Will Japan become Asia's Pied-piper of green energy?

Japan will increase yen loans and investment in clean-energy technology to help cut greenhouse emissions in China and India, Asia's two economic powerhouses.

The Japan Bank for International Cooperation, the government's main overseas lender, said the investment is part of the $12 billion in loans and grants Prime Minister Yasuo Fukuda has promised to spend in five years to tackle climate change.

“We have to focus on major developing countries, and as a financer we are going to put more and more money into private-sector investment in these countries, not only by lending but also by equity financing,” Takashi Hongo, director-general of environment finance at JBIC, said in Tokyo. Hongo declined to say how much money the bank has set aside for the projects.

Japan, together with the World Bank, the U.S. and the U.K. plans to raise a $5.5 billion fund to help poor nations develop clean technology. Finding ways to convince developing countries to agree to emissions targets is likely to be a focus of the Group of Eight industrialized nations summit in Japan's northern island of Hokkaido next week.

“We are proposing to utilize multi-governmental funds as a tool to mitigate investment risks in developing countries and boost capital spending by private companies on clean projects,” Hongo said. The fund “should be used as a kind of catalyst to attract private money.”

Carbon Underground

Environment ministers of the Group of Eight rich nations in May also vowed to raise a pool of money to develop technologies that would help them meet a goal of halving global emissions blamed for global warming by 2050.

Hongo named carbon-capture-and-storage technology, in which carbon-dioxide is caught in the air and stored underground, as “the key” to reaching the emissions-cutting goal. G-8 energy ministers last month agreed to jointly develop carbon capture by 2020 and launch 20 large-scale demonstration projects by 2010.

In May, China and Japan said they would cooperate in using the technology to inject carbon dioxide into oil wells to both store the gas and to make the crude more viscous, so it can be pumped faster. The countries are expected to use the method at China's Daqing offshore oil field.
G-8 leaders want to reach an agreement when they meet next week that will lay the groundwork for a successor to the 1997 Kyoto treaty on climate change. About 180 nations are meeting through 2009 to negotiate the accord, due to be signed in Copenhagen next year.

The Kyoto agreement requires its 37 signatory nations to cut emissions by a combined 5.2 percent from 1990 levels by 2012. China and the U.S., the two biggest emitters, aren't subject to any targets. The U.S. rejected Kyoto as being unfair because it set no emission cuts for developing nations.

Will Japan's initiative be welcomed by developing countries with open arms?