The Tokyo Stock Exchange (TSE) is taking steps to make participation in Japan’s carbon credit market easier for major companies with high carbon emissions from November this year. This is being done to give a push to the lagging carbon credit market of the country.
TSE opened the market to trade in Japanese government-certified credits in October. Since then, only 310,000 tonnes of carbon credits have been traded, which is much lower as compared to similar overseas markets.
When carbon credit trading started in South Korea in 2015, 5.7 million tonnes of credits were traded in the first year. In China, the trading began in July 2021 and towards the end of the year, 170 million tonnes were traded.
Carbon credits, known as J-Credits in Japan, can be traded only by companies and municipalities that have reduced emissions by measures like planting forests or introducing renewable power. However, only 1 million tonnes of J-Credits are created every year and most traders are either governments, forestry corporations or regional companies.
TSE now plans to allow the companies participating in the government’s GX [Green Transformation] League, a national framework for decarbonization, to trade in the market. The country has set a goal to reduce greenhouse gas emissions by 46% in 2030 compared to what it was in 2023. If companies that are a part of the GX League reduce emissions beyond the national target they can sell the surplus as credits.
The carbon credit transaction expansion requires approval from Japan’s Financial Services Agency and TSE aims to receive it by June.
Presently, over 750 businesses are GX League participants including high-emission companies like Nippon Steel, Eneos and Tokyo Electric Power Co. Holdings.