Japan will soon unveil its first-ever national carbon pricing exchange, starting with a soft launch to ease the mechanism into business life. The exchange is expected to run a hybrid model, combining a voluntary cap-and-trade scheme with a platform for trading carbon credits.
Although lagging carbon trading developments in Europe by two decades, Japan’s government aims to create an international hub open to overseas players and credits. It will also allow for trade in both compliance and voluntary credits.
The move could become one of the most important developments in Japan’s power industry since market liberalization, assigning a value to emissions that should encourage businesses to lower their CO2 footprint and improve the economics for clean energy projects. And yet, the fanfare around the launch has been toned down.
With the war in Ukraine sending already high energy prices to record levels, the government has focused on near-term ways to rein in electricity and fuel costs, including via oil subsidies. It is wary of companies that perceive the new market as an additional burden.