Explainer: Japan's carbon pricing scheme kicks off at Tokyo Stock Exchange
11/10/2023 06:41
By Yuka Obayashi and Katya Golubkova
TOKYO, Oct 11 (Reuters) - The Tokyo Stock Exchange (TSE)
started trading carbon credits on Wednesday, a key element in
Japan's strategy to tackle climate change.
The world's fifth-largest carbon dioxide (CO2) emitter is
the latest among Asian nations to formulate plans for a carbon
pricing mechanism and emissions trading system, aiming to cut
emissions by 46% from 2013 levels by 2030 and achieve net zero
by 2050.
WHAT IS JAPAN AIMING TO ACCOMPLISH WITH THE SCHEME?
The carbon pricing scheme, which Japan launched in April in
a staged rollout, is aimed at speeding up decarbonisation to
help limit global warming in a country that has lagged other
major economies in implementing policies to curb emissions.
Japan believes the scheme, which combines emissions trading
and a carbon levy, will help make the world's third-largest
economy greener while maintaining the global competitiveness of
its industries, including heavy emitters like steelmakers.
Europe and the United States have developed state support
tools to help the private sector meet risks and costs associated
with green investments.
The Japanese government estimates the public and private
sectors will need to invest more than 150 trillion yen ($1
trillion) in decarbonisation measures over the next 10 years.
It will contribute 20 trillion yen of the total by
issuing bonds, with the revenue from the carbon levy and
emission allowances to be used to finance the redemption.
HOW IS THE EMISSIONS TRADING SCHEME BEING ROLLED OUT?
The scheme, based on proposals mainly by Japan's ministry of
economy, trade and industry and approved by the cabinet this
year, consists of emissions trading and a carbon levy.
As a first step, the TSE launched a new carbon credit market
on Oct. 11, 2023 to trade the existing carbon credits, known as
J-Credits.
In the next step, Japan's version of an emissions
trading system (ETS) will start in 2024 involving a forum for
"green transformation" called the "GX League".
Participants - about 680 companies as of the end of January
accounting for more than 40% of Japan's emissions - will be
given emissions allowances and required to set emissions-cutting
targets that will help the country meet its 2030 and 2050 goals.
Companies that beat their targets and the country's target,
will be able to sell emissions allowances, while those that do
not meet their targets would need to buy allowances.
Details have yet to be finalised on GX League emissions
trading, due to begin on the TSE next October.
By the 2026/27 fiscal year, Japan aims to set guidelines
for the ETS and introduce a mechanism for third-party
certification of companies' targets to make the system fair and
effective.
Official supervision may also be introduced for those
abusing the system.
From around 2033/34, auctions for emission allowances for
power producers will begin.
A carbon levy will be introduced from around 2028/29 on
fossil fuel importers such as refiners, trading houses and
electricity utilities. The initial tax will be set low but will
gradually rise.
HOW WILL TSE'S CARBON TRADING WORK?
A total of 188 entities had registered as participants of
TSE carbon credits trading as of Sept. 19. Trading hours are
9:00-11:29 a.m.(0000-0229 GMT) and 12:30-2:59 p.m. (0330-0559
GMT).
Via the new market, registered members can trade J-Credits
on the TSE, a unit of Japan Exchange Group Inc 8697.T .
Transaction prices are set twice a day and published after
trading hours.
Under the J-Credit system, the government certifies as a
"credit" the amount of greenhouse gas emissions, such as CO2,
reduced or removed through efforts to introduce renewable
energy, energy-saving equipment or forest management.
($1 = 148.6400 yen)
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Top 50 global CO2 emitters https://tmsnrt.rs/3fsAYKG
Top CO2 emitters by company and country https://tmsnrt.rs/3DTfdMj
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(Reporting by Yuka Obayashi and Katya Golubkova; Editing by
Sonali Paul)
((Yuka.Obayashi@thomsonreuters.com; +813-4520-1265))