Indonesia is one of the countries where Japan hopes to create an overseas carbon storage hub to sequester some of its emissions. Yet it’s also the country where Japanese firms have committed to reducing their CO2 footprint the most, via a specialist bilateral carbon credits mechanism.

Interestingly, both countries launched national carbon trading markets in the fall of 2023, and data indicates that the cost of carbon reduction is considerably lower in Indonesia. This opens a pathway for Japanese companies with overseas assets, especially in manufacturing, an option to bring down their CO2 footprint for less while “greening” their supply chain.

Last month, the Ministry of the Environment in Tokyo published the latest allocation of funding support via the Joint Crediting Mechanism (JCM), a scheme that offsets the costs for Japanese firms looking to introduce clean energy technologies overseas.

In return for funding projects in one of the 29 nations where Tokyo has a JCM agreement, Japan is able to claim around half of the CO2 reduction as its own. At the end of February, Ukraine became the 29th country to join the Joint Crediting Mechanism, the second European country to do so.