Japan is planning to launch its emissions trading system, namely GX-ETS, in April 2023, following the establishment of the GX League¹ by the Ministry of Economy, Trade, and Industry (METI) in 2022, and Former Prime Minister Suga’s declaration for Japan to be carbon neutral by 2050. The GX-ETS is part of Japan’s GX plan, a core policy in achieving Japan's carbon neutral target that outlines regulatory, financing, and technology development priorities for greening industries.

According to the GX plan's 10-year roadmap, the first phase of GX-ETS will last for three years until the end of March 2026, involving voluntary participation from companies and a baseline-and-crediting design. Companies who beat their targets will be eligible to earn issued credits. From 2026, the system will transition to a more traditional ETS. From 2033 the focus will be accelerating the transition toward decarbonization in the power sector, with auctioning to be introduced.

METI is currently in charge of developing the ETS, and a new government agency will be created to fully run the operation and provide support for the scheme over the medium to long term.

A set of guidelines for companies to participate the GX-ETS is being released, including “Guidance on efforts required of GX League participating companies”, “Base Year Emissions Calculation and Reporting Guidelines”, “Calculation/Monitoring/Reporting Guidelines”, “Third Party Verification Guidelines”, “Excess Reduction Limit Register Regulations” and “GX Dashboard Information Disclosure Guidelines”.

A brief summary of basic details of the GX-ETS is given below.

¹ A multi-industry platform where government, academia, and finance collaborate to take on the challenge of GX (Green Transformation), to discuss the transformation of the entire economic and social system, and to take the lead in the creation of new markets in order to achieve decarbonization.