Photo/Illutration Business operators are being increasingly pressured to reduce their carbon footprints amid the global trend of decarbonization. (Asahi Shimbun file photo)

In a quest to reduce the nation's carbon footprint, Japanese business operators starting in fiscal 2023 will be able to buy and sell quotas of carbon dioxide (CO2) emissions.

Under the envisioned system, to start on a trial basis, corporations can trade unnecessary emission allocations secured through introduction of renewable energies and other arbitrary efforts.

The voluntary system will serve as a test of whether a full-fledged counterpart can be enacted someday, as Tokyo is considering imposing CO2 emission limits on individual enterprises in the future such as is being done in Europe.

The Ministry of Economy, Trade and Industry on Feb. 1 unveiled the basic concept of the Green Transformation (GX) League, which will be composed of corporations aggressively seeking to decarbonize. 

Member companies must agree on the government’s goal of achieving net zero CO2 emissions by 2050 under the program. They are also expected to release their own carbon footprint reduction targets for fiscal 2030.

Business operators are to disclose the amounts of CO2 generated in processes ranging from product manufacturing to disposal. The progress of their emissions reduction efforts will be reported annually to the league.

The economy ministry is weighing offering assistance to enterprises forging ahead with advanced projects in subsidies and other forms via the program.

In the run-up to the emission trading system’s introduction, the carbon credit market will be put into operation as part of the GX League setup.

The government will issue credits for companies that succeed in cutting their carbon footprints more drastically than their initial goals by adopting power-saving devices and renewable energy. When businesses fail to meet their targets, they will purchase credits to make up for their shortfalls.

A verification experiment will start in autumn 2022, and the transaction system will start operations in April 2023 at the earliest. The economy ministry estimates that 500 large and other enterprises will join.

As the emissions trading mechanism will inevitably add to the burden on businesses, corporations will be allowed to determine their own involvement under the economy ministry’s plan.

“A system to adjust emissions between companies is essential for realizing a carbon-free society,” said a senior ministry official about its future plan. “The initiation of emission transactions will become unavoidable at some point in time.”

In Europe, an emissions trading mechanism is already in place under which ceilings on the generation of CO2 and other greenhouse gases are set for corporations in certain industries. Firms with excess emissions have to buy quotas from other businesses.

A system called carbon border adjustments is on the agenda as well, so that goods imported from countries with looser environmental regulations will likely face higher tax rates.

Unless Tokyo takes steps to respond to those changes, the competitiveness of Japanese companies could gradually be undermined. With this possibility in mind, the economy ministry is seeking to accelerate decarbonization through the planned measures.

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