Japan plans to set up carbon credit market

  • Market: Electricity, Emissions
  • 13/08/21

The Japanese government is working on setting up a carbon credit market, to play a role in cutting greenhouse gas (GHG) emissions through an appropriate domestic carbon pricing scheme, and to build on Japan becoming a carbon emissions trading hub for Asia.

Japan's trade and industry ministry (Meti) has set a target to set up a demonstration carbon credit market in the April 2022-March 2023 fiscal year. Any Japanese carbon credit market is likely to start with combining existing carbon trading systems, such as the Joint Crediting Mechanism (JCM), J-Credit, non-fossil fuel energy certificates and voluntary credits.

Trading volume and liquidity is needed, while global companies that emit GHGs in Japan could join the market, the government said. Discussions are continuing towards a demonstration market launch in 2022-23, with 400-500 companies participating, Meti said.

Japan set up the JCM in 2013. Verified emissions and removals through low-carbon projects under the scheme can be used to quantify participating parties' efforts of GHG mitigation. The country has set up the joint mechanism with 17 countries, mostly in Asia.

J-Credit is a scheme set up in 2013 that the Japanese government verifies the amount of GHG emission reductions and removals. Market participants trade in the system, while buyers can use it for carbon offsets.

The country also launched an auction system in 2018to sell non-fossil fuel energy certificates. The certificates, which are issued by the Japanese government, verifies electricity is generated by renewable sources, aiming to help domestic electric power retailers to achieve a 44pc share of zero-emissions power sources by 2030.

Japanese carbon costs are at ¥6,301 ($57) per 1t ofcarbon dioxide, sourcing the country's tax system and a renewable energy feed-in-tariff scheme, according to the government. Meti recognises it is relatively high compared with international levels.

Japanese GHG emissions account for around 3pc of the global total. They fell in 2019-20 for a sixth consecutive year to a preliminary 1.213bn t of CO2 equivalent, the lowest level since records began in 1990-91, the Japanese environment ministry said.


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