Japan Starts First Carbon Credit Exchange in Net Zero Push

(Bloomberg) -- Trading on Japan’s first carbon-credit exchange started Wednesday, as the nation looks to put a price on emissions to help zero them out by 2050.

The market is being run by the Tokyo Stock Exchange, and participants can trade so-called J-Credits, a locally issued unit certified by the government that is awarded to projects that reduce emissions and can be used by companies or institutions wishing to offset their own pollution. There will be J-Credits in six categories, such as renewable energy and agriculture. 

Carbon credits, or offsets, have attracted criticism in recent years due to question marks over whether many of the projects actually deliver climate-friendly benefits that wouldn’t have occurred without the payments. They’ve also stirred a debate about how much companies should be trying to shrink their carbon footprints before they offset what they deem to be unavoidable emissions.

Other Asian nations are also attempt to price pollution. Most recently, Indonesia began a carbon emissions trading market last month. Japan aims to cut greenhouse gas emissions by 46% from 2013 levels by 2030 and plans “full-scale” emissions trading by 2026, although details haven’t yet been released.

“One of the biggest merits of having a market is having price transparency,” said Miyuki Kan, director of derivatives department at Daiwa Securities, which participated in the trading at the market’s open. “Market functions will likely improve as more buying and selling take place in the future.”

Renewable power was the most active J-Credit on Wednesday, with 3,001 tons of emissions traded in the afternoon session at 3,060 yen ($20.58) per ton, according to the bourse.

There were 188 registered participants on carbon credit exchange by last month. The TSE will accept orders in the morning and afternoon, with prices placed at 11:30 a.m. and 3 p.m. local time. Previously, there was trading in J-Credits directly between parties.

“Through carbon credit trading, carbon emissions reduction can be priced, thereby improving the predictability of decarbonization investment and encouraging companies to implement them,” Trade Minister Yasutoshi Nishimura said Wednesday at the market opening ceremony. 

(Updates with details of trading in 6th paragraph.)

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