The carbon tax (Tax for Climate Change Mitigation) on CO2 emissions from all fossil fuels was enforced in October 2012. The tax rates have been consistent or gradually increased across sectors. The revenues are neutral and used to curb CO2 emissions from energy.
Japan’s Voluntary Emissions Trading Scheme (JVETS)
JVETS was launched in 2005 to support over 200 businesses not part of the Keidanren (a business association in Japan) in reducing emissions and ended operation in March 2014. JVETS was led by the Ministry of the Environment and helped to accumulate knowledge and experience of operating a cap and trade scheme.
Integrated domestic market for emissions trading (or “Trial Implementation”)
An initiative to link JVETS with the “Keidanren’s Voluntary Action Plan (VAP) toward 2020” – a voluntary commitment in 1997 among a majority of installations registered as a member of the Keidanren (a business association in Japan) - implemented a trial version of a domestic emissions trading scheme in 2008. The idea of the establishment of a national emissions trading scheme is based on the Basic Act on Global Warming Countermeasures which stipulates the establishment of a domestic emissions trading scheme to:
Set emissions allowance to achieve target reduction
Allow flexible fulfillment of reduction obligations
Promote cost-effective emission reduction
Subnational Emissions Trading Scheme
Over 30 local governments have started their own mitigation schemes/programs that require businesses to draft their GHG reduction plans. For example, launched in April 2010 by the Tokyo Metropolitan Government, the Tokyo Emissions Trading Scheme requires mandatory reduction of absolute CO2 emissions in urban emitters, such as office buildings and factories.
Offset and/or Other Emission Reduction Crediting Programs
Emissions reduction by SME, agriculture and forestry and other domestic projects are verified as reliable credits for market transactions.
Bilateral Offset Credit Mechanism (BOCM)/ Joint Crediting Mechanism (JCM)
Japan uses flexibility mechanisms to meet its emissions targets by purchasing credits from abroad. GHG reductions from BOCM/JCM are monitored through a sophisticated MRV system.
Other Climate Financing Instruments
Japan seeks to raise the share of renewable energy through the feed-in tariff. Under this scheme, electric power suppliers are required to procure the whole renewable electricity at a fixed price. They collect surcharges from electricity users to cover the costs.