Government working group holds first meeting to discuss key issues for the full-scale introduction of emissions trading.
On September 3, the government launched a carbon pricing expert working group to discuss the specific design of a CO2 emissions trading system in preparation for its full-scale implementation in FY2026. The working group plans to summarize the key points in December. The government intends to submit a revised bill for the GX promotion law to the ordinary Diet session next year, incorporating the emissions trading system.
Emissions trading was launched on a trial basis last fiscal year through the ”GX League”, a coalition of companies from the steel, chemical, and electricity, gas, and heat supply industries, committed to advancing GX (Green Transformation). In January, Prime Minister Fumio Kishida announced plans to prepare for the full-scale introduction in FY2026 by pursuing mandatory participation for large companies and establishing a certification system for individual companies’ emission reduction targets.
The first issue to be discussed by the WG is the target of the emissions trading system, specifically how to determine the criteria for targeting companies with emissions above a certain scale. The second issue is the objectivity and fairness of target levels, considering the variability in emission reduction targets within the GX League, not only across industries but also among individual companies.
According to the GX Implementation Office of the Cabinet Secretariat, in the EU, the participation of financial institutions and investment firms in emissions trading has increased the volume of trading and the market has become more active. However, some in the industrial sector are wary of the market becoming a money game, and the fourth point of contention is how the scope of trading participants and the nature of the exchanges should be defined.
The last issue is investment predictability. In the emissions trading system, there is a concern that the market price fluctuation will reduce the predictability of the trading price. The plan is to set an upper and lower limit to the trading price, and to set up a mechanism to increase predictability by indicating the price range in advance.