Japanese companies that emit 100,000 tons or more of carbon dioxide annually will be required to participate in the carbon emissions trading system under a bill approved by the Cabinet on Feb. 25.
The bill to revise the law on promoting green transformation will be submitted to the current Diet session, with the aim of requiring companies that exceed the quotas to begin trading in fiscal 2027.
The obligation is expected to apply to 300 to 400 companies, which account for about 60 percent of the country’s greenhouse gas emissions.
Under the system, the government will allocate emission allowances to each company every fiscal year.
Companies that emit less than their allotted quotas can sell the surplus emission units to other companies, while those exceeding their limit must buy additional units from other firms.
If emissions still exceed their allotted allowances after purchasing additional units, companies must pay a financial penalty to the government.
The method for calculating emission allowances will be determined in fiscal 2025, with trading set to begin in fiscal 2027.
Emissions trading is a measure to reduce global warming through charging companies based on their CO2 emissions and aims to reduce overall emissions.
As part of its climate policy, the government plans to introduce a surcharge on fossil fuel importers in fiscal 2028 and start auctioning off emission allowances to power companies in fiscal 2033.
On the same day, the Cabinet also approved a bill to revise the law on promoting the effective utilization of resources.
Starting in fiscal 2026, companies that produce or sell a certain volume of plastic-based products will be obligated to use recycled materials.
“To ensure the smooth implementation of the system, we will enhance transparency in corporate emissions while gaining understanding from companies,” industry minister Yoji Muto said at a news conference that day.
