Prime minister Yukio Hatoyama announced Japan’s mid-term goal at UN General Assembly in September 2009 that it would reduce greenhouse gas emissions by 25% from 1990 level by 2020 on the condition that all major emitters should involve in an equitable and effective international framework to combat climate change and agree to ambitious targets.

Subsequently at COP 15 in December 2009, parties failed to agree on a new framework that could replace the Kyoto Protocol of which first commitment period expires in 2012. However, the parties “takes note of” the Copenhagen Accord in which they agree to reinforce long-term cooperative actions to achieve peaking out of global and national emissions as soon as possible based on the scientific view that global temperature rise should be below 2 degrees Celsius. Thus, they continued to acknowledge the importance of continued efforts to reduce greenhouse gas emissions.

As part of domestic mitigation scheme, a national crediting scheme was launched in Japan already in 2008. With the support from big companies, Japan’s effort to promote mitigation activities on the part of small-and-medium sized companies has been scaled up as well. Participants of “the pilot emission trading scheme” acquired emission allowances for the first time in 2009 since its start in FY08, based on their pledged emission reduction targets and actual results.

On the other hand, the European Union started considering international accounting standards to accommodate the European emission trading scheme (EU-ETS) in its second phase. Alongside, EU moved forward with consideration of a new climate change reporting framework at Climate Disclosure Standards Board (CDSB), which may affect Japanese financial reporting standards as well.

This research committee engaged in proactive discussion as to how to treat home-grown credits financially based on past findings of the treatment of Kyoto credits and identified challenges to deal with the issue. In FY 2009, we organized the committee to explore more practical perspectives given the upfront transaction and financial procedures are now taking place. By looking at international trends, we tried to streamline various approaches in order to erase concerns about accounting/taxation and legal issues for business entities and enable them to concentrate on their business while curbing business-derived emissions. We also wish that this program will make a humble contribution to the promotion of Japan’s machinery industry.