Major companies in Japan face mandatory new rules on climate reporting under the next phase of the country¡¯s planned national emissions trading system.
Reporting requirements begin in April for about 300 to 400 companies with annual Scope 1, or direct, emissions of at least 100,000 metric tons. By September 2027, the businesses ¡ª which collectively account for about 60% of Japan¡¯s emissions ¡ª will need to submit calculations of their climate footprint and set out reduction targets.
Trading in the market is scheduled to begin next year following the allocation of emissions allowances.
Japan follows jurisdictions including the European Union and China in implementing a cap-and-trade system to spur heavy-polluting sectors to lower emissions. The Green Transformation Emissions Trading System, also known as the GX-ETS, is seen as a key pillar in Japan¡¯s plan to meet long-term climate targets, which include hitting net zero by 2050.
Adhering to the rules being introduced in April will require additional reporting and assurance activity, though the ¡°impact on overall business processes will be limited,¡± Japan Airlines, one of the companies covered under the plans, said in a statement.
Policymakers in December set a floor and ceiling on prices for allowances in the emissions trading system through 2030. ¡°The use of carbon credits and price controls may limit the ability of the program to incentivize short-term emissions reductions,¡± Bloomberg Intelligence strategist Yasutake Homma said in a note last month.
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