Japan is likely to shelve a plan to introduce carbon emissions trading as the troubled ruling Democratic Party bows to powerful business groups still recovering from a costly downturn.

If confirmed, it would be a massive reversal by the party, which has backed one of the toughest emissions reduction targets of any major economy and said emissions trading was a key way to achieve that goal and drive greater energy efficiency at home.

It would also be a blow to hopes more top greenhouse gas polluting nations outside the European Union would usher in emissions trading, after efforts in the United States and Australia were shelved.