Japan To Accept Durable Carbon Removals In Its Emissions Trading Scheme

Japan To Accept Durable Carbon Removals In Its Emissions Trading Scheme - Carbon Herald

Japan became the world’s first country to accept the use of durable carbon dioxide removals in its national emissions trading system called the Green Transformation ETS (GX- ETS).

The move is a result of growing national carbon mechanisms in Asia, working on creating space for high-quality voluntary credits that will be used for compliance obligations. This is one of the few instances where a national government is so close to implementing durable carbon removals into a compliance market. 

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The Green Transformation ETS is part of the Green Transformation policy – a mix of fiscal and policy measures that outline a 10 year roadmap for an investment of 150 trillion yen (over $1.1 trillion) to transform various industrial sectors to achieve carbon neutrality and contribute to the energy transition in Asia. The ETS was launched in 2023. 

The first phase of Japan’s ETS is set to last until the end of March 2026 and involve voluntary participation from domestic companies in a baseline-and-crediting type system. It will transition into a compulsory ETS after 2026. 

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The scheme is also based on the concept of “pledge and review,” which means participants pledge their own ambitious reduction targets that are disclosed to capital markets, and are expected to be raised over time. The targets will be reviewed and if participants fail to reach them, they need to explain the reasons. The disclosure of their status incentivizes companies to make the best effort for their targets.

The ETS accepts two regulated carbon credit systems operated by the national government: the Joint Crediting Mechanism (JCM) and the J-Credit Scheme. The carbon removal methodologies that will be now accepted include carbon capture and utilization (CCU), bioenergy with carbon capture and storage (BECCS), coastal blue carbon, and direct air carbon capture and storage (DACCS).

Other methods may be added in the future depending on the outcomes of government studies and council discussions, or if progress is made on the works of other methodologies that are already being considered.

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