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Japan commits 20 trillion yen to accelerate emissions trading and carbon reduction

The Japanese government is injecting a significant 20 trillion yen ($137.4 billion) to drive decarbonisation efforts, motivating businesses to engage in the emissions trading system (ETS). While ETS participation remains optional for companies, the government is poised to link financial support to this green initiative.

Japan commits 20 trillion yen to accelerate emissions trading and carbon reduction_View of Tokyo at sunny day with Mount Fuji in the background_visual 1View of Tokyo at sunny day with Mount Fuji in the background.

Industry-specific guidelines will be instituted to curtail carbon emissions, accompanied by potential penalties for non-compliance starting the 2026 fiscal year. Companies gain autonomy in setting their reduction targets following ministry guidelines, subject to third-party certification.

The Ministry of Economy, Trade, and Industry plans a transformative amendment to the Green Transformation (GX) Promotion Act in 2025, integrating measures to enhance the ETS. Currently, participation in the programme is optional, but the ministry aims to create a mechanism to stimulate involvement post 2026.

Read more: Revolutionising green finance: Wall Street's role in the $1 trillion carbon market

To receive government support via GX Economic Transition Bonds, valued at 20 trillion yen, companies must partake in the ETS. The ministry's December 2023 schedule outlined sector-specific decarbonisation plans, with a focus on supporting low-emission manufacturing methods, including hydrogen-based steelmaking.

Japan, aiming to catch up with global leaders, currently lags in emissions trading, with only 50% of domestic emissions covered by the 568 participating companies, including industry giants Nippon Steel, Hitachi, Toyota, and TEPCO. The move aligns with global efforts, as emissions trading has proven effective in the EU, China, and select US states, achieving a 37% reduction in targeted industries since 2005.

Read more: Carbon pricing: global solutions for a global challenge

The policy revision addresses diverse industry challenges, recognising varying decarbonisation complexities. For instance, the steel industry, a major emitter, faces hurdles in decarbonisation technology, making tailored guidelines essential.

To effectively fulfil environmental pledges, global cooperation is needed. Nations must build upon the opportunities of carbon offsetting initiatives, sharing expertise and best practices while establishing international agreements that champion fair and sustainable solutions. DGB Group remains steadfast in adhering to rigorous industry standards and collaborating with all stakeholders, including governments, policymakers, and local communities, ensuring the meticulous execution of our nature-based projects. These initiatives are distinguished by their exceptional quality and enduring impact on the environment. They not only rejuvenate essential habitats and enhance ecosystem resilience but also cultivate a balanced coexistence between humanity and the natural world. Our resulting carbon credits are highly coveted in the market, attesting to the quality of our projects.

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