jcdm.jp/committee/data/haifu_32/03_v2.pdf) (in Japanese)

TOTAL

National/regional: 67

Okinawa: 30 Kyushu: 283

Shikoku: 165

Hokkaido: 258

Chugoku: 196

Tohoku: 239

Kanto: 405 Chubu: 517

Kinki: 272

24

In establishing a new crediting scheme, the Ministry of the Environment (MOE); the Ministry of Economy, Trade and Industry (METI); and the Ministry of Agriculture, Forestry and Fisheries (MAFF) jointly set up a “Study Group for a New Crediting Scheme”. It held 3 meetings from April 16, 2012 to June 18, 2012. According to the report titled “Direction of the New Crediting Scheme” published on August 2, 2012 by the three ministries, a new mechanism should adopt merits of both the Domestic Credit Scheme and the J-VER Scheme to complement each other, and integrate them into a new mechanism, in which various entities can participate. The contents, which are taken from the Domestic Credit Scheme and applied to the new mechanism, include simple measurement and application forms to make the application process easier; and those passed on from the J-VER Scheme include a highly reliable MRV (Measurement, Report, and Verification) that complies with ISO, including an idea that no limits for participants should be imposed, etc. [Management Structure of the Scheme] The three ministries of MOE, METI and MAFF administer the scheme. In order to carry out efficient system management and credit certification, 2 committees for operation and certification have been set up. A secretariat is also established to support administrators and both committees of the scheme. [Methodology28] In this scheme, 58 methodologies for 5 areas (energy saving, etc.: 38, renewable energies: 9, industrial processes: 5, agriculture: 3, waste: 1, forest: 2) have been announced as of the end of January 2014. [Number and Amount of Certified Credits] As of the end of January 2014, the number of registered projects is 200, and the amount of credits certified is 6,533t-CO229.

(5) Joint Crediting Mechanism The Joint Crediting Mechanism (JCM) aims at contributing to the world in regard to emission reduction/sinking. Having this aim, Japan transfers technologies and establishes systems to implement measures in developing countries with flexibility and speed taking their conditions into consideration. Through transfer and spread of GHG reduction technologies, products, systems services, and infrastructure in developing countries, this mechanism quantitatively assesses Japan’s contribution for reduced/absorbed GHE emissions in order to use that data to achieve Japan’s reduction targets.

*MRV：Measurement, Reporting, Verification

Figure 29: Image of the Joint Crediting Mechanism (Source: New Mechanisms Information Platform)

In January 2013, the Japanese and Mongolian governments signed bilateral agreement for Joint Crediting Mechanism30. As of the end of January, 2014, Japan has agreed on JCM implementation with a total of 10 countries31 (Bangladesh, Ethiopia, Kenya, Maldives, Viet Nam, Laos, Indonesia, Costa Rica, and Palau). Japan is

28 J-Credit Scheme: List of Methodologies (http://japancredit.go,jp/menu04/methodology.html) (in Japanese) 29 The results of 3rd J-Credit Scheme Certification Committee (http://japancredit.go.jp/committee_holding/data/summary_03.pdf) (in Japanese)

The number of registered projects includes those transferred from J-VER scheme and from domestic credit scheme. 30 Press release, Ministry of the Environment (http://www.env.go.jp/press/press.php?serial=16174) (in Japanese)

Press release, Ministry of Economy, Trade and Industry (http://www.meti.go.jp/press/2012/01/20130108002/20130108002-1.pdf) (in Japanese) 31 New Mechanism Information Platform (http://www.mmechanisms.org/e/index.html)

25

also pursuing bilateral talks with other interested countries, hoping that this new mechanism will take root and grow to contribute to the reduction of carbon emissions for the whole world.

26

Chapter 3 Global Carbon Offset Trends This chapter surveys the general situation of global carbon offset, the measures against global warming by nation, and carbon offset related schemes. Note that the descriptions in this chapter, unless otherwise indicated in footnotes, are primarily based on "Mapping Carbon Pricing Initiatives"32, information from Bloomberg New Energy Finance33, and "Maneuvering the Mosaic: State of the Voluntary Carbon Markets 2013"34 from Ecosystem Marketplace.

1. World Carbon Market Overview (1) Overall Trends in the Carbon Market

The trade volume in the overall carbon credit market in 2012 was 10.7 billion t-CO2, a 26% increase over 2011, in which the previous highest volume was recorded. The cause of this trade volume increase is attributed to growth in trade to issue and acquire UN credits at the end of the year and an increase in trade riding on record low prices (about €0.4/t-CO2) as well as the impact of active use of EU-ETS auctioning and the free allocation control mechanism of the European Commission. Although the trade volume increased, the trade value for the entire carbon credit market in 2012 dropped

dramatically (36%) from 2011 and was €61 billion (approx.US$82.9 billion). The average credit price for the entire carbon credit market was €5.7 (approx. US$7.80)/t-CO2, a 50% decrease from the previous year, and the crash of UN credit prices was a major factor in the drop.

(2) Trends in Voluntary Markets The trends in the 2012 voluntary market will be viewed from the following four points: overall trade volume, total trade value, share of trade volume of each VER system, and trade trends. [Overall Trade Volume] The overall trade volume for credits in the voluntary market in 2012 was 101 million t-CO2, a 4% increase over 2011.

Renewable energy projects accounted for the greatest share (34%) in the VER marketplace, followed closely by forestry/land use (32%). As in 2001, wind-power generation accounted for the largest percentage in renewable energy, but the trade volume suffered a significant decrease of 35% from the previous year. However, demand for forestry/land use increased.

32World Bank "Mapping Carbon Pricing Initiatives Development and Prospect 2013"

(https://www.thepmr.org/system/files/documents/Mapping%20Carbon%20Pricing%20Initiatives-%20Developments%20and%20Prospects.pdf) 33Bloomberg New Energy Finance (http://about.bnef.com/) 34Ecosystem Marketplace, Maneuvering the Mosaic: State of the voluntary Carbon Markets 2013

(http://www.forest-trends.org/documents/files/doc_3164.pdf)

27

Figure 30: Changes in Overall Trade Volume of Credits in the Voluntary Market

[Total Trade Value]

The total trade value for credits in the voluntary market in 2012 was $523 million, an 11% decrease from 2011.

