Japan and Hungary sign accord on CO2 credits transfer

TOKYO (Reuters) - Japan on Tuesday signed its first basic agreement with Hungary to buy the European country's surplus allowances for greenhouse gas emissions under the Kyoto Protocol, government officials said.

The memorandum of understanding, signed in Budapest, covers the basic framework for the Japanese government to buy intergovernmental surpluses, or AAUs, from Hungary under the Green Investment Scheme (GIS).

Under the Kyoto Protocol, governments are able to sell AAUs to other countries that fall short of their emissions targets.

To ensure AAUs result in actual emissions reductions, the Green Investment Scheme has been created to force governments selling AAUs to invest the revenues in clean energy projects.

Japanese officials said the country hopes to strike similar deals with more nations and diversify sources from which it can meet the shortfall in its emissions targets.

Japan, the world's fifth-biggest greenhouse gas producer, curbed its emissions by 1.3 percent last year to 1.341 billion tonnes of carbon dioxide (CO2) equivalent, but the figure still exceeded its commitments under the Kyoto Protocol by some 155 million tonnes a year.

Tokyo is currently in talks with countries including Poland, the Czech Republic and Ukraine on similar deals, as the Japanese government plans to buy 100 million tonnes of credits between 2008 and 2012, officials said.

Tuesday's agreement does not cover how many tonnes of credits the Japanese government will buy, or the payment for the transferred credits.

The Japanese government is expected to buy some portions of the 10 million tonnes of AAUs that Hungary is set to initially offer for sale next year, an official with Japan's Ministry of Economy, Trade and Industry said.

(Reporting by Osamu Tsukimori, editing by Anthony Barker)