The move follows the start in October of an experimental emissions trading system in Japan. The system allows companies to voluntarily set targets for cutting CO2 and other greenhouse gas emissions and to sell credits earned by reducing emissions more than the targets.

A center the agency is setting up in fiscal 2009 will introduce forestry cooperatives, lumber mills and other entities making biofuels to potential users of the CO2-free energy source, such as farmers, small businesses and schools.

The center will then help biofuel users sell CO2 emissions credits they earned through its use to utilities, steelmakers and other major companies engaging in business activities involving greenhouse gas emissions.

Made from plants, biofuels are considered to contribute nothing to global warming since plants absorb carbon dioxide as they grow. Gasoline and other fossil-based fuels only add to the amount of CO2 in the atmosphere when burned.

The Forestry Agency plans to appropriate 500 million yen to run the center. It will be operated by think tanks and nonprofit organizations on the agency's behalf.

The agency wants the operation of the center to reduce the cost of producing biofuels and show they can become a sustainable source of energy in terms of profitability.