31: Changes in Total Trade Value of Credits in the Voluntary Market

million t-CO2

millon USD

28

[Average Trade Price of Credits] The average price for credits traded on the voluntary market in 2012 was $5.90/t-CO2, a slight decrease from the $6.20/t-CO2 in 2011. The average credit price in the VER systems varied greatly from the $0.10/t-CO2 for CCX credits to the $85/t-CO2 for J-VER credits.

Figure 32: Average Credit Prices by VER Systems (2012)

[Share of Trade Volume of Each VER System] The Verified Carbon Standard (VCS) system had the most activity among the VER systems with 43 million t-CO2 (those VCS credits with co-benefit assessment assigned to VCS (VCS+CCBS) was 12.5 million t-CO2), taking the top position for six consecutive years. Gold Standard had the second greatest share with 10 million t-CO2 of activity for the first time, led by demand for low-emissions cooking stoves and clean water projects.

Figure 33: Trade Volume Share of VER Systems by Independent Third Party (2012)35

[Trade Trends] In 2012, 90% of traded credits were purchased by the private sector. Multinational corporations accounted for 36% of purchasers while small to medium sized businesses accounted for 31%. The major reason for

35VER systems restricted to in-country, such as J-VER and K-VER, are excluded.

29

corporations to become involved with carbon offset was, as in the past, "to fulfill CSR," but in 2012, many corporations stated that the purpose of becoming involved in carbon offset was "to display leadership in the countermeasures for climate change in each industry." In addition, in the private sector, the trend to become involved in carbon offset arose in order to promote resilience to climate change among sub-suppliers. Looking at trends in Europe and the United States, where most primary credit purchasers reside, those in Europe tended to prefer credits created in developing nations while the United States tended to prefer credits created from domestic projects.

2. Global Carbon Offset Related Schemes

The following describes global warming measures occurring in major countries and regions of the world and the status related to global warmingmeasures that use market mechanisms.

(1) Overview of Global Warming Measures and Legal Systems

[European Union] Europe is a key player driving the carbon market. The European Union held a nearly 50% share of the 2012 voluntary carbon market. The EU utilizes EU-ETS and targets a reduction of GHG emissions of 40% by 2030 and 80% by 2050 from 1990 levels.

European Union Emission Trading System (EU-ETS) EU-ETS is managed by the European Commission since 2005 and is the world's largest emissions trade market for the reduction of GHG. It utilizes the cap and trade system, and currently has 28 participant nations (25 EU nations, Iceland, Liechtenstein, and Norway). The second compliance period of the EU-ETS started in 2008 and ended in 2012. During the second compliance period, emission allowances were cut by about 6.5% from the first compliance period (2005 to 2007). The overall trade volume for the EU-ETS market increased 12% over the previous year to 7.72 billion t-CO2, but the total trade value dropped by 31% from the previous year to €54 billion (approx. US$73.3 billion). The EUA annual average price decreased 42% from the previous year to €7 (approx. US$9.50)/t-CO2, and the CER/ERU combined annual average price plummeted 36% to US$5.70/t-CO2. Since this decline was caused by an oversupply of emission credits, the European Commission, in December 2013, adopted a proposal to retain emissions credits with a view to increasing prices. In addition, the European Commission held consultation meetings with stakeholders in March and April of 2013 to discuss the radical reforms to the EU-ETS proposed by the Directorate General for Climate Change of the European Commission in November 2012. In January 2014, a proposal was made for establishing a market stability reserve and tightening the cap in 2021 or later.36

The United Kingdom The United Kingdom was the second largest purchaser of credits, after the United States, in the voluntary carbon market for 2012. In addition, an investment of US$81 million into the CER market, which had suffered from a lack of new investments due to low prices, contributed to support developing nations and revitalize the market.37 In November 2008, the Climate Change Act 2008 was enacted to establish a long-term vision of climate change measures. A reduction in CO2 emissions by 80% from 1990 levels is targeted by 2050. In addition, the Act established a “Carbon Budget” and sets GHG emissions for 3 periods of 5 years38.Announced in 2010, the Green Deal adopted a mechanism to reduce emissions from homes and office buildings and conserve

36European Commission(http://ec.europa.eu/clima/news/articles/news_2014012201_en.htm) 37Bloomberg New Energy Finance dated 12/9/2013 38“Climate Change Act”, British Embassy, Tokyo

(http://ukinjapan.fco.gov.uk/ja/uk-activities/energy-environment/climate-change/uk-climate-cha

30

energy by improving energy efficiency through improvements in building insulation39. In 2012, the UK Green Investment Bank was established as the world’s first investment bank dedicated to the development of a green economy. In April 2013, a Carbon Price Floor was started, which sets the minimum price for emissions credits that thermal power generation companies are required to purchase, and efforts to make the power sector low-carbon continues to be promoted. In addition, the Carbon Reduction Commitment (CRC) was established in April 2010. The CRC is a cap-and-trade type emissions trading system that applies to large non-energy-intensive commercial and public sectors that are not covered by existing policies, such as EU-ETS, and that covers the equivalent of 10% of total CO2 emissions in the UK.40

Switzerland In May 2011, a decision was made to gradually phase out nuclear power, which accounted for 40% of the domestic power supply, and Energy Strategy 2050 set a goal of reducing emissions by 20% or more by 2020. A carbon dioxide emissions tax for hydrocarbon fuel was introduced in 2008. The Swiss Revised CO2 Act enacted in January 2013 included, in addition to programs to improve buildings, linkages among emissions trading systems, carbon tax and domestic carbon offsets. In the Swiss ETS, the first phase was set for 2008-2012 and the second phase for 2013-2020. The Swiss ETS allows use of CER and ERU, but credits created domestically cannot be used. In preparation for linking with the EU-ETS, the Swiss ETS has designed mechanisms, such as adapting the legal system and the benchmarking approach for free allocation, so as to have higher compatibility with the EU-ETS. In preparation for the linking, negotiations with the EU started in 2011, and in October 2012, negotiations included issues on the content to be included in the link agreement and technical issues related to the registry. At the time, the timetable for negotiations called for an end in 201341, but negotiations were postponed and a fifth round of negotiations is planned for March 201442. [The United States] The United States is the world leader in credit supplying and purchasing. Although President Obama sought to introduce a national cap and trade system, this course was abandoned in 2010. After that, the United States Environmental Protection Agency was instructed to set emissions regulations for CO2 from power generating facilities, and announced a limit for new power plants in September 2013. The US has displayed a position of leadership in the area of climate change with the announcement of President Obama's Climate Action Plan in July 2013, and the proclamation of the Executive Order-Preparing the United States for the Impact of Climate Change in November.

