Emissions Trading Scheme (GX-ETS): Policy direction to be clarified by year-end; Fossil fuel levy also under discussion
Regarding the introduction of the GX-ETS (Green Transformation Emissions Trading Scheme), the Ministry of Economy, Trade and Industry (METI) began work on the detailed design of the emissions allowance trading market on August 26. The market is scheduled to open around autumn 2027. METI will also examine the calculation method for the fossil fuel levy, which is expected to be introduced in FY2028. The METI is expected to finalize the policy direction for both items by the end of the year.
The Emissions Trading Scheme Subcommittee of the Industrial Structure Council (an advisory body to the METI) met, and the secretariat outlined the issues to be considered in the current fiscal year.
Once the details have been finalized, ministerial ordinances, public notices, and other relevant provisions under the GX Promotion Act will be amended.
Key issues concerning the emissions allowance trading market include the frequency of market operation and the trading method. At the meeting held on the same day, the METI presented a draft basic market design. The market is scheduled to operate on weekdays, with a trading unit of one metric ton of carbon dioxide (CO₂)
The trading method will be a call auction, in which all buy and sell orders are aggregated and executed simultaneously at a single price.
The METI also announced plans to consider responses under the GX-ETS in light of the situation in the Middle East, which had not been anticipated as of FY2025, based on surveys of actual conditions across industries. Key issues include the application of adjustment measures for the “benchmark activity level,” which refers to production volumes or electricity generation volumes and is used as a basis for allocating free emission allowances.
The fossil fuel levy will be introduced in FY2028 for businesses importing oil, coal, and natural gas. It will be imposed in proportion to CO₂ emissions attributable to imported fossil fuels, and the resulting costs are expected to be reflected in wholesale electricity prices and retail electricity rates.