Japan will study introducing a carbon cap-and-trade system for greenhouse gas emissions, officials said Thursday, as the business lobby hinted it will back down on its opposition to the scheme.

Japan, despite its advocacy of the Kyoto Protocol named after its ancient capital, is far behind on meeting its own obligations under the treaty as its economy recovers from recession in the 1990s.

Japan is hoping to show its role as a leader in the fight against global warming when it hosts the summit of the Group of Eight major industrial nations in July at the northern mountain resort of Toyako.

Prime Minister Yasuo Fukuda recently announced a panel on the environment, which the government said late Wednesday would look at carbon trade.

The trade ministry is also considering setting up a panel on the idea, a trade ministry official said Thursday.

"We are preparing to set up a panel on the premise of introducing a cap-and-trade system," he said.

A carbon-trading system sets a cap on the amount of pollutants companies can emit and then forces heavy polluters to buy credits from companies that pollute less -- creating financial incentives to fight global warming.

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