Japan starts carbon credit trading trial to meet climate goal

TV camera men wait for the opening of market in front of a large screen showing stock prices at the Tokyo Stock Exchange in Tokyo
TV camera men wait for the opening of market in front of a large screen showing stock prices at the Tokyo Stock Exchange in Tokyo, Japan October 2, 2020. REUTERS/Kim Kyung-Hoon/File Photo

TOKYO, Sept 22 (Reuters) - Japan started a trial trading of carbon credits on Thursday at the Tokyo Stock Exchange (TSE) as the world's fifth-largest carbon emitter aims to create a nationwide market mechanism to meet its goal of becoming carbon neutral by 2050.

The TSE, a unit of Japan Exchange Group Inc (8697.T), has been commissioned by the Ministry of Economy, Trade and Industry (METI) to conduct the pilot project as the ministry prepares to set up the first exchange-based market for trading carbon credits in Japan, to help participants offset their emissions or monetise reduced emissions.

"The use of carbon credits is an essential initiative to achieve efficient emission reductions throughout society," Makoto Nagamine, parliamentary vice-minister of METI, told an opening ceremony.

"Putting a price on the value of carbon reductions through the credit trading will increase the predictability of decarbonisation investments," he said.

Under the trial, registered members, numbering 145 as of Thursday, can trade existing carbon credits, known as J-Credits, certified by the government. They have been traded over-the-counter on a voluntary basis since 2013.

The J-Credit scheme is designed to certify as credits the holder's emissions reductions or removal of greenhouse gases such as carbon dioxide through energy-saving devices, forest management and other methods.

At the TSE, trading hours are 9:00-11:29 a.m. and 12:30-2:59 p.m. (0000-0229 and 0330-0559 GMT). Transaction prices are set twice a day and published after trading hours.

A total of 627 CO2-tonnes was traded in the four categories under the J-Credit scheme on Thursday, with the most-active renewable energy credit settling at 3,300 yen ($23) per CO2-tonne, TSE said.

The trial will continue through the end of January, followed by a government review and possible improvements to the system before it is formally launched.

"We want to go into full-scale operation as early as next April if all goes well," an official at the industry ministry said.

The ministry is also preparing to create Japan's version of an emissions trading system (ETS), called "GX League," next business year that starts in April. GX stands for green transformation.

A group of participants, 440 as of end-March, would be required to pledge and disclose their emissions reduction targets in accordance with methodology set by the government. If the target is not met, they will trade emissions through the market on a voluntary basis.

($1 = 142.5100 yen)

Reporting by Yuka Obayashi; Editing by Edmund Klamann and Jane Merriman

Our Standards: The Thomson Reuters Trust Principles.