State of California The California cap & trade program, which started in 2012, set 2013-2014 as the first compliance period. The cap for 2013 was 16,280 t-CO2 (equivalent to 35% of the total emissions for California), and the cap for 2014 is expected to be tightened by 2%. In September 2013, the California Air Resource Board (CARB) issued the first compliance credit, and by the end of January 2014, approximately 5 million t-CO2, including early action credits, have been issued. Of the four types of approved projects (forest projects, urban forest projects, livestock projects, and ozone depleting substances projects), credits created from ozone depleting substances projects were the most numerous, accounting for 65% of the total. In April 2013, regulations to the effect that the linkage of the cap and trade systems for California and Quebec, Canada, was to begin in January of the following year were approved43, and the linkage became official the same day44.

39 The UK Government “The Green Deal” (http://www.gov.up/government/news/one-year-to-green-deal-energy-act-becomes-law) 40Emissions Trading Insight (http://www.ets-japan.jp/ovs/ovs_4_2.html) 41 Ministry of the Environment (http://www.env.go.jp/earth/ondanka/det/os-info/mats/euets20130213.pdf) 42 The Swiss Government (http://www.bafu.admin.ch/dokumentation/medieninformation/00962/index.html?lang=en&msg-id=51350) 43Air Resource Board New Release ( http://www.arb.ca.gov/newsrel/newsrelease.php?id=300) 44Air Resource Board Facts about the Linked Cap-and-Trade Programs(http://www.arb.ca.gov/cc/capandtrade/linkage/linkage_fact_sheet.pdf)

31

Regional Greenhouse Gas Initiative(RGGI) Beginning in January 2009, the Regional Greenhouse Gas Initiative (RGGI) began a cap and trade program for the power industry, and currently nine states are participating. The first compliance period ended in 2011, and the second compliance period from 2012 to 2014 is now in effect. In January 2014, it was announced that the cap for 2014 would be tightened by 45% from the previous year to 91 million t-CO2, and the trading price immediately increased 3%. Furthermore, the cap is planned to be tightened by 2.5% per year from 2015. Currently, five additional states are deliberating joining RGGI.

New York City45 New York City set a goal of reducing emissions by 30% from 2005 levels by 2030, and achieved a 16.1% reduction from 2005 levels in 2011. The largest contributor to the reduction was power supply (multiple factors including switching from coal to natural gas and updating aging facilities). For calculations,geopolitical boundaries are set, and scope 1 and 2 emissions based on production rather than consumption are calculated. Currently, emissions from transboundary transportation (aviation in particular) are not included, but inclusion within the next period’s inventory is being considered.

[Canada] In Canada, there is a trend aiming for voluntary GHG emissions calculation/reporting, and carbon neutrality; and at the state level, establishment and operation of regulations in regard to GHG emissions reduction obligations through market mechanisms is being advanced.

GHG CleanStartTM Registry46 Under the scheme called the GHG CleanStartTM Registry that was launched in 2009, businesses are able to publicly announce their emissions reductions efforts and claim carbon neutrality. The Canadian Standards Association (CSA) acts as secretariat. This scheme, in accordance with ISO14064, assists businesses with calculating and reporting GHG emissions and with setting reduction targets; and requires registration of GHG emissions information in a public registry, third-party audits, and management or invalidation by serial number.

Alberta Alberta, which has the highest emissions, implemented a mandatory Specified Gas Emitters Regulation based on base unit targets in 2007. The obligation is recognized as being met through trading of Emissions Performance Credits, which are generated by exceeding reduction amounts, and purchasing offset credits.

Quebec In the cap and trade system of Quebec, during the first compliance period (two years from 2013 to 2014), the electricity generation and industrial sector companies with emissions of over 25,000 t-CO2 annually were targeted. The cap was set at 23.2 million tons t-CO2 (covering about 30% of the total emissions for Quebec). For the second compliance period (2015-2017), the targeted industries are to be expanded, and the cap is planned to be set at 65.3 million tons t-CO2 to cover about 85% of the total emissions for Quebec. The credits used by the system are issued only for domestic projects. There are three recognized projects for which credits are issued, and all three are methane destruction systems. The minimum bidding price is set at CN$10/t-CO2, and at the inaugural auction held in December 2013, purchasing and selling was established at a minimum bidding price of CN$10.75/t-CO2. The minimum bidding price will increase 5% per year.

British Columbia47 In 2008, British Columbia passed the Greenhouse Gas Reduction (Cap and Trade) Act, which was the legal foundation toward entry into the ETS. The Greenhouse Gas Reduction Targets Act of 2007 committed to a

45Based on information on PlaNYC website (http://www.nyc.gov/html/planyc2030/html/home/home.shtml) and survey interviews to the local

government by The Institute of Overseas Environmental Cooperation Center 46 GHG CleanStartTM Registry(http://www.csaregistries.ca/cleanstart/index_e.cfm) 47 Based on information on website of Government of British Columbia (http://www.env.gov.bc.ca/cas/mitigation/carbon_neutral.html) and survey

interviews by The Overseas Environmental Cooperation Center

32

reduction of 33% below 2007 levels by 2020 and 80% below the same by 2050. The cap and trade system was scheduled to start at the beginning of 2012, but it has yet to be implemented as of the end of January 2014.

