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Japan GX-ETS

ETS Status
under development
Jurisdictions
Japan
Offsets and credits
JCM credits and J-Credits will be allowed, details are under development.
GHGs covered
CO2

General Information

Japan combines several carbon pricing instruments to help meet net zero emissions by 2050: an existing carbon tax, a voluntary ETS (GX-ETS) that will evolve into a mandatory ETS from 2026, and a carbon levy (GX-Surcharge) to be introduced from 2028. Plans for this are outlined in the Basic Plan for the “Green Transformation (GX) Policy”, Japan’s ten-year decarbonization strategy.

The GX-ETS started as a voluntary baseline-and-credit system during its first phase 2024 to 2025. More than 700 companies, accounting for more than 50% of national emissions, participate. Under the GX-ETS, J-Credits (see below) are traded on the Tokyo Stock Exchange.

The GX-ETS is expected to transition to a mandatory ETS from FY2026 after its first compliance deadline. Upper and lower price limits are planned to be introduced. From FY2033, auctioning will be introduced for high-emitting entities in the power sector. A study group was established to clarify legal and regulatory aspects of the GX-ETS, including free allocation, auctioning, and cap setting.

Separately, a carbon levy (GX-Surcharge) will be introduced from FY2028 on fossil fuel importers and domestic fossil fuel extractors.

Japan is actively participating in international carbon markets. Its Joint Crediting Mechanism (JCM) is a bilateral scheme to incentivize decarbonizing technologies and mitigation actions in 28 partner countries. JCM credits will also be eligible for use in the GX-ETS. Separately, over 100 countries and organizations have joined Japan’s global capacity-building initiative, the Article 6 Implementation Partnership.

Emissions & Targets

1,135.5 MtCO2e (2022)

By FY2030: 46% reduction from FY2013 GHG levels including LULUCF credits; and continue efforts to cut emissions by 50% (NDC)

By 2050: Net zero GHG emissions (updated NDC)

Size & Phases

CO2

PHASE 1: Two years (2024 to 2025) (voluntary phase)

PHASE 2: Seven years (2026 to 2033)

Point source 

More than 700 entities

Flexibility & Linking

The GX-ETS will not be linked with any other system.

  • Carbon tax: Tax for Climate Change Mitigation on fossil fuels since 2012
  • Carbon tax: GX-Surcharge will be introduced in FY2028 to fuel importers and domestic extractors
  • Sub-national ETSs: in Tokyo and Saitama
  • Domestic and international crediting mechanism: J-Credits and JCM

Other Information

Ministry of the Environment: Supports the implementation of J-Credits and JCM; tasked with developing carbon pricing in Japan jointly with the Ministry of Economy, Trade, and Industry.

Ministry of Economy, Trade, and Industry: Supports the implementation of J-Credits; responsible for the GX League; tasked with developing carbon pricing in Japan jointly with the Ministry of Environment.

Central Environment Council: Advisory body to the Japanese Cabinet.

GX Acceleration Agency: Established to carry out operations related to the ETS and the GX-Surcharge system.

GX Basic Plan

GX Promotion Act

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