Japan and Indonesia signed a bilateral agreement to offset emissions under the Joint Crediting Mechanism, a carbon trading program.

The bilateral offset credit mechanism will allow Japanese companies to earn carbon credits by helping Indonesia cut carbon dioxide (CO2) emissions.

The program is similar to the Clean Development Mechanism ― a carbon credit scheme under the Kyoto Protocol ― except for its requirement for companies to go through a United Nations screening process instead of a bilateral one.

“Japan has sophisticated technology that can (...) support low carbon emission projects,” said Japanese Ambassador to Indonesia Yoshinori Katori on Friday. “Japan can also facilitate investment and cooperation through its private sector, which is renowned for its experience in implementing emission-reducing technology.”

Katori said JCM is in line with Japan’s commitment to cutting 25 percent of carbon emissions by 2020 from its figures in 1990.

Indonesia, on the other hand, has announced it would cut emissions by 26 percent by 2020 and by up to 41 percent with help from the international community.

Rizal Affandi Lukman, deputy to the coordinating economic minister for international economic cooperation, said that both governments would look to form a joint committee by the end of this year to identify potential projects and develop measurement, reporting and verification procedures, to avoid “double-counting of cut carbon emissions.”

Japan also has similar pacts with Laos, Mongolia, Bangladesh, Ethiopia, Kenya, the Maldives and Vietnam, and is currently seeking to conclude one with India and 10 other countries.

Out of the eight countries with whom Japan has a JCM, it only set up a joint committee with Mongolia three months prior to their JCM signing, while there has been no progress yet for the other seven.

In preparation for the JCM, the Japanese government has given grants to Japanese companies to conduct feasibility studies for the scheme.

Katori said that Japan had conducted 57 feasibility studies ― of which 23 were in the field of renewable energy ― since 2010.

According to JCM’s official website, Japan has conducted at least three feasibility studies in Indonesia for the 2012 fiscal year, including one for a renewable project (solar-diesel hybrid power generation to stabilize photovoltaic power generation system) in Nias Island, North Sumatera, headed by Hitachi Zosen Corporation.

The other two were on land use management and biomass utilization, both in Jambi and Central Kalimantan, each headed by Shimizu Corporation and Mitsubishi UFJ Research and Consulting Co. Ltd.

(Business Desk, The Jakarta Post)