In addition, from 2010, the Carbon Neutral Government program began, and all public organizations (including government offices) were obligated to achieve carbon neutrality. Credits used for carbon neutrality were procured by Pacific Carbon Trust (PCT), a public corporation, from the province in general, and 750-800 thousand t-CO2 are purchased each year at a unit price of $25/t-CO2 using taxes. Companies in British Columbia are subject to a carbon tax, but corporate burden was reduced by lowering corporate taxes at the same time the carbon tax was introduced, and a mechanism was constructed so that a profit could be made by selling credits corporations obtained through reduction activities to the PCT.

[Oceania, Asia, and Other Regions] Australia

Australia implemented a carbon pricing system in July 2012. Plans call for switching over to a cap & trade system from July 2015 and adjustments are being made to link that system with the EU-ETS and the New Zealand Emissions Trading Scheme (NZ-ETS). However, the new government inaugurated in September 2013 introduced legislation to repeal the carbon tax.

New Zealand New Zealand introduced NZ-ETS in 2008. In November 2012, the law was amended and the changes included continuation of the fixed price option (measure to allow purchase of New Zealand Units (NZU) for NZ$25/NZU from the government) and of the 1 for 2 option (measure to allow half for repayment obligations), extension of the mandatory compliance period for the agricultural industry that was set for 2015, and the exclusion of synthetic gas imported cars or other products from the targeted industries. The average price for emissions allowances, which was NZ$16.52 in 2011, plummeted to NZ$5.57 in 2012, and dropped 50% more in 2013. The repayment amount in 2012 increased by 64.6% over 2011 to 26.93 million t-CO2, with ERU being used for 70%. To prevent market uncertainty caused by not taking on the second commitment period for the Kyoto Protocol, New Zealand is expected to prohibit the use of some United Nations credits from about the middle of 201548.

China China achieved its goal of 20% emissions reduction in energy consumption per GDP set in the 11th Five-year Plan (2006-2010), and the 12th Five-year Plan (2011-2015), which began in 2011, also sets a target for reduction of energy consumption (16% decrease from 2010 levels). In addition, targets were also given for increasing forested areas and for reducing CO2 emissions per GDP (40-45% reduction from 2005 level by 2020), which was committed to under the UNFCCC.

In October 2011, the National Development and Reform Commission (NDRC) announced the implementation of ETS pilot projects in two provinces and five cities: Beijing, Tianjin, Shanghai, Chongquing, Guangdong, Hubei, and Shenzhen. The emissions trading system started in Shenzhen in June 2013, then in Shanghai and Beijing in November, and in Guangdong and Tianjin in December. Plans call for Hubei to start in the first quarter of 201449. However, plans for starting in Chongquing have not been updated. When the system is adopted in all of these two provinces and five cities, over 20% of the GHG emissions within China will be covered.50 Only emissions credits and Chinese Certified Emission Reductions (CCERs) issued based on the national VER standard are traded on the market.

Shenzhen started trading in June with a price of 23 yuan/t-CO2, but in September the price soared to double

the EUA price (70 yuan ≒ US$11.50/t-CO2) due to active buying by individual investors. In November, a draft of market intervention measures was released by authorities to prevent sudden price fluctuations. In the

48 Bloomberg New Energy Finance dated 12/6/2013 49 Reuters (http://jp.reuters.com/article/businessNews/idJPTJEA0102520140102) 50Ministry of the Environment,Chinese Interviews (http://www.env.go.jp/earth/er-potential/04/mat03.pdf)

33

Shanghai market, which was the second market started, trading started at 27 yuan (US$4.43)/t-CO2, Beijing, which was the third market to start, started at 50 yuan (US$8.20)/t-CO2, Guangdong, which stipulates a

minimum bidding price (60 yuan ≒ US$9.88), started at around the stipulated price, and Tianjin started at 26-28 yuan (US$4.28-4.61)/t-CO2.

According the NDRC, introduction of a national system is planned by 2016. Guangdong, which is to have the second largest market share in the world, openly faces linking with the EU-ETS and US carbon market in the future.

In September 2010, the Ministry of Environmental Protection, targeting a low carbon economy and promoting energy conservation and greenhouse gas emissions reduction, established an authentication scheme for low carbon standards for four products: washing machines, refrigerators, copiers, and digital printers. To obtain authentication, compliance with the "China Environmental Labeling Product Authentication Standard" enacted by the Ministry in 2008 and the "International Energy Star Program" is required.

South Korea51 On January 28, 2014, the Ministry of Environment of South Korea announced the establishment of a Greenhouse Gas Emissions Reduction Roadmap that included a reduction of 233 million t-CO2 or 30% of the 2020 estimated greenhouse gas emissions of 776 million t-CO252. Based on the Basic Law on Low Carbon and Green Growth, enacted in April 2010, the GHG and Energy Target Management System (TMS) that implements GHG emissions reduction targets for businesses came into operation in 2011, ahead of the emissions trading scheme. In May 2012, the "Act for the Allocation and Trading of GHG Emissions Allowances" and then in November of the same year the "Enforcement Decree of the Allocation and Trading of GHG Emissions Allowances" were enacted. Model projects were implemented in 2011 and 2012 before the full-scale startup in January 2015. With the 2012 project, virtual currency was provided as a trading means and the MRV allowed the TMS standards to be used without modification in order to reduce the burden on corporations53. The third model project will have been implemented by June 201454.

South Korea launched K-VER in 2007, the Carbon Footprint Labeling system55 in 2009, and the Low-carbon Product Certification system in October 2011. The Low-carbon Product Certification system bestows certification on products with carbon footprints that meet GHG reduction targets, and all products and services, excluding a few products such as agricultural products, are eligible.56

Kazakhstan In December 2011, an emissions trading scheme (KAZ ETS) was established through revision of the Ecological Code. The first pilot phase was implemented in 2013, and the second phase is being implemented from 2014 to 2020. The cap for the first phase was 147 million t-CO2 (with a separate reserve of 20.6 million t-CO2), and the cap will decrease linearly for the second phase. Only the two types of credits created domestically (Primary Drive and converted domestic credits) can be used, and it is yet to be determined whether United Nations credits will be used. Primary Drive refers to credits obtained by directly investing in credit generating projects and there is no limit on their use. Converted domestic credits also have no explicit limit on usage, but they cannot be used if there is no reserve. Linkage to the EU-ETS and other schemes is being considered for the future.

