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Initiatives for Promotion of the Bilateral Offset Credit Mechanism

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Project Feasibility Study for Promoting the Adoption of the Bilateral Offset Credit Mechanism

The Bilateral Offset Credit Mechanism Advocated by the Japanese Government

The Bilateral Offset Credit Mechanism (BOCM), a new international framework advocated by the Japanese government as a way for countries to cooperate in reducing greenhouse gas (GHG) emissions, and solving the problem of global warming, has become the focus of attention. Japan is a leader in low–carbon technologies and products and, under the BOCM, the emissions reductions (assessed under a decentralized system) achieved by countries that adopt these Japanese technologies and products would be used, via bilateral agreements and other means, to help Japan achieve its emissions reduction goals.

A similar scheme exists in the form of the Clean Development Mechanism (CDM), one of the Kyoto mechanisms. The CDM's examination process, however, requires an inordinate amount of time, making approval highly uncertain. Moreover, under the CDM, it is difficult to gain recognition for technology transfers in energy–efficiency products, high–efficiency coal–fired power generation, and other fields in which Japan plays a leading role.

In contrast, the BOCM incorporates simplified procedures that certify GHG emissions reduction project results and assign credits under bilateral agreements. The BOCM also vastly expands the range of eligibility for emissions reduction credits. It is expected that these advantages will invigorate support for GHG emissions reductions particularly among Southeast Asian countries, and ultimately lead to lower emissions globally.

Research in Support of BOCM Construction and Promotion

Mizuho was one of the first to focus on the possibilities of the CDM, emissions rights trading, and other Kyoto mechanisms for helping Japan achieve its GHG reduction goals, and has accumulated knowledge and expertise toward that end. Group companies of Mizuho now work together to provide comprehensive support in matters regarding emissions rights trading. This support ranges from identification of projects for creating emissions rights, to assessment of commercialization feasibility based on preliminary studies, and application for and issuance of emissions rights.

Mizuho drew on the wealth of expertise and knowledge it had accumulated through this work to win and completed what turned out to be a two–year commissioned BOCM feasibility study* regarding a high–efficiency coal–fired thermal power generation plant in India.

Starting with meetings with India's principal electric power companies, Mizuho identified needs for the latest technologies and capital, and gained insight on expectations for the BOCM. It then gained cooperation from local partners and conducted a feasibility study for the construction of a power plant using Japan's ultra supercritical pressure coal–fired thermal power plant technology. More specifically, Mizuho assessed the feasibility of the power plant project, examined both financing schemes for supporting project implementation and methods for assessing emissions reduction impacts, and identified transaction possibilities.

  • *Fiscal 2010 Initial Global Warming Mitigation Technology Promotion Project (Ministry of Economy, Trade and Industry), Fiscal 2011 Global Warming Mitigation Technology Promotion Project (New Energy and Industrial Technology Development Organization)

Helping to Reduce GHG Emissions Globally by Promoting the Adoption of Japan's Outstanding Power Generation Technologies

Ultra supercritical pressure coal–fired thermal power plant technology is one of the low–carbon technologies in which Japan excels and there are high expectations for the promotion of its adoption overseas through the BOCM.

Coal–fired power generation is generally seen as an electricity generation approach that emits large volumes of GHGs. However, in emerging economies and developing countries with rapidly growing electricity demand, the need for stable electric power supplies makes coal–fired power generation indispensable. Compared to alternatives like petroleum and natural gas, coal is much more abundant and, with deposits geographically dispersed, carries a relatively low risk of supply problems and price spikes. Given these advantages, the amount of electricity produced through coal–fired power generation is expected to continue rising, particularly in emerging economies and developing countries.

The extent to which the environmental burden of coal–fired power generation can be lowered, therefore, is a critical issue for lowering GHG emissions globally while sustaining economic development in emerging economies and developing countries. And it is in that connection that the proliferation of high–efficiency thermal power generation technology that can help to reduce GHG emissions is gaining attention.

Moving from sub–critical to super critical (SC), and ultra supercritical (USC) pressure technology, thermal power generation becomes more and more efficient, and GHG emissions have been reduced through this technical evolution. At the cutting edge, USC thermal power generation requires technology to manufacture boilers and turbines that can withstand extremely high temperatures and pressures, and control technologies that will work under such extreme conditions. Japanese companies excel in these technologies.

Spreading the use of these technologies to emerging economies and developing countries that are expected to increase their use of coal–fired thermal power plants will not only help to get a handle on global warming but also lead to overseas business opportunities for Japanese companies.

In India, which is a coal–producing country, coal–fired thermal power accounts for a high percentage of total power generation and many more coal–fired thermal power plants are planned for construction. The country, however, has no experience with USC power generation. Opening the way for USC adoption in India can be viewed as a prime test case for promoting BOCM adaption.

Mizuho will continue to perform feasibility studies and identify opportunities for the construction of power plants using USC technology. By helping to form relationships between Japanese companies and companies in developing countries and emerging economies, Mizuho will not only contribute to the construction of high–quality infrastructure and provision of stable electricity supplies in those countries but also help Japanese companies develop business in foreign countries and further efforts to reduce GHG emissions globally.

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