By Rujun Shen and Tom Miles
BEIJING, April 23 (Reuters) - Japanese trading firm Mitsui and Co said on Thursday the days of easy, high-yielding projects under the U.N.'s scheme to cut carbon emissions were numbered and that renewables and energy efficiency projects were now the focus.
Abatement of powerful greenhouse gases hydrofluorocarbons, such as HFC-23, and nitrous oxide had fallen out of favour despite dominating the early stages of the U.N's Clean Development Mechanism (CDM), said Mitsui executive Ryohei Aoyama.
"HFC or N20 reduction has no bright future after 2012," Aoyama, head of the company's emission reductions business department.
Mitsui has invested in clean-energy projects mainly from China, and then selling the offsets to Japanese companies, for nearly 10 years, according to Aoyama.
Under the Kyoto Protocol's CDM scheme, rich countries such as Japan can meet their U.N. greenhouse gas reduction targets by buying CERs, or Certified Emission Reductions, issued by the United Nations to clean-energy projects in developing nations.
Although HFC is a greenhouse gas, the use of the CDM to cut refrigerants has been controversial, with some countries -- including China -- accused of deliberately increasing output in order to boost carbon trading revenues.
Many also regard projects that capture and destroy HFC and nitrous oxide from industrial processes as "low-hanging fruit" -- a cheap way to generate large amounts of carbon credits that contributes very little to global efforts to combat climate change.
Some are calling for the projects to be phased out or downgraded in any post-Kyoto agreement.
Aoyama said that investors have to think carefully about the kind of emissions that will be traded on the global market when the first phase of Kyoto expires in 2012.
"The investment tendency will change from the chemical side and methane as well to renewable energy and energy efficiency," he said.
Wind power, solar or biomass, some developers say, are tougher to plan and build and much more in the spirit of the CDM, in which a core criterion of clean-energy projects in developing nations is that they must be "additional".
Meeting this criterion, the United Nations says, ensures carbon offsets are allocated only to projects that would otherwise have been unprofitable and therefore not built.
According to the Kyoto Protocol, Japan will need to meet its target of reducing greenhouse gas emissions by six percent below 1990 levels between 2008 and 2012. So far, it has bought more CERs than any other industrialised country and is significantly above its Kyoto target.
Delegates from nearly 200 countries plan to meet in the Danish capital Copenhagen in December to hold discussions on a successor to the Kyoto Protocol.
The CDM is likely to face major reforms if the outlines of a broader climate pact from 2013 is agreed at the end of the year.
Aoyama hoped to see an agreement on sectoral emission plans, but said even among developed countries a consensus has not yet been reached. (Editing by David Fogarty)