[Other Regions] Some developing nations participate in the Partnership for Market Readiness (PMR) established by the World Bank and are working to build capacity to implement global warming measures that use market

51Ministry of the Environment, South Korea Interviews (http://www.env.go.jp/earth/er-potential/05/mat02.pdf) 52Yonhap News (http://japanese.yonhapnews.co.kr/pgm/9810000000.html?cid=AJP20140127003000882) 53Seoul Yonhap News (http://www.wowkorea.jp/news/korea/2012/0506/10097294.html) 54Asia Market Review

(http://t21.nikkei.co.jp/g3/ATCD017.do?keyPdf=AMRKDBAMR20130615-10-11%5CAMR%5C10%5C11%5C%5C%5C2969%5CY%5C%5C20130615-10-11%5CPDF%5C20130615%5Cda7e6b8f&analysisIdentifer=&analysisPrevActionId=CMNUF10)

55Korea Environmental Industry and Technology Institute (http://www.ftis.org.tw/active/download/1_6.pdf) 56 International Workshop on LCA Policy Use(http://www.meti.go.jp/committee/kenkyukai/sangi/lca/pdf/001_06_01j.pdf)

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mechanisms (16 countries as of the end of January 2014). In particular, the Latin American nations of Chile, Costa Rica, Brazil, and Mexico are very active. Brazil is considering introducing ETS not only at the national level but also at the regional for Rio de Janeiro57. In addition, Indonesia is working toward establishing a voluntary carbon trading scheme that can link with other countries.

Some Asian countries are required to submit the Nationally Appropriate Mitigation Actions (NAMAs) to the secretariat of the UNFCCC. In the development of appropriate mitigation actions, interest is growing in efforts that generate credits such as CDM or REDD projects, domestic VER schemes, and the Joint Crediting Mechanism (JCM) in cooperation with developed countries.

(2) Voluntary Carbon Offset Schemes With improved corporate CSR and higher overall social environmental awareness, various carbon offset schemes are being established globally, as they are in Japan. Various types of certification exist, from schemes that exist as public frameworks to ensure validity and transparency of the carbon offset, to ones by which developed standards and certification bodies perform unique services. Independent global carbon offset related schemes are introduced below.

PAS206058 The UK’s PAS2060 is an international standard issued by the British Standard Institute (BSI) in April 2010, which specifies requirements related to achieving and proving carbon neutrality. Subject to this are activities, events, and manufactured products of practitioners (including organizations, governments, groups, and individuals). Consistent methods and requirements are specified for calculating carbon footprints, formulating management plans, and reducing emissions. The following can be used for offset: CER generated from carbon reduction/absorption projects in developing countries through CDM, or credits created from Joint Implementation (JI), Verified Carbon Standard (VCS, P37), or similar schemes. Carbon neutrality certification using PAS2060 is performed by Carbon Clear, an international offset provider, or others entities.

National Carbon Offset Standard (NCOS)59 Australia’s National Carbon Offset Standard is a carbon neutral accreditation scheme introduced, from the viewpoint of consumer protection, by the Australian government in July 2010. The scheme targets organizations, products, services, and events. The scheme specifies carbon footprint calculations, reduction measures, third party verification, and carbon offset implementation. Calculation standards comply with ISO 14064, ISO 14040, GHG Protocol, and the National Greenhouse and Energy Reporting Act 2007. Australian Carbon Credit Units (ACCUs), credits originating from the Greenhouse Friendly Program, CERs, ERUs, RMUs, VERs issued by Gold Standard (GS, P38), VCUs and others can be used for offset. As of the end of January 2014, 33 organizations have been accredited60.

carboNZero certification61 New Zealand's carboNZero certification is the carbon neutral certification scheme for the carboNZero programme established in 2001 by a Crown Research Institute of the New Zealand government to provide the means to contribute to of GHG and CFP reduction. Landcare Research New Zealand Limited (a government-owned institute) acts as the secretariat. The programme specifies calculation, management, reduction, and third party verification. Calculation tools in compliance with GHG Protocol and ISO14064 are provided for calculation, and credits created from GS, VCS, CDM, JI, and other such schemes are used for carbon offset. As of the end of January 2014, 66 organizations, 5 organizations and products, 7 organizations

57Although Brazil also considered regional ETS for Sao Paulo, this has been extended until February 2014.

(THOMSON REUTERS article dated 2014/2/13 http://www.pointcarbon.com/news/reutersnews/1.4099173) 58BSI (http://www.bsigroup.com/en-GB/) 59National Carbon Offset Standard(http://www.climatechange.gov.au/ncos) 60 National Carbon Offset Certification- accredited business

(http://www.climatechange.gov.au/climate-change/carbon-neutral/carbon-neutral-program/accredited-businesses ) 61carboNZero certification (http://www.carbonzero.co.nz/)

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and services, 6 products, and 35 events have been certified, for a total of 119 certifications62. The carboNZero programme also provides CEMARS® certification for emissions calculation and management for organizations, products, and services63. As with the carboNZero programme, it requires reduction and third party verification, and as of January 2014, a total of 154 companies in 4 countries have been certified64.

CarbonFree® Product Certification65 The US's CarbonFree® Product Certification is a carbon neutral certification program for products that is operated by the Carbonfund.org Foundation, a nonprofit organization. The program specifies CFP determination by performing a Life Cycle Assessment (LCA)66 and reduction planning. LCA is implemented based on GHG Protocol, PAS2050, and ISO14044. Credits created from schemes such as CDM, as stipulated by the Carbonfund. org's quality assurance protocol; American Carbon Registry (ACR, P38); Climate Action Reserve (CAR, P38); Climate, Community and Biodiversity Project Design Standards (CCBS, P39); GS; and VCS are used for offset. The website also provides LCA calculating tools. As of the end of January 2014, a total of 115 products have been certified.

