Carbon Pricing

Committee:
Sustainability & Social Responsibility
status:
Some progress
Published:
Japan has introduced carbon pricing mechanisms, including a modest carbon tax and the voluntary GX emissions trading scheme launched in 2023. While these are steps in the right direction, current price levels remain far below what is needed to drive meaningful behavioral change among businesses and consumers. The voluntary nature of current instruments, combined with limited sectoral coverage and low price signals, means most greenhouse gas emissions remain largely unaffected. This weakens incentives for investment in low-carbon technologies and infrastructure.

Recommendations

The Japanese government should strengthen its carbon pricing framework by:
  • Introducing a robust, economy-wide system with meaningful price signals, whether through a carbon tax, emissions trading, or a hybrid model
  • Expanding coverage to all major emitting sectors
  • Setting clear timelines and predictable price trajectories to guide long-term investment decisions
A credible carbon pricing mechanism is essential to shift financial flows toward low-carbon solutions and ensure that Japan’s climate targets are achieved efficiently and equitably.