Govt to Oblige Companies to Set CO2 Reduction Targets; Japan to Begin Emissions Trading System in Fiscal 2026

The Yomiuri Shimbun

21:00 JST, December 19, 2024

The government plans to oblige companies that will take part in its emissions trading system, which will be fully introduced in fiscal 2026, to set and make public medium- and long-term goals for cutting carbon dioxide (CO2) emissions, according to informed sources.

The step will be taken to boost external oversight functions to achieve the goal of Japan becoming carbon-neutral — meaning that greenhouse gas emissions will be effectively reduced to zero — by 2050. The government plans to impose penalties on companies that fail to set emission reduction goals.

The Economy, Trade and Industry Ministry will submit proposed amendments to the relevant law to the ordinary Diet session next year. The amendments will reflect the government’s plans.

About 300 to 400 companies that emit more than 100,000 tons of CO2 per year in Japan are expected to participate in the emissions trading system. These companies emit about 60% of the nation’s current CO2 emissions.

Under the system, participating companies will be required to draw up CO2 reduction goals each year and submit them to the government, according to the sources. The government will disclose the goals to enable investors and others outside to monitor the progress. The ministry plans to consider what punitive measures to take against companies that fail to set objectives.

Under the emissions trading system, the government will allocate emissions quotas to individual companies each fiscal year. If companies’ emissions exceed their allocated quotas, they will be able to purchase quotas in the carbon market. If companies’ emissions are below the allocated quota, they can sell spare quotas in the market. Companies’ CO2 emissions will be subject to third-party verification.