TOKYO (Reuters) – The Tokyo Stock Exchange (TSE) launched trading in carbon credits on Wednesday, a key part of Japan’s strategy to combat climate change.
The world’s fifth largest emitter of carbon dioxide (CO2) has implemented a carbon pricing and emissions trading scheme, aiming to reduce CO2 emissions by 46% compared to 2013 levels by 2030 and to reach net zero by 2050.
WHAT ARE JAPAN’S OBJECTIVES?
The carbon pricing system, which Japan gradually rolled out in April, aims to accelerate decarbonization, while the country has lagged behind other major economies on reducing emissions.
Japan believes that the system, which combines emissions trading and a carbon tax, will help make its economy greener while preserving the competitiveness of its industries, particularly those that emit a lot of CO2, such as steelworkers.
Europe and the United States have developed tools to support the private sector to help it cope with the risks and costs associated with green investments. The Japanese government estimates that the public and private sectors will need to invest more than 150,000 billion yen (949.5 billion euros) in decarbonization measures over the next ten years.
The government will contribute 20,000 billion yen by issuing bonds reimbursed by revenues from the carbon tax and emission quotas.
HOW IS THE EMISSIONS TRADING SYSTEM IMPLEMENTED?
The system, based on proposals primarily from Japan’s Ministry of Economy, Trade and Industry and approved by the Prime Minister’s Office this year, consists of an emissions trading system and a carbon tax.
The TSE first launched a new carbon credits market on October 11, 2023 to trade existing carbon credits, known as J-Credits.
In October 2024, the Japanese version of the Emissions Trading System (ETS) will be implemented, which will go through a forum for “green transformation” called “GX League”.
Participants – around 680 companies as of the end of January, representing more than 40% of Japan’s emissions – will be allocated emissions allowances and will be required to set emissions reduction targets that will help the country achieve its goals. for 2030 and 2050.
Companies that exceed their targets and those of the country will be able to sell emission allowances, while those that do not meet their targets will have to buy them.
Details of the GX League emissions trading have yet to be finalized.
By fiscal year 2026/27, Japan intends to set guidelines for the emissions trading system and introduce a certification mechanism for corporate targets, to make the system fair and efficient.
Supervision could also be put in place for those who resist.
From around 2033/34, the auction of emission allowances for electricity producers will begin.
A carbon tax will be introduced from around 2028/29 on fossil fuel importers like refiners, commodity brokers and power companies. The initial tax will be low, but will gradually increase.
HOW DOES THE TSE CARBON EMISSIONS TRADING SYSTEM WORK?
As of September 19, a total of 188 entities had registered as participants in the TSE carbon credit trading system. Trading hours are 9:00 a.m. to 11:29 a.m. (0000-0229 GMT) and 12:30 p.m. to 2:59 p.m. (0330-0559 GMT).
Through the new market, registered members can trade J-Credits on the TSE, a unit of Japan Exchange. Transaction prices are set twice daily and published after trading hours.
Under the J-Credit system, the government certifies as a “credit” the amount of greenhouse gas emissions reduced or eliminated through efforts to introduce renewable energy, energy-saving equipment energy or forest management.
(Written by Yuka Obayashi, Katya Golubkova, French version Corentin Chappron, edited by Kate Entringer)
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