GX: Green Transformation Policy: Emissions Trading System (ETS)

Country / jurisdiction: Japan · Year: 2023 · Status: In force · Level: National · Type: Voluntary

The Green Transformation (GX) ETS was introduced in 2023 as a voluntary baseline-and-credit system, with 570 companies joining the initiative. The voluntary phase (Phase I) is expected to last up to the end of 2025, and will become a mandatory ETS from 2026 onwards.

Under the voluntary phase, companies would set their own reduction targets for direct and indirect GHG emissions for 2025 and 2030. If a company exceeds its reduction target, it would be eligible to obtain an excess reduction allowance or carbon credits. If a company does not meet the target, it could either procure excess reduction allowances or eligible carbon credits or explain and publicly announce the reasons for not achieving the target.

Under the mandatory system, Japan plans to introduce emissions caps on large emitters, including major companies that emit 100,000 tons or more of CO2 annually in industries like electricity, steel, cars, and airlines. Companies will receive emissions quotas, and those who exceed the quota would be required to buy additional quotas, while those with a surplus would be permitted to sell them.

Official source: https://www.meti.go.jp/press/2022/02/20230210002/20230210002_1.pdf