Japan's Tokyo Stock Exchange (TSE) started national carbon credit trading on 11 October, as part of the country's strategy to achieve decarbonisation by 2050.
More than 200 registered members can now trade J-Credits, the government-certified amount of greenhouse gas (GHG) emissions reduced or removed through efforts to introduce energy saving devices along with renewable energy facilities. Forest management can also be an eligible activity to qualify for the credit trading.
The country's minister for trade and industry (Meti) Yasutoshi Nishimura, who attended the opening ceremony of the trading at TSE, said that he hopes private-sector companies will participate in the carbon credit trading to help achieve economic growth and decarbonisation.
The minister also expects the transactions at TSE will be a driver of forming carbon prices that could activate decarbonisation markets. Valuing GHG emissions reductions through the credit market will help promote private investment in green transformation (GX) with more transparency and predictability, Nishimura said.
A Meti official later said that the ministry will refer to the carbon credit transactions at TSE for setting up future minimum and the maximum carbon prices, although further details were undisclosed.
The ministry has been reluctant and cautious about creating a carbon credit market as it could constrain the economic activity of private-sector companies. But it has adopted the view Japan cannot fall behind other advanced economies any further in its pursuit of decarbonisation by 2050.
To activate carbon credit transactions Meti and TSE plan to expand trading products beyond J-Credits, aiming to add after October 2024 another emissions trading scheme under GX league, a cross industry collaboration to achieve carbon neutrality.
But voluntary carbon credits will not be on offer at TSE anytime soon as they require a variety of forms and types that Meti and TSE will need some time to verify, Nishimura told Argus. Trading is also limited to domestic investors for the moment, he added, although they will discuss the future eligibility of foreign investors.
TSE completed demonstration trading of carbon credits in January after its first auction in September 2022. A total of 183 members, including private-sector companies along with local government affiliates, participated in the pilot programme with around 150,000t of carbon dioxide traded at ¥300mn ($2mn).
Japanese companies are already involved in overseas carbon credit projects to offset their GHG emissions, partly to eventually use the credits in Japan once future cross-border trading between Japan and the foreign markets is allowed.
