The current ETS began in 2023 and corporate participation is voluntary. 568 companies have joined so far, accounting for over half of Japan’s total greenhouse gas emissions. Targets for emissions cuts were also left up to industry associations. The ETS was designed to be voluntary to not burden companies with excessive decarbonization costs.
But last week, it became clear that GX League member companies’ emissions reduction targets will only reach 40% by 2030 compared to 2013, falling short of the government’s target of a 46% cut by 2030. The government’s plan to link its support with ETS participation would encourage more companies to join and set more ambitious targets.
The support will come from the proceeds of the GX transition bonds (issued under the name Climate Transition Bond), which are expected to have a total value of JPY20 trillion. This incentive is set to be formalized in 2025, when METI will submit an amendment to the GX Promotion Law at a regular session of the Diet.
METI also plans to create industry-specific guidelines for emissions cuts rather than letting the industries set these targets themselves. For companies that fail to reach METI’s targets, the government will consider issuing guidance and recommendations after 2026
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