Context:
Starting in April 2026, Japan will implement a legally mandated carbon emissions trading system targeting large-scale emitters. This move follows the passage of new legislation by the Japanese Parliament aimed at curbing industrial carbon emissions.

What Is It?
A compulsory emissions trading scheme for companies releasing 100,000 tonnes or more of CO2 annually. Under this system, firms must monitor, limit, and offset their emissions through a carbon credit market.

Key Features:

• Mandatory Compliance: Applies to high-emission sectors such as power generation, steel, cement, paper, and chemicals.
• Emission Caps: Each company is assigned an annual carbon emissions allowance.
• Credit Trading: Firms that exceed their cap must purchase carbon credits from companies that emit less than their allowance.
• Market-Driven Approach: Aims to incentivize adoption of cleaner technologies and improve emissions efficiency through financial mechanisms.

Why It Matters:

• Global Alignment: Brings Japan closer to the EU’s carbon market standards, promoting international consistency.
• Climate Commitments: Supports Japan’s goal of carbon neutrality by 2050 and a 46% reduction in emissions by 2030 (relative to 2013 levels).
• Corporate Accountability: Encourages industries to invest in sustainable practices and green innovation through economic incentives.