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Emission Trading Schemes

Policy Overview

Emission Trading

Discussions on the introduction of an emission trading system are held at the Ministry of Environment, the Ministry of Economy Trade and Industry (METI) and GX Executive Council.

GX Basic Policy

On December 22, 2022 the government unveiled the draft Green Transformation (GX) Basic Policy. Under this strategy the Japanese government aims to raise initial 20 trillion yen (USD 140 billion) through ‘GX Bonds.' They will be repaid through ‘carbon pricing’ revenues that combine a ‘carbon levy’ to be introduced in 2028, and voluntary emissions trading introduced in 2023 and expanded to the power sector with allowance auctions in 2033.

Current draft plan proposes introducing emissions trading in phases, with a prolonged initial period of voluntary trading based on carbon allowances set by the companies themselves.

  • Phase I set to begin in 2023, the trading mechanisms will be tested among the voluntary, industry-led group of GX League of companies with self-assigned emission caps.
  • Phase II from 2026, during the so called “full scale operation” further guidelines on the scope of target companies, allowance allocations and monitoring will be determined – though it is unclear to what extent the industry-led voluntary model will shift towards regulations.
  • Phase III from 2033, trading based on allowance auctions is expected to begin in the power sector.

GX League

A system similar to cap-and-trade is being considered for the GX League. The GX League is a group of companies formed under METI's initiative in February 2022. It consists of 600 companies that account for over 40% of Japan's total greenhouse gas emissions. Presently, corporate participation in emissions trading is voluntary, companies set their own emission targets and if they fail to meet their own targets, they are required to provide an explanation without incurring any penalties.

In September 2022, METI and the Tokyo Stock Exchange started a trial trading of carbon credits among the GX League of companies. The market will be used to trade excess emission allowances and general carbon credits, while the publicly available trading data is expected to feed into the development of a carbon price. The GX League and the carbon credit market are scheduled to be fully operational in April 2023.

Evidence Profile

213728134

Key

◼ opposing ◼ not supporting ◼ mixed/unclear
◼ supporting ◼ strongly supporting

Policy Engagement Overview

Many industry associations appear to support a weakened form of Emission Trading. Keidanren and Keizai Doyukai stated support for voluntary emissions trading initiatives, without expressing a clear position on how it can be expanded to the rest of the economy. The Japan Corporate Leaders Partnership and the Real Estate Companies Association of Japan have been supportive of cap and trade. Most individual corporations have not expressed a clear position on emissions trading schemes.

Policy Engagement Trends

In its proposal for the Green Transformation in May 2022, Keidanren supported emissions trading with major exceptions, supporting free allocations and suggesting to start within a voluntary initiative, as well as emphasizing concern for trade exposed hard-to-abate sectors. Japan Shipowners Association (JSA) appeared unsupportive of emissions trading October 2021.

Keizai Doyukai supported the voluntary GX League trading system, but was not clear on whether it should be regulated and expanded to the entire market in March 2022. Japan Foreign Trade Council (JFTC) has not expressed a clear opinion on emissions trading, while the Japanese Bankers Association (JBA) have supported cap & trade system that would include foreign origin credits.

The Real Estate Companies of Japan (RECAJ) expressed support for cap and trade emissions trading in a position statement submitted on August 2022.

The Japan Climate Leaders Partnership (JCLP) strongly supported the introduction of emissions trading.

Evidence Profile

213728134

Key

◼ opposing ◼ not supporting ◼ mixed/unclear
◼ supporting ◼ strongly supporting

Live Lobbying Alerts

JISF supports Japan's 2050 goal while opposing environmental taxation policies

07 October 2022

In a position paper on the fiscal 2023 tax reform, published on its website on September 29th, Japan Iron and Steel Federation (JISF) advocated against the carbon tax, Tax for Climate Change Mitigation, and emissions trading, while stating support for Japan’s 2050 carbon neutrality goal. It also advocated for tax exemptions for coking coal used in steel production and stated that thermal power generation “will continue to be necessary in the future.” Additionally, it requested increased financial support for technological development to decarbonize steel production, as well as “carbon-free electricity and hydrogen,” while supporting hydrogen reduction steelmaking, without specifying a position on its decarbonization.

Entities Engaged on Policy

Influencemap Performance BandOrganizationEngagement Intensity
D-Nippon Steel Corporation31Metals & MiningAsia
E+Japan Iron and Steel Federation (JISF)44Metals & MiningAsia
D+Japan Business Federation (Keidanren)50All SectorsAsia
DJapan Chamber of Commerce and Industry (JCCI)27All SectorsAsia
DENEOS Holdings (formerly JX Holdings Inc)29EnergyAsia
A-Japan Climate Leaders Partnership (JCLP)38All SectorsAsia
D+Japanese Shipowners' Association (JSA)14TransportationAsia
DFederation of Electric Power Companies of Japan (FEPC)36UtilitiesAsia
DJapan Chemical Industry Association (JCIA)19ChemicalsAsia
DPetroleum Association of Japan (PAJ)29EnergyAsia
B-Japan Association of Corporate Executives (Keizai Doyukai)38All SectorsAsia
B+Renewable Energy Council (REC)19UtilitiesAsia
D+Japan Foreign Trade Council (JFTC)11Business ServicesAsia
D+Mitsubishi Corporation22IndustrialsAsia
D+Central Japan Economic Federation (CJEF)20All SectorsAsia
C+Real Estate Companies Association of Japan23Construction MaterialsAsia
D+ITOCHU11IndustrialsAsia
DToyota Motor39AutomobilesAsia