May 28 (Bloomberg) -- Japan will spend 209 billion yen ($1.72 billion) over five years to help companies develop next- generation cars and fuels that would cut carbon dioxide emissions.

In the five years to March 2012, the government will subsidize development of batteries and hydrogen fuel cells for vehicles, and so-called gas-to-liquid technology for producing diesel from natural gas, Satoshi Kusakabe, director of the trade ministry's auto division said today in Tokyo.

Japan, a signatory to the Kyoto protocol, has lagged behind its target under the treaty, emitting more greenhouse gases compared with 1990. The government is relying on new technologies to meet its aim of cutting emission 6 percent from the 1990 level by 2012 in the world's second-biggest economy.

``Currently Japan relies almost completely on oil products the meet the fuel needs of its transport sector, and we need to curb it,'' Kusakabe said. ``Consumers bear additional costs for environmentally friendly products, but our aim is to not burden them for choosing ecologically-friendly products.''

A hydrogen fuel-cell car currently costs more than 20 times the price of a gasoline-driven vehicle, the trade ministry said in a statement. The government's target is to reduce prices of such vehicles to the level of those that run on gasoline.

The government will allocate 32 billion yen per year for at least next five years for developing a hydrogen fuel-cell vehicle, Kusakabe said. It will spend 24.5 billion yen for developing batteries and 24 billion yen for gas-to-liquid technology in the five years ending March 2012, the statement said.

`Export Them Worldwide'

``Japan can develop these technologies and export them worldwide to help halve carbon dioxide emissions on the planet,'' he said.

To promote the use of biofuels, which are typically made from grains and sugarcane, Japan targets cutting the cost of domestically-made products.

By 2020, the trade ministry seeks to cut the prices of bio- fuels made using cellulose such as rice straw to about 20 yen a liter, from the current estimates of more than 150 yen a liter, said Takashi Shimada, director of policy planning section at the natural resources department of the trade ministry.

The ministry, together with Petroleum Association of Japan and the automaker's association, will form a study group in July to discuss measures to cut costs, Shimada said.

Japan emitted 8.1 percent more greenhouse gases in the year ended March 31, 2006, than in 1990, according to the environment ministry, led by a 37 percent surge from households and a 42 percent jump from commercial users like office-building owners.

To contact the reporters on this story: Megumi Yamanaka in Tokyo at myamanaka@bloomberg.net.

Last Updated: May 28, 2007 02:01 EDT