Japan

JP-2:Japanese Voluntary Emissions Trading Scheme (JVETS)

Policy Description

The Japanese Voluntary Emissions Trading Scheme (JVETS) was introduced in September 2005 by the Ministry of Environment Japan (MOEJ) to support greenhouse gas emissions (GHG)  reduction activities by Japanese companies  that are not included under the Keidanren Voluntary Action Plan (VAP). JVETS is a voluntary cap-and-trade system, which has recently concluded its fourth phase (period 2008-2010).

Description

The Japanese Voluntary Emissions Trading Scheme (JVETS) was introduced in September 2005 by the Ministry of Environment Japan (MOEJ) to support greenhouse gas emissions (GHG)  reduction activities by Japanese companies  that are not included under the VAP [1], [3]. JVETS is a voluntary cap-and-trade system, which has recently concluded its fourth phase (period 2008-2010).

The total number of participants in the four phases was about 250, of which 80 adopted a target. During the 5th Phase about 80 participants with targets remain (*3). The participants adopt absolute emissions reduction targets (rather than intensity-based) and receive emission allowances - Japanese Emission Allowances (JPAs)- from the government corresponding to the level of emissions in the year of compliance (*2). The issued allowances can be traded and used for compliance. CDM credits, known as j-CERs under the scheme can also be used without limit, but not as the primary means of achieving the pledged targets. Banking is allowed under the scheme, while borrowing is not.

The so-called Competent Authority Committee under the Ministry of Environment manages the JVETS. The Committee drafts guidelines, approves submitted monitoring plans and verification reports, and evaluates verifiers’ achievements.

One third of the cost of GHG emission reduction measures is subsidized by government as an incentive. However, subsidies are no longer  available since April 2009. In case of non-compliance, the subsidy must be returned to the government. 

A nation-wide domestic cap-and-trade emission trading scheme has been proposed in 2009 (after several years of discussion), which builds on the experience gained in the JVETS. This mandatory system is however strongly opposed by Japanese stakeholders and in December 2010 the government officially postponed the plans for a national emissions trading scheme.

Policy Information Expand this section for information on the key features of the policy, such as its date of introduction, categorization, main objective(s) and linkages with other policies.

Policy Categorisation

Policy Instrument Type: Economic, Emissions Trading

Position in the Pyramid

About Us

Participation: Mandatory

Period

Start Date: 2005

Policy Linkages

Supported By Subsidy scheme for energy efficiency Supporting Measure
Supported By Fiscal incentives for energy efficiency Supporting Measure
Complements Keidanren Voluntary Action Plan (VAP) (ENDED) Effort Defining

Agencies Responsible

Ministry of Environment
Competent Authority Committee

Primary Objective: GHG Emissions

Objective

To gain experience for a future comprehensive domestic emission trading scheme for large emitters [2]:

Target Group

Nonferrous metal industry, machine and other manufacturing, ceramic, steel, chemical, paper and pulp, textile, food and drink and some non-industrial sectors. Only companies from these sectors that do not participate under the VAP are covered by JVETS [3]

Driver of energy consumption or emissions affected by policy: Total GHG emissions

Implementation Information Expand this section for information on targets, monitoring, verification and enforcement regimes, and implementation requirements and tools.

Coverage

Companies that do not participate in the Kaidanren VAP, currently about 80 participants.

Quantitative Target? yes

Target: Different absolute GHG target for each participant, unilaterally decided [2]

Time Period: Annual commitment periods

Progress Monitored? yes

Verification Required? yes

Enforced? yes

Sanctions: In case of non-compliance, the received subsidy of energy efficiency measures must be paid back. Names of firms that fail to meet their target are made public.

Requirements on the Target Group

  • Monitoring and reporting (i.e. Annual emission report), which follows ISO 14064/14065 guidelines;
  • Combined with compliance report at the end of the period ;
  • Surrendering sufficient allowances to cover emissions.

Support by Government

• Cost for monitoring and verification will be paid by MOE; • One third of the cost of GHG emission reduction measures is subsidized by government as an incentive. In case of non-compliance, the subsidy must be returned to the government.

Implementation Toolbox

The most important tools providing support to the implementation of this policy are: Methodologies for allocation of emission allowances in the emission trading system; • Monitoring and reporting guidelines, • Emissions verification guidelines; • Standard transaction contracts, and the IT-system for emissions trading (including the registry). See www.jvets.jp (Japanese only).

Complexity of Implementation

Government

The trading scheme was innovative and required much effort from the government in developing the system, regulation and guidelines for reporting, monitoring and verification.

Target Group

Although the scheme was new to the target group, the extensive guidance provided by government supported the implementation by the target group. Targets were unilaterally set.

Impacts, Costs & Benefits Expand this section to find information on policy effectiveness and efficiency.

Impact Quantitative Estimate Qualitative Estimate
Estimated effect on energy consumption or emissions Phase IV comprised 61 target participants and 25 trading participants. The total emissions reduction target was of 0.23 Mt of CO2, while achieved reductions are not yet known. The average cost of emissions reductions was JPY 1766/tCO2 (USD 17/tCO2). [8] Assumed to be low, due to voluntary participation, and unilaterally adopted targets
Estimated costs/benefits for industry Not available Assumed to be low, due to voluntary participation, unilaterally adopted targets, coverage of M&R cost by government and subsidies to cover part of the cost of measures.
Estimated cost for government Not available Costs of subsidies provided as incentive for participation
Other Benefits
General Benefits Emission reductions, reduced energy costs, improved competitiveness.
Specific Benefits A survey among participants resulted in the following perceived specific benefits (in order of importance): gaining know-how on emissions trading, better insight into emissions, more insight into options for energy efficiency improvements, and sales revenues from trading.

References & Footnotes

References

[1] Japan's Voluntary Emissions Trading Scheme(J-VETS) http://www.et.chikyukankyo.com/English/index2005.html

[2] Institute for Global Environmental Strategies (IGES), Japanese Voluntary Emissions Trading Scheme (JVETS): http://www.iges.or.jp/en/cp/pdf/activity06/07.pdf

[3] Ministry of the Environment, Japan, Japan’s Voluntary Emissions Trading Scheme (JVETS): http://www.env.go.jp/en/earth/ets/jvets090319.pdf

[4] Kyoto University, JVETS: http://www.wupperinst.org/uploads/tx_wiprojekt/ikkatai1_03.pdf

[5] Leggett, J., Greenhouse Gas Control Policies in Japan, Feb 2010: http://www.eoearth.org/article/Greenhouse_Gas_Control_Policies_in_Japan

[6] Junko Edahiro, [Newsletter] Tokyo Metropolitan Government Leads Japan, Launches Own GHG Emissions Cap-and-Trade Program, JFS Newsletter No.94 (June 2010) : http://www.japanfs.org/en/mailmagazine/newsletter/pages/030080.html

[7] Statement of Japan's National Strategy Minister, Koichiro Gemba. December 28, 2010.

[8] http://www.iea.org/textbase/pm/?mode=cc&id=2365&action=detail

Footnotes

(*1) JVETS is now in its fifth phase: Phase 1 (FY06 or Fiscal Year 2006), Phase 2 (FY07), Phase 3 (FY08,) Phase 4 (FY09), Phase 5 (FY10)

(*2) • Base year emissions: an average of the actual emissions over the past three years e.g. 4 million t-CO2 p.a. for the 150 participants; • Emissions reduction commitment: voluntarily pledged by the participants e.g. 0.7 million t-CO2 p.a.; • Annual emissions reduction commitment against the base year: 17% less

(*3) also non-target participants can participate in JVETS, including traders and sellers.