Climate Neutral Guaranteed67 Holland’s Climate Neutral Guaranteed is a carbon neutral certification program operated by the Climate Neutral Group. The program targets events, transportation, products, organizations, and services. The program specifies setting of boundaries, development of scope, calculating carbon footprints, efforts to reduce emissions, and offset. Calculations are implemented based on the GHG Protocol and ISO14064. Credits created from VCS and GS are used for offset. The website provides CO2 calculation tools for organizations and events.

Climate Label “CO2 Neutral”68 The Swissclimate label “CO2 Neutral” is a carbon neutral certification program operated by Swiss Climate AG, a Swiss environmental consulting company. The program specifies carbon footprint calculation, credits, and third party verification. Credits created from GS are used for offset.

(3) City’s GHG Emissions Calculation Efforts Cities, through their activities, account for two-thirds of global energy consumption, and are the source of over 70% of total CO2 emissions. Their existence may have a stronger impact on climate change in the future due to increased economic activity and concentrated populations in newly developed countries69. Since cities can make decisions in line with circumstances faster than national or state governments, cities have taken the leadership in recent years to create mechanisms to evaluate case studies for bottom-up activities70. In addition, in September 2012, the Knowledge Centre on Cities and Climate Change (K4C) was established by the United Nations Environment Programme (UNEP), Cities Alliance, the United Nations Human Settlements Programme (UN-Habitat), and the World Bank71; and in January 2014, former New York City mayor Michael Bloomberg, who was committed to climate change measures, was appointed as UN Special Envoy on Cities and Climate Change for the United Nations Human Settlements Programme (UN-Habitat), and climate change measures focusing on cities is becoming energetic. Standards and platforms related to calculating urban GHG emissions are introduced below.

62carboNZero certified organisations, products and services (http://www.carbonzero.co.nz/members/cz_organisations_certified.asp) carboNZero

certified events (http://www.carbonzero.co.nz/members/events_certified.asp) The number of certified events is the total from 2007. 63CEMARS® certification (http://www.carbonzero.co.nz/options/cemars.asp) 64CEMARS® certified organisations (http://www.carbonzero.co.nz/cemars/cemarscertified.asp) 65The Carbonfund.org (http://carbonfund.org/) 66Method to assess the impact on the environment from the manufacture, use, and disposal of a product by measuring resource consumption and

emissions volumes 67Climate Neutral Group (http://climateneutralgroup.com/en/) 68Swiss Climate AG (http://swissclimate.ch/e/index.php) 69C40 "Why Cities?" (http://www.c40.org/why_cities) 70Examples include the US Sustainability Tools for Assessing and Rating (STAR) Communities program (http://www.starcommunities.org/) and the

Resilient Communities for America (RC4A) (http://www.resilientamerica.org/) that is a campaign in which regional public figures pledge 3 actions to strengthen resilience to climate change in the region.

71Knowledge Centre on Cities and Climate Change (http://www.citiesandclimatechange.org/)

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GLOBAL PROTOCOL FOR COMMUNITY-SCALE GREENHOUSE GAS EMISSION (GPC)72

The three organizations, C40 Cities Climate Leadership Group (C40, P36), World Resources Institute (WRI), and Local Governments for Sustainability (ICLIE, P36), became involved in the development of a protocol for calculating total emissions in cities, and the GPC Pilot Version 1.0 was released in 2012 and the Pilot Project was implemented in 2013. A major feature of the GPC is that it incorporates the framework of the scope of the GHG Protocol. Emission reporting more closely reflecting reality is made possible by adopting the scope and reporting on direct and indirect emissions. A final version of Pilot Version is scheduled to be announced during 2014 after evaluation of the results of the Pilot Project. A final version of the expanded version is scheduled to be issued in 2015.

PAS 207073 PAS 2070, issued by BSI Standard Limited, specifies the requirements relating to assessing city GHG emissions. Both direct GHG emissions (emissions from sources within city boundaries) and indirect GHG emissions (emissions from products and services produced outside of city boundaries but used or consumed within city boundaries) are targeted for assessment. The Direct Plus Supply Chain (DPSC) method and Consumption Base (CB) method are used for calculation. London is collaborating as a case study.

Climate Positive Development Program (CDPD)74 The CPDP is promoted through cooperation of the Clinton Climate Initiative (CCI) and C40 in order to promote the response to rapid urbanization and climate change. Participants in the program target Climate Positive Development that is beyond carbon neutrality by advancing through four stages using Climate Positive Credits. To advance one stage, a review is performed by C40. As of January 2014, 18 projects in 10 countries were underway.

CDP Cities75 CDP Cities is a platform for local governments to disclose information about climate change and is operated by CDP. A pilot project was implemented in the US in 2008, and the platform launched globally in 2009. Although no specific calculation standards are provided, the calculation standards used must be announced. There are five question fields: regulation functionality, risk and adaptation, opportunity, emissions, and strategy. In 2013, reports from 110 cities were received.

ICLEI76 ICLEI is a United Nations organization comprising local governments that have made a commitment to sustainable development. It was established in 1990 with the assistance of UNEP and other organizations. As of the end of January 2014, participants totaled 1012 cities in 86 countries, including 12 megacities such as Tokyo and New York. ICLEI provides technical consultation and a space to connect local governments targeting a sustainable city, provides information, and performs capacity building.

The C40 Cities Climate Leadership Group (C40)77 C40 was established in October 2005 as a group of climate leadership megacities involved in climate change measures. Recognizing the importance of the role of cities in climate change measures, C40 promotes emissions reduction and climate change measures. There are 63 participating cities including economically developed cities such as Tokyo, London, and New York as well as developing cities such as Addis Ababa (Ethiopia) and Bogota (Colombia). Not only are the activities of member cities showcased on the website, but a forum (C40 Exchange) where member cities can directly exchange information privately is provided. C40

72The Greenhouse Gas Protocol (http://www.ghgprotocol.org/city-accounting) 73PAS2070 (http://shop.bsigroup.com/Browse-By-Subject/Environmental-Management-and-Sustainability/PAS-2070-2013/) 74CDP(https://www.cdp.net/en-US/Programmes/Pages/cdp-cities.aspx) 75CDP(https://www.cdp.net/en-US/Programmes/Pages/cdp-cities.aspx) 76ICLEI (http://www.iclei.org/) 77C40 (http://www.c40.org/)

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also sponsors the City Climate Leadership Awards that recognize cities demonstrating leadership toward climate action and realizing a low carbon society.

