Govt shows draft plan for carbon pricing system

TOKYO (Jiji Press) — The Economy, Trade and Industry Ministry presented a draft plan Wednesday for a proposed carbon pricing system under which companies will pay for their carbon dioxide emissions according to the amounts.

The plan, shown at a ministry panel meeting, also envisions that a full-fledged carbon emission trading system will start as early as fiscal 2026 and that power utilities will be required to buy emission quotas in stages from around fiscal 2033.

The plan is expected to be reported to the government’s green transformation implementation council, headed by Prime Minister Fumio Kishida, within this month for a final decision.

The government estimates that over ¥150 trillion in public and private investments will be necessary in the next decade to promote decarbonization.

Of the total, about ¥20 trillion will be raised by issuing new green transformation bonds, which will be managed under a special account of the government.

The bonds will be redeemed with funds procured through the carbon pricing and emission trading systems and with a new levy on oil wholesalers and other fossil fuel importers based on emission volumes, set to be implemented from around fiscal 2028.

Currently, companies that import fossil fuels pay the petroleum and coal tax, while companies in general and households pay the renewable energy levy that is added to electricity rates.

As decarbonization progresses, petroleum and coal tax payments are expected to start decreasing around fiscal 2028, while payments of the renewable energy levy will go down from around fiscal 2033.

The industry ministry’s draft plan is aimed at introducing the carbon pricing system in stages around when such payments are seen decreasing.

The ministry also presented a proposal on how to use the ¥20 trillion proceeds from the green transformation bonds.

Between about ¥6 trillion and ¥8 trillion will be used to promote nonfossil energy sources such as hydrogen, while around ¥9 trillion to ¥12 trillion will be spent to spur industrial restructuring and energy conservation efforts.

Meanwhile, about ¥2 trillion to ¥4 trillion will go to items related to resource recycling, including research and development of new technologies.