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The Japanese government's commitment to carbon neutrality by 2050 has prompted the introduction of an emissions trading system, marking a significant step towards achieving sustainability goals. In line with this, Tokyo Stock Exchange, Inc. (TSE) has initiated plans to establish a Carbon Credit Market based on insights gained from the Technical Demonstration Project for Carbon Credit Market commissioned by the Ministry of Economy, Trade and Industry (METI) in FY2022.
Key Components
- Market Framework: The Carbon Credit Market will facilitate trading of J-Credits, representing carbon dioxide equivalent quotas, derived from various schemes including Domestic Credit, Offset Credit, and regional J-Credits.Trading will be conducted through auctions held on trading days specified by TSE, ensuring transparency and fair price formation.
- Participant Requirements: Prospective participants, termed "Carbon Credit Market Participants," must meet stringent criteria ensuring financial stability, operational integrity, and adherence to regulatory standards. Registration involves thorough scrutiny of applicants' credentials, including financial documentation, system capabilities, and legal compliance.
- Trading Mechanism: Auction trading will occur twice daily, with orders accepted within specified timeframes. Only pre-specified price orders (limit orders) will be accepted, ensuring orderly market conduct and price stability.
- Settlement Procedures: Settlement will involve the transfer of carbon credits and funds between buying and selling participants, facilitated by TSE. Strict timelines and procedures govern the transfer of credits and payment of funds to ensure smooth transaction execution.
Implementation Schedule
Trading on the Carbon Credit Market is slated to commence in October 2023, with participant registration expected to open around July 2023. This timeline aligns with the government's roadmap for emissions trading system implementation, marking a crucial milestone in Japan's journey towards carbon neutrality.
