Japan yet to decide on carbon market development plan post-2026: official

The governments of Japan and Kazakhstan have signed a memorandum of cooperation for emissions reduction project development and carbon credit trading under the Paris Agreement's Article 6.2, the Ministry of the Environment of Japan said in a statement late Oct. 30.

As one of the pilot countries exploring inter-governmental, cross-border emissions trading, Japan established the Joint Crediting Mechanism in 2013.

The JCM, aligned with Article 6.2, enables Japan to invest in emissions reduction projects overseas and use part of the emission reductions to meet its climate targets committed under the Paris Agreement, called Nationally Determined Contributions.

Japan has already signed MOCs with 27 countries, the statement showed.

Like with other countries, the MOC with Kazakhstan does not specify which types of projects will be developed and how the emissions reductions will be distributed between the two countries.

"Both governments ensure the transparency and environmental integrity of the JCM and maintain it simple and practical," according to the MOC.

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To follow up the MOC, Japan and the partner countries are expected to form joint committees and plan for actual JCM projects.

On Oct. 31, the MOEJ announced that the first joint committee meeting between Japan and Sri Lanka had been concluded. The meeting reviewed a planned JCM project, and the committee decided that it had no objections to the planned project, according to another statement from the MOEJ.

The statement did not disclose the project type nor any detailed plan for implementation. Japan and Sri Lanka signed the MOC on Oct. 10, 2022.

JCM credits, once being delivered to the market, will be allowed to be used by companies participating in Japan's national emission trading scheme, called GX ETS, launched in April.

Currently, companies can only purchase J-credits, namely carbon credits produced from emission reduction projects within Japan. J-credit prices are relatively high due to high project development costs in the country. The JCM credits, to be produced overseas, are likely to have a lower level of prices, according to market participants.

In 10 days of trading from Oct. 11, when Japan's exchange-based carbon credit market was launched, J-credit traded prices were Yen 2,800-3,900/mtCO2e ($18.48-$25.74/mtCO2e) for renewable power generation projects and Yen 7,000-9,900/mtCO2e ($46.20-$65.34/mtCO2e) for forest-based, carbon sequestration projects, according to official data from Tokyo Stock Exchange, which hosted the trading platform.

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