The challenge of a blue water city: emissions cap and trade schemes and a sustainable future - March 2025

The challenge of a blue water city: emissions cap and trade schemes and a sustainable future - March 2025

As we enter the 2020s, countries around the world are introducing or strengthening emissions trading schemes (ETS) in an effort to reduce greenhouse gas emissions.
In particular, the European Union's (EU) EU-ETS functions as the world's largest emissions trading scheme, achieving a 43% reduction in emissions in 2020 compared to 2005 levels.

Current Status in Japan

In Japan, no national emissions trading scheme has yet been introduced, but the Tokyo Metropolitan Government and Saitama Prefecture are operating their own schemes.
The Tokyo Metropolitan Government and Saitama Prefecture launched their schemes in 2010 and 2011, respectively, setting reduction targets for energy consumption and greenhouse gases.
These systems have reported high compliance rates among eligible businesses, contributing to the achievement of reduction targets.

Future Prospects

The Japanese government is considering the full-scale operation of an emissions trading system to achieve Green Transformation (GX).
Detailed design of the system is underway, including setting upper and lower bounds on prices and enhancing the price discovery function on the exchanges from FY2026 onward.

Expansion of the carbon credit market is also underway, with trading volume increasing from 2020 to 2023.

Related Information

- EU Emissions Trading Scheme (EU-ETS)
- 43% emission reduction by 2020 compared to 2005 levels.

- Tokyo Metropolitan Government and Saitama Prefecture Emissions Trading Scheme
- Introduced in 2010 and 2011, respectively, and achieved high compliance rates.

- Japanese Government's GX Policy and Future of ETS
- Considering introduction of a full-scale emissions trading system from FY2026 onward.

- Expansion of carbon credit market
- Trading volume is increasing from 2020 to 2023.

The introduction and strengthening of emissions trading schemes in the 2020s is accelerating countries' decarbonization efforts.
In Japan, based on successful examples at the regional level, studies are underway to introduce a country-wide system.
Future policy developments and corporate responses will be key to achieving a sustainable future.