(4) Global Carbon Credit Schemes

A large variety of VER credits are traded on the global voluntary market. The recent trend is to develop and operate, in various parts of the globe, VER systems of a type that limits project target areas to those in-country. Systems that fall under this are Japan's own J-VER scheme, South Korea's K-VER scheme, Brazil's Brasil Mata Viva Programme, and Thailand's T-VER scheme. This section introduces representative VER schemes that have a large share of trading on the voluntary market recently and other distinctive VER schemes. Tables that appear in this section should be read as follows.

Operation Whether the operating body for the VER scheme is based in the government or the private sector

Target Region Regions where the project can be implemented

Forest Absorption Methodology Whether absorption credits can be created

Co-benefit Requirement

Whether there is a requirement for a benefit other than GHG emissions reduction and absorption (such as sustainable development in developing nations) to be created by project implementation

Number of Registered Projects Volume of Credits Issued

Number of projects registered under the VER, and the volume of credits issued (number released as of the end of January 2014)

Verified Carbon Standard (VCS)78 The VCS was made public in 2006 by the Climate Group, IETA, World Economic Forum, and WBCSD with the goal of providing certification standards for projects and credits in the voluntary markets that have undergone quality assurance. Emissions that have been reduced or absorbed by implementing projects are issued as Verified Carbon Unit (VCU) credits. VCS has had the most trading volume in the voluntary markets over the past six years. Although a wide range of methodologies are provided covering 15 categories, 52% of trading in 2012 were credits from renewable energy methodologies. In 2012, a wetland restoration calculation methodology was announced. Although the VCS does not require a co-benefit assessment, 95% of the credits for forest absorption systems that have been traded up to the present (12 million t-CO2 of the 13 million t-CO2) have adopted CCBS to assess co-benefit. In November 2012, VCS and CCBS announced the provision for VCS+CCBS projects that reduce costs and simplify the process when acquiring certification in both simultaneously.

Operation Private sector

Target Region Global

Forest Absorption Methodology Yes

Co-benefit Requirement No

Number of Registered Projects Volume of Credits Issued

Number of Registered Projects: 1,145 Volume of Credits Issued: 143,859,013 t-CO279

Climate Action Reserve (CAR)80

78VCS (http://v-c-s.org/) 79VCS Project data base (http://www.vcsprojectdatabase.org/) 80Climate Action Reserve (http://www.climateactionreserve.org/)

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CAR, formerly the California Climate Action Reserve established by the State of California in 2001, is in operation since 2008. The program guarantees the environmental integrity of GHG reduction projects and focuses on creating and supporting financial and environmental value in the U.S. carbon market. Emissions that have been reduced or absorbed through project implementation are issued as Climate Reserve Tonnes (CRT) credits. As a VCS linked program, conversion from CRT to VCU credits can be done freely. In 2012, the program was recognized as a project registry for California's cap and trade program. In addition, the credits based on the four protocols of CAR are recognized as credits that can be used within the same program by going through a defined procedure.81

Operation Government

Target Region North America, Mexico

Forest Absorption Methodology Yes

Co-benefit Requirement No

Number of Registered Projects Volume of Credits Issued

Number of Registered Projects: 206 Volume of Credits Issued: 45,048,511 t-CO282

The Gold Standard (GS) for VERs83 The Gold Standard was founded by the World Wide Fund for Nature (WWF) in 2003 and is now run with support of more than 80 NGOs. This program is distinctive in that it not only assesses GHG emission reductions as credits, but also provides a mechanism to assess the level of contribution to sustainable development. Projects are recognized as GS-VER based on CDM methodologies or methodologies for GS-VER approved by GS. In addition, a mechanism is provided to disclose CDM or JI projects that meet GS standards in the GS-CDM/JI project database. In 2012, the Gold Standard acquired CarbonFix Standard, which specializes in forest-based projects, and formed a fair trade label partnership with the Forest Stewardship Council (FSC). In 2013, the Gold Standard asserted that it would continue to develop the Gold Standard Water, which is a scheme for certifying activities that produce benefits in water supply, use, and purification84.

Operation Private sector

Target Region Global

Forest Absorption Methodology Yes

Co-benefit Requirement Yes

Number of Registered Projects Volume of Credits Issued

Number of Registered Projects: 223 Volume of Credits Issued (including credits expected to be issued): 65 million t-CO2 or more85

American Carbon Registry (ACR)86 The American Carbon Registry was founded by the Environmental Resources Trust in 1996 as the first private VER system in the U.S. Credits issued from projects are traded as Emission Reduction Tons (ERT). ERT credits were recognized to be used in the California emissions trading scheme that started in January 2013.87Although its share of the market in the US decreased in 2012, the ACR protocols were being reviewed for use as new protocols for California's cap and trade scheme. In 2012, the Restoration of Degraded Deltaic Wetlands of the Mississippi Delta methodology was approved as a global deltaic restoration methodology. In addition, in partnership with the Beijing Environment Exchange, a Poverty Alleviation Assessment Criteria

81Climate Action Reserve : Compliance Offset Projects

(http://www.climateactionreserve.org/how/california-compliance-projects/compliance-offset-projects/) 82Reserve Fact (http://www.climateactionreserve.org/) 83The Gold Standard(http://www.cdmgoldstandard.org/) 84Gold Standard Water(http://www.cdmgoldstandard.org/our-activities/gold-standard-water) 85Gold Standard Project Pipeline (http://www.cdmgoldstandard.org/our-projects/project-pipeline) 86American Carbon Registry(http://americancarbonregistry.org/) 87 Air Resources Board News Release (http://www.arb.ca.gov/newsrel/newsrelease.php?id=376)

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Tool was developed to assess the impact of projects for forestry and land use under the Panda Standard (P40) on poverty alleviation.

