Exciting news from Tokyo Stock Exchange! The carbon credit market is now open, paving the way for sustainable business practices and a significant reduction in CO2 emissions. 

Japan, October 11, 2023 - The Tokyo Stock Exchange, a member of the Japan Exchange Group (JPX), opened a carbon credit market for trading quotas to reduce carbon dioxide (CO2) emissions and initiated trading. This move enables market trading of carbon credits negotiated between businesses, supporting companies in reducing their CO2 emissions and contributing to the goal of reducing greenhouse gas (GHG) emissions by 46% by 2030, ultimately achieving carbon neutrality (virtually zero GHG emissions) within 50 years.

The market will be operated by the TSE under contract from the Ministry of Economy, Trade and Industry, based on the concept of the GX League, an industry-academia-government consortium established under the leadership of the Ministry of Economy, Trade and Industry. As of September 19th, 188 people have registered, and with applications included, the number exceeds 200. Companies and organizations from various industries, not just energy, are participating.

The amount of CO2 emissions reduced through the introduction of energy-saving equipment and the use of renewable energy, as well as the amount absorbed by forests, will be traded as credits. Initially, the "J-Credit," certified by the government, will be eligible. Six types of buying and selling categories have been established, including energy saving and renewable energy (electricity). Buyers and sellers place orders in their desired categories, and trades are executed twice a day, in the morning and afternoon.

Approximately 1 million tons of J-credits are created every year, with a cumulative total of 8.89 million tons in fiscal 2022. Government ownership accounts for over 60% of this. A "market maker system" will be introduced to smoothly supply government-held credits to the market and increase the liquidity of transactions. Financial institutions, such as securities companies, register as market makers and procure credit from the government. Then, by placing buy and sell orders, the price is always determined, making it easier for general consumers to trade. The system will begin operation in November.

In the future, an increase in the handling of non-J-credits and the addition of excess reduction quotas under the GX League’s emissions trading system are expected. Other candidates include the “Bilateral Credit Mechanism (JCM),” which utilizes Japanese technology to contribute to global warming countermeasures overseas, and “Voluntary Credit,” led by overseas private sectors and non-governmental organizations (NGOs).

At a ceremony held on the 11th, Minister of Economy, Trade and Industry Yasutoshi Nishimura stated his ambition: “We will draw out green transformation (GX) investment from private companies while realizing efficient emissions reduction for society as a whole.” JPX CEO Hiroki Yamamichi said, “We will proceed with system design in cooperation with the Ministry of Economy, Trade and Industry.”

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