Japan has championed the Kyoto Protocol, named after its ancient capital, but is well behind in meeting its own goals as the world's second largest economy picks up steam from recession in the 1990s.

Japan, which long insisted it could meet its goals through voluntary measures and buying credits for fighting global warming overseas, recently set up a panel to study an emissions trading system.

WWF International said introducing such a system would "turn Japan into a credible leader in the global fight against climate change and bring massive benefits for the country's flagging economy."

Japan is hoping to take a leadership role on global warming when it hosts the summit of the Group of Eight rich nations in July.

"If Japan were to establish an emissions trading scheme, it would signal to the world it is indeed serious about avoiding dangerous climate change and that this government is aiming for a successful G8 summit," Hans Verolme, WWF climate director, said in a statement.

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

The WWF, in what it called a first-of-a-kind study for Japan, said introducing emissions trading would have short-term costs but result in an economic boost of 14 trillion yen (137 billion dollars) by 2015.

It also forecast that if all other economic trends continued unchanged, an emissions trading system would cut Japan's unemployment rate to four percent in 2015 as opposed to 6.3 percent without it.

The jobless rate was 3.8 percent in January.

The WWF based its findings on the theory that emissions trading would spur green industry and that Japan would otherwise be left behind as Europe and a growing number of US states embrace mandatory gas caps.

Japan's influential business lobby recently toned down its opposition to a cap-and-trade system, noting its growing acceptance abroad.

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