Japan, the world's fifth largest greenhouse gas emitter, has been reluctant to impose a mandatory cap on a companies' emissions because of past efforts by industry to clean up and become more efficient.

Japan is one of the world's most energy-efficient countries. But, like all rich nations, it has come under increasing pressure from developing nations to pledge deeper cuts to its emissions as part of a broader UN-led fight against climate change.

"It's based on a voluntary (cap) because we'd like to see as many companies as possible joining in as we start. But we're aiming to make it a cap-and-trade scheme eventually," Environment Minister Tetsuo Saito told reporters.

"We're hoping to accept applications from thousands or even tens of thousands of companies, ranging from big companies to medium to small ones as well as mainstay companies in each region," he added.

The trial over-the-counter market is aimed at accelerating further cuts in the private sector via new technologies to save energy and reduce or remove emissions from the atmosphere, he said.

The trading rules and impact on national emissions reductions will be subject to review every year, the government has said.

Japan is obliged to cut greenhouse gas emissions by 6% in 2008-2012 from the 1990 levels under the U.N.'s Kyoto Protocol climate pact.

But as of 2006, Japan's emissions were 6 percent above 1990 levels.

The Japanese government and big corporates have been active in buying UN carbon offsets called CERs to try to help the nation meet its Kyoto target.

The powerful Keidanren business lobby has resisted mandatory emissions targets as well as emissions trading akin to that already in place in the European Union.

Currently, each industrial sector under Keidanren voluntarily sets a target over the five years to 2012. These targets from the country's top polluters are crucial for Tokyo to try to meet its Kyoto target.

At present, Japan is only one of 37 industrialized nations that are bound under Kyoto to meet emissions curbs from 2008 to 2012, when the pact's first phase ends.

Negotiations are underway aimed at agreeing a replacement for Kyoto that would hopefully bind all nations to emissions curbs from 2013. The U.N.-led talks reach a climax in Copenhagen, Denmark, at the end of next year.

Japan has already pledged a long-term target to cut emissions by 60 to 80% by 2050 from current levels but has so far avoided a mid-term reduction target for 2020 or 2030 as demanded by developing nations to show sincerity in the fight against climate change.

The government starts accepting applications on Tuesday for the trial scheme and the closing date is December 12, 2008 for companies to set a voluntary emission cut target for the year to March 2009. No pricing details have been announced.

Actual trading is to start at any time after the government approves applicants' targets. More participants are likely to join late next year because authorities are due to verify companies' emissions in the first Kyoto year by mid-October.