Japan is gearing up to develop a carbon credit market in the country, which it views as increasingly necessary for offsetting remaining greenhouse gas (GHG) emissions to achieve its 2050 carbon neutral goal.
Japan's trade and industry ministry Meti is currently discussing the details of the market framework, including the effective use of carbon credits and the possible use of new credits through a new technology, to clarify policy direction and establish an ideal market.
Meti is proposing to set up a carbon credit market that will initially allow participants to trade credits through the Joint Crediting Mechanism (JCM), J-credits and voluntary credits, as well as credits generated by companies. The companies would be required to set their emissions targets, with any excess or deficiency to be traded in the carbon market. The government does not plan to provide participants free credits in advance.
Meti is also eyeing credits from direct air capture (DAC) and absorption by algae, to be traded in the carbon credit market in future.
It is still unclear when exactly will Japan launch the carbon credit market. But Meti presently plans to start demonstrating the system for trading, such as transferring emissions between companies, sometime in the April 2022-March 2023 fiscal year. It plans to recruit companies from a wide range of sectors to participate in the programme soon.
Meti has secured ¥1bn ($8.76mn) of funding to help support the pilot operations, as part of the country's nearly ¥36 trillion supplementary budget plan for the current fiscal year ending on 31 March 2022.
Japan has pledged to cut GHG emissions by 46pc by 2030-31 compared with 2013-14 levels, before achieving a carbon neutral society by 2050. The country's preliminary GHG emissions during the April 2020 to March 2021 fiscal year were 1.149bn t of CO2 equivalent (CO2e), which was down by 5.1pc from 2019-20 and by 18.4pc from 2013-14, according to the environment ministry.
