Demand for Carbon Credit Trading is Expected to Skyrocket
The Tokyo Metropolitan Government recently launched Asia's first mandatory program to cut carbon emissions. The program will cover approximately 1,400 industries, commercial buildings and large office buildings within Tokyo. According to the Sustainability and Climate Change Reporter, “the Tokyo program is being touted as a potential model that could spread throughout Japan and other cities in Asia.”
The program is also noteworthy because it's the world’s first urban cap and trade program to cover office buildings as emissions reduction targets.
Tokyo’s ground-breaking initiative echoes Arnold Schwarzenegger’s efforts as governor of California to push carbon emissions cuts on a state basis ahead of national US action.
The program will be rolled-out in two phases. In the fiscal 2010-2014 first phase of the scheme, the targeted entities will be required to cut carbon dioxide emissions by either 6 percent or 8 percent from base-year levels that are calculated from average emissions over a period of three consecutive years between fiscal 2002 and 2007.
In the fiscal 2015-2019 second phase, they will be required to slash emissions by 17 percent from their base-year levels.
To meet the emissions-cut targets, offices and factories in the capital can either make efforts on their own, such as updating to energy-saving equipment, or purchase carbon emissions credits from other entities that have reduced carbon emissions.
Actual trading under the mandatory system in Tokyo is set to begin in fiscal 2011 after data on reduction efforts in fiscal 2010 are finalized.
Interestingly, Tokyo's CO2 trading scheme was launched just as Japan's Sony Corporation announced its Road to Zero global environmental plan. The plan is a long-term goal of achieving a zero environmental footprint by 2050.
Zero by 2050? Now that's a worthy goal. I'm not aware of any company in the U.S. having established a similar program. Does anyone out there know of one?
I'd hate to see another country take the lead on this.
-Santiago
P.S. My interest in international cap and trade systems stems from an innovative program my firm launched to accept carbon offset credits as partial payment for legal fees. Our firm’s program was the subject of a Wall Street Journal article, which you can read about here.
Be sure to read my two previous posts on the subject:
Remember Japan? Well, Michael Shuman of Time magazine does. He’s written a compelling article appearing in next week’s issue. While the focus of the article, Turning Japanese, is on Japan’s recent economic and political paralysis, Michael correctly points out that, given the current state of the global economy, Japan’s economic stability is enviable:
While much of [Asia] is still hurtling along the path of development — a blinding whirl of frenetic construction and perpetual change — Japan is a vision of stability, a nation that has everything others in Asia want, and has already had it all for decades. Money. Technology. Global brands. A seat at the table with the powerful countries of the industrialized world.
Japan Offers Better Investment Climate Than in Years Past
Despite the fiscal bumps and bruises it has suffered in the past several decades, Japan is on the brink of a renaissance. The historic victory of Prime Minister Yukio Hatoyama in last year’s election ushered in a renewed sense of optimism in the hopes of hanging on to Japan’s standing as the world’s third largest economy (behind the U.S. and China).
Under the slogan "Invest Japan," Japan is now working to establish a better and more effective investment environment for foreign investors. The Japan External Trade Organization (JETRO) published a comprehensive ebook to help foreigners understand the Laws & Regulations On Setting Up a Business in Japan.
The ebook provides information on laws, regulations and procedures on registration of incorporation, visas, taxes, human resource management, and trademark and design protection systems.
For business owners looking to expand abroad, there’s never been a better time in the last two decades to set up shop in Japan.
Business Entities: Four Options
There are four primary types of legal entities for a business. Tax matters aside, operation of the four different types of business entities is fairly similar. You can open a bank account, hire, rent office space, lease equipment, enter into contracts, and potentially sponsor a visa with any of these four primary legal entities.
When starting a new business in Japan your four options are:
Branch office for your pre-existing (i.e. foreign) corporate entity. Opening one means that corporate headquarters will still be responsible (i.e. have unlimited liability) for the branch office.
Corporate subsidiary. This is known in Japan as a kabushiki kaisha or KK. A KK is analogous to Delaware-incorporated subsidiary (a “C-corporation”) one might set up, if doing business in the U.S. With a KK, a shareholder’s liability is generally limited to the extent of his or her capital contribution. In some cases, the shareholder may be personally liable for certain actions taken, through the subsidiary.
Japanese Limited Liability Corporation (LLC), or what is known as a godo kaisha or GK.
Liaison office. While it has limited liability, the activities the business is permitted to engage in are also limited. These are restricted to primarily nonprofit activities, such as market research, information gathering or preliminary advertising.
If you already have an established connection or business relationship with someone in Japan whom you are coming to work for specifically, a branch office is often adequate.
Setting up a liaison office might be beneficial in the early stages of developing your business. It will allow you to get more information about opportunities and your potential customer base as well as what legal structure will best serve your needs.
Representation in Japan
In the initial setup stages you need to know whether or not your business will have representation in Japan, in the form of a director. In some cases you will want one. In others, you will be required to. For example, pre-incorporation, you might not need one with a branch office. On the other hand, you will definitely need one for a KK corporation. Your director must be a resident of Japan, though not necessarily a national.
One thing to keep in mind is how much trust you place in this person. As a director, he or she will be able to enter into contracts and create potential legal obligations for your new entity. Depending on how you feel about this, your level of comfort with potential liability may dictate which direction you want to go with your business entity. For example, you may want limited liability as a KK instead of a branch office.
Additional Resources
Be sure to check additional resources such as the Doing Business Japan website, Doing Business 2010 Data. With Japan generating unprecedented international interest, you won't want to miss out on all the opportunities.
Trend to Watch: Look for Japan to Offer an Increasing Amount of Incentives to Attract Foreign Direct Investment
The International Law Prof Blog has passed along details about an upcoming teleconference, “Doing Business with Japan,” sponsored by the American Bar Association Section of International Law.
The conference could not come at a better time. Businessweek’s Daniel Kruger reported this week that Japan has overtaken China as the largest foreign holder of U.S. Treasury securities. The number is staggering--Japan is now holding $768.8 Billion in U.S. T-Bills.
Folks, the conference is a great first step towards bridging the trade gap and getting back some of those T-Bills.
Are you interested in getting a better understanding of the legal system in Japan? Or in the advantages (and dangers) of selecting Japanese law or Japan as a place to arbitrate? Or other issues relating to doing business with (and in) Asia?
There's a teleconference on "Doing Business with Japan" on Wednesday, February 24, 2010 from noon to 1:30 p.m. Eastern US Time. The program is organized by the Asia/Pacific Committee of the American Bar Association Section of International Law. Click here for the program description, speaker bios, and registration form. Download Japan. There is an extremely modest fee to call in ($15 for section members and $25 for non-members). Register by Monday, February 22, 2010.
Looks like an excellent program. Will you be attending?
Founding partner Santiago A. Cueto focuses his practice on international business law with an emphasis on class action and international commercial litigation, arbitration and transactions. His practice is based in Miami, Florida. He has been featured in the Wall Street...More...
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