Japan to pilot first carbon trading market in September


Japan Exchange Group (JPX) is collaborating with Japan’s Ministry of Economy, Trade, and Industry (METI) to set up the country’s first exchange for carbon trading. The scheme is expected to start operating as a technical demonstration project in this September.

JPX is a Japanese financial services corporation which owns and runs the Tokyo Stock Exchange, Osaka Exchange, and Tokyo Commodity Exchange.

The project is to establish an exclusive market within the Tokyo Stock Exchange (TSE), with a pilot project set to begin in September. If everything goes as planned, the exchange should come into full operation by April 2023.

MEIT has previously launched a framework called the Green Transformation (GX) League. The members of the league must abide by Japan’s carbon neutrality goal for 2050 and disclose every year the amount of their carbon emissions in the processes ranging from manufacturing to disposal.

A total of 440 companies have agreed to join the league, and these firms are expected to participate in the upcoming carbon trading market.

As of today, globally active Japanese corporations have made attempts to begin carbon trading with others, both among themselves and with foreign parties, but domestic enterprises have been excluded due to a lack of price transparency.

Without the benefit of carbon trading, decarbonization can be a lengthy process for highly energy-intensive industries such as mining, metals, chemicals and cement. As a result, a robust, internationally visible, and credible carbon trading market might be utilized to accelerate these corporations’ promises of net zero emissions by at least a decade.

Japan’s scheme is the same as the plan for other countries. Firms should set specific targets for reducing emissions by 2030, and if those targets are not met, they should purchase carbon credits to offset their emissions. However, unlike the European scheme which forces power plants to purchase emission allowances, participation in the trading market will not be compulsory under the Japanese system.

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