COP27 kicks off in Egypt this week. Some participants have come to talk about policy; others to bemoan geopolitics; and more than a few to argue over the validity of various climate actions. Japan, however, will be there primarily to do business.
Of course, the nature of the business is very much linked to climate and the ways in which Japan can meet its agreed GHG emission cuts. Tokyo’s primary goal at the UN climate change conference, which officially opened on Nov. 6, will be to help craft an international framework for the cross-border trading of emissions credits.
Japan has worked on such a framework ever since the basis of such trading, Article 6 of the Paris Agreement, was ratified at last year’s COP26 in Glasgow. Also, Tokyo recently launched a domestic carbon trading exchange, albeit on a trial basis.
Should carbon trading mechanisms align across many countries, it would incentivize investment in decarbonization in lower cost geographies, potentially creating better efficiencies and providing funds for green solutions in developing economies. Such an international approach could create an export market for Japanese decarbonization tech, while also locking in emissions cuts as a business procedure.