About a “Pro‒Growth Carbon Pricing Concept”

Abstract

Based on the GX Promotion Act（enacted May 2023）, the Japanese government adopted the “GX Promotion Strategy” in July 2023. The strategy sets forth necessary policies to be implemented to achieve 150 trillion yen of public and private investments to realize GX（green transformation）, a transition from a fossil fuel-oriented economic and industrial structure since the Industrial Revolution to a clean energy-oriented one. To promote the GX investment as described above, a “Pro‒Growth Carbon Pricing Concept” will be embodied and implemented as soon as possible.

1) 　Government support for advance investment by issuing new government bonds

2) 　Introduction of carbon pricing to incentivize early GX investment

⑴　Full-scale operation of emissions trading system in high emission industries［from FY2026］.

⑵　Introduction of a GX‒Surcharge on fossil fuel supply［from FY2028］

⑶　Allowance auctioning to be phased in gradually to power generation companies［from FY2033］

3) 　Strengthen financial support through public-private partnership（e.g. blended finance with the GX Promotion Agency）

The GX League is a framework in which a group of internationally competitive companies that are boldly taking on the challenge of transitioning to carbon neutrality will drive GX. As of FY2024, more than 700 companies have participated in the league.

These companies have been making significant efforts to reduce emissions, upholding their own targets of emission reductions not only for FY2030 but also for FY2025, and have also decided to participate in an emissions trading system currently being operated on a trial basis. Moreover, active discussions on and proposals for rulemaking, which is difficult for individual companies to undertake, have been held regarding areas such as emissions reductions throughout the supply chain and the input of green products into the market.