Japan’s trade and industry ministry will discuss imposing caps on greenhouse gas emissions as part of a review of measures to combat global warming after the Kyoto protocol expires in 2012.

The review, to be completed by June, has led to speculation that the trade ministry (Meti) may be preparing to reverse its objection to a cap-and-trade system. Until now it has backed big business’ insistence on a voluntary scheme.

Masakazu Toyoda, vice-minister for international affairs, denied in an interview with the Financial Times that policy had changed. “Meti will review various economic measures to deal with climate change, and cap and trade won’t be excluded.”

He added, however, compulsory caps were incompatible with Japan’s main diplomatic ambition of getting India, China and the US to sign up to a post-Kyoto protocol. “If cap and trade were digestible for the major developing economies and the US, it might be workable. But there is no sense of that happening yet.”

Tokyo wants to make climate change a central theme of the Group of Eight summit in July. Yasuo Fukuda, prime minister, wrote in the FT last month that he intended to “spell out how Japan will set its own national target to reduce greenhouse gas emissions”. He said it would help define a structure that “must include China, India, the US and other mega-emitters”.

Mr Toyoda said a hybrid international system would probably emerge in which some countries, particularly in Europe, imposed domestic caps while others stuck to voluntary commitments.

Tokyo, he said, would “probably not” opt for cap and trade. “We have a quite workable system of reductions on a voluntary basis. Japanese companies prefer to stick to that and I think that their performance is rather good.”

Japan is looking at ways to help its electric power producers meet voluntary caps agreed under the Kyoto framework. A separate Meti commission is examining whether to allow the utilities, responsible for about 30 per cent of Japanese CO2 emissions, to buy and sell credits through Tokyo’s wholesale power exchange.

The country’s overall emissions are running at 6.4 per cent above 1990 levels, although Tokyo has pledged to cut that to 6 per cent below the 1990 baseline.

Power companies have committed to a 20 per cent reduction by 2010 but shutdowns at nuclear plants have forced them to rely more on coal, and most “are not going to hit that target”, Meti said. “The idea is that if a company over-achieved it could sell offsets to a company that was behind.”

While the proposal would not directly help Japan to hit its Kyoto target, being limited to domestic power producers, it could promote energy efficiency by putting a cash value on companies’ emissions-cutting efforts.