Operation Private sector

Target Region Global

Forest Absorption Methodology Yes

Co-benefit Requirement No

Number of Registered ProjectsVolume of Credits Issued

Number of Registered Projects: 91 Volume of Credits Issued: 38,635,059 t-CO288

Climate, Community and Biodiversity Project Design Standards (CCBS)89 The CCBS is operated by the Climate, Community and Biodiversity Alliance, which was established in 2003. The goal of the CCBS is to support development and marketing of projects that contribute not only to GHG reductions but also to preservation of local communities and biodiversity. The CCBS are effective rules and guidelines for project design and standards as well as to assess environmental and social impacts of projects. Because CCBS does not quantify GHG emission reductions nor issue credits, when project participants want to have credits issued, a scheme that does issue credits (such as CDM or VCS) can be used in conjunction. In 2012, VCS-CCB Certification that allows for project approval and credit issuance in collaboration with VCS was established, which improved user convenience.

Operation Private sector

Target Region Global

Co-benefit Requirement Yes

Number of Registered Projects Volume of Credits Issued

Number of Verified Projects: 1790

Plan Vivo91

Plan Vivo was first developed by the Edinburgh Center for Carbon Management in the 1990s and is now being developed and operated by the Plan Vivo Foundation, a registered Scottish charity organization. Plan Vivo provides a framework for communities participating in a project to implement land-use projects that consider long-term benefits to climate change, livelihoods, and ecosystems. Projects can be implemented globally (developing nations). In 2012, Plan Vivo had a less than 1% share of the voluntary market, but new projects continue to increase, and it is expected that the number of registrations will increase as well.

Operation Private sector

Target Region Global

Forest Absorption Methodology Yes

Co-benefit Requirement Yes

Number of Registered Projects Volume of Credits Issued

Number of Registered Projects: 10 Volume of Credits Issued: 1,728,572 t-CO292

Carbon Farming Initiative (CFI)93 In August 2011, the CFI Act (Carbon Credits (Carbon Farming Initiative) 2011) was passed by the Australian Parliament as part of the government's Clean Energy Future Plan and is the first national scheme established by Australia for regulating creating and trading credits. Projects for which credits can be created are limited to

88ACR Statistics (http://americancarbonregistry.org/carbon-registry) 89CCBS (http://www.climate-standards.org/ccb-standards/) 90CCBA Verified Projects(http://www.climate-standards.org/category/projects/verified-projects/) 91Plan Vivo (http://www.planvivo.org/) 92Plan Vivo Project Register (http://www.planvivo.org/projects/registeredprojects/) 93Carbon Farming Initiative

(http://www.climatechange.gov.au/reducing-carbon/carbon-farming-initiative)

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agriculture, landfill, and forestry. Credits are issued as Australian carbon credit units (ACCUs), and though voluntary, can be used in the government carbon pricing mechanism. Trading in 2012 totaled 4 million t-CO2.

Operation Government

Target Region Australia

Forest Absorption Methodology Yes

Co-benefit Requirement Yes

Number of Registered Projects Volume of Credits Issued

Number of Registered Projects: 100 Volume of Credits Issued: 4,260,643 t-CO294

Panda Standard95

The Panda Standard Version1.0, announced in 2009, was co-developed by the China Beijing Environment Exchange, BlueNext, China Forestry Exchange, and Winrock, as China's first VER scheme, provides agriculture, forestry and land use (AFOLU) methodologies. The target region is limited to China, and use of both independent methodologies and recognized CDM methodologies are allowed. Currently, one project has been certified under an approved independent methodology.

Operation Government

Target Region China

Forest Absorption Methodology Yes

Co-benefit Requirement Yes

Number of Registered Projects Volume of Credits Issued

Number of Certified Projects: 196

W+ Standard97

In April 2013, Women Organizing for Change in Agriculture and Natural Resource Management (WOCAN) established the Women's Carbon Standard and publicly announced a name change at COP 19 (Warsaw) in November of the same year. The W+Standard is the first women-specific standard measuring social benefits and complements existing compliance and voluntary standards. Project design and implementation requirements are divided into six categories (income and assets, time, education and knowledge, leadership, food security, and health). Verification must be carried out by an inspector or inspecting organization recognized by WOCAN. As of the end of January 2014, no methodologies have been announced.

Operation Private sector

Target Region Global (Developing Nations)

Forest Absorption Methodology No

Co-benefit Requirement Yes

Number of Registered Projects Volume of Credits Issued

None

94Clean Energy Regulator

(http://www.cleanenergyregulator.gov.au/Carbon-Farming-Initiative/Register-of-Offsets-Projects/Pages/default.aspx) 95Panda Standard (http://www.pandastandard.org/index_cn.html) 96Panda Standard Registered Projects(http://www.pandastandard.org/projects/registered.html) 97W+ Standard (http://www.wplus.org/)

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Conclusion: The Outlook for Carbon Offset

We have looked at carbon offset activities, both domestic and international, and, in general, efforts in mitigating global warming using market mechanisms, such as carbon offset, are occurring in countries all over the globe and are expected to continue expanding.

In Japan, with the growing interest of consumers in the environment and regional revitalization, it is expected that involvement in various offset activities, from offset activities at the grass-roots level in regional festivals and events to proactive offset activities at the corporate level based on the Action Plan for Achieving a Low-Carbon Society of the Japan Federation of Economic Organizations, will continue beyond 2014. In addition, as described in Chapter 2, credits will become easier to use with the new J-credit scheme established in 2013, and use of credits created in-country are expected to continue to increase. To let consumers become more familiar with carbon offset, the Ministry of the Environment plans to strengthen communication with consumers, and continues to promote outreach efforts to further improve knowledge and understanding of carbon offset among consumers. Carbon offset is an opportunity for us to review our lifestyles in terms of global warming, and is an initiative that can help create an environmentally-friendly society through credits. We anticipate that carbon offset and carbon neutral initiatives will permeate society, and the circle of global warming measures by individuals, corporations, and local communities will continue to expand.