Perhaps you came across the news yesterday regarding Japan’s carbon emissions and greenhouse gas production last year? In a nutshell, carbon emissions were up 2.3%…a clear step in the wrong direction of reducing their output of carbon dioxide (CO2). All told, Japan produced 1.37 billion tons worth of CO2, or its equivalent, last year…a record they aren’t exactly proud of.

Japan voluntarily entered the Kyoto pact, which essentially limits the amount of pollution each pact participant is allowed to generate. And, the country’s government thought they could come in under their quota when the pact was first signed. In fact, they were fully expecting a decrease in carbon emissions, which they had managed to do the year before. However, an earthquake led to the shutdown of a key nuclear power plant (TEPCO), so the country fired up their coal power plants. Their CO2 output increased accordingly.

There’s still no word on when or if the nuclear plant will be operational again, so the reprised problem is also an indefinite one.

It’s worth mentioning that - in an effort to abide by the Kyoto pact - Japan is looking to push their carbon output levels to less than 1990’s levels by the end of 2012. That will require almost a 10% reduction of CO2 output every year until then though. So, it’s not unreasonable to think the goal is out of reach, considering the latest batch of data.

What’s this got to do with China Energy Recovery (CGYV)? Nothing, directly. Indirectly it has everything to do with China Energy Recovery.

Considering China Energy Recovery’s (or CER’s) specialty is making coal power cleaner and more efficient, Japan’s solution is a no-brainer… buy some of CER’s caps and boilers. The cost is a pittance compared to the benefit.

One discouraging announcement itself (like this one) doesn’t put money in CER’s pocket. And, just because the solution to the problem is clear doesn’t mean Japan is going to place an order for the equipment that clearly could solve the problem. However, the fact that the problem is so well defined - coupled with the fact that the pressure is on - certainly speaks to the kind of demand CER should enjoy over the next 3 to 5 years. See, Japan is hardly alone here….China’s got a similar challenge, as do many countries including the U.S. (which does not participate in the Kyoto pact).

Carbon emission restrictions are not going away, nor is coal power. One way or another, the world’s got to find a way to make them work together….which is precisely what CER does.

We’re generally not into this kind of ‘concept’ investing, since it doesn’t define a specific valuation. However, CER has provided a clear valuation along with a brilliant product/service concept. That’s why we remain so encouraged.

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