 Compulsory caps on carbon emissions by big firms are not a proven tool to fight climate change, despite their mounting popularity among other rich nations, an official at Japan's top business lobby said on Friday. The country's industry has used a voluntary scheme to keep emissions below levels of three decades ago and critics should look at results rather than fixating on methods, said Masami Hasegawa at the Japan Business Federation (Keidanren). He rejected the warning of a top UN climate official that the country could find itself isolated at a time when its prime minister wants to help lead the fight against global warming, because it rejects a cap-and-trade system to control emissions. "We don't think that this system will contribute to reduce carbon dioxide emissions in the long term," said Hasegawa, Manager of the Environment Group under the Industrial Affairs Bureau III. "No one knows the results of it yet in economic terms or in environmental terms ... Innovative technology is the key to reducing emissions in the future." The business group argues that emissions caps will mean government meddling, unfair handouts of permits to emit, restrictions on growth of healthy companies and subsidies for ailing ones. Instead, it has set a "voluntary" target for members to keep average annual emissions below 1990 levels, over the five years through 2012 when Japan is bound by the Kyoto Protocol. The agreement covers 35 sectors including major emitters like steel and power firms. They can chose from a range of different targets -- including cutting energy use, lowering overall carbon emissions, or reducing emissions per dollar earned. There are no sanctions for anyone who misses their target or independent verification, though a small third-party panel of academics and other advisers checks data sent to the Keidanren. A sense of social responsibility means the companies have successfully held down emissions, Hasegawa said. He declined to comment on how much the scheme was costing members. But critics say the companies have limited incentives to make costly domestic reductions so are buying too many credits from overseas to make up quotas, and the system is too opaque to allow a rigorous evaluation of improvements notched up at home. ISOLATION? Japan hosts a G8 summit this year, and has promised climate change will be a key issue. But Yvo de Boer executive secretary of the U.N. Framework Convention on Climate Change, warned on Thursday that this means emissions trading may also be in focus. "After the elections in the United States, whoever wins those elections, every industrialised country in the world will be favouring a cap and trade approach," he said. "The challenge then I think will be whether Japan also decides to embrace a cap-and-trade regime or not." Industry players -- some of whom feel a tight Kyoto goal is an unfair challenge for already-efficient Japan -- are in favour of focusing on a sectoral approach and cheaper cuts to emissions in developing countries, Hasegawa said. "In the short term there is a lot of reduction potential in developing countries...so we have to transplant our technology." But he did not say who would pay for the usually expensive equipment, a major bone of contention for poorer nations that want to fight poverty and warming at the same time.