<article><p class="lead">Japan's green transformation bill has passed both houses of the parliament, allowing the government to secure funds by issuing energy transition bonds along with its carbon pricing scheme.</p><p>The so-called <a href="https://direct.argusmedia.com/newsandanalysis/article/2403783">green transformation bill</a> passed the Japanese parliament on 12 May and will mostly come into force within three months after the law is promulgated. </p><p>Under the new law, Japan plans to issue around ¥20 trillion ($147bn) of energy transition bonds over 10 years from the April 2023-March 2024 fiscal year. This would help support the country's public-private investments in achieving carbon neutrality by 2050, which is estimated to require more than ¥150 trillion over the next decade. </p><p>The government is set to redeem the energy transition bonds by 2050-51, by collecting funds through a carbon pricing mechanism, which is comprised of a carbon levy and a carbon emission trading system. Details of the schemes will be discussed within two years after the law is enforced. </p><p>Tokyo currently plans to impose the carbon levy on fossil fuel imports from 2028-29, depending on the amount of CO2 emissions derived from fossil fuel imports. The country's power producers will also be encouraged to buy CO2 emission quotas from 2033-34, under the auction system for emission allowances. </p><p>Japan is gearing up efforts to spur decarbonisation while pursuing economic growth, to achieve the interim target of a 46pc greenhouse gas emission reduction by 2030-31 against 2013-14 levels and to reach carbon neutrality by 2050. Before introducing the carbon pricing mechanism, the government is planning to implement a carbon credit market from 2026-27, after voluntary trading over 2023-26. </p><p class="bylines">By Motoko Hasegawa</p></article>