"Japan's Green Transition Focuses on 'Growth'... 747 Companies Including Toyota Voluntarily Participate"

Martial Arts 'Characteristics and Implications of Japan's Emissions Trading System' Report Published

Although Japan ranks as the world's 5th largest carbon dioxide emitter, it has been slow to respond to climate change. However, recent efforts to strengthen industrial competitiveness and promote economic growth through the Green Transformation (GX) strategy have drawn attention.

According to the "Characteristics and Implications of Japan's Emissions Trading System" report released on the 20th by the Korea International Trade Association (KITA) Institute for International Trade and Commerce, Japan has set economic growth as the core goal of its green transformation strategy and is advocating a growth-oriented carbon pricing system, including an emissions trading scheme. Additionally, Japan has announced detailed investment promotion measures outlining when, where, and how to provide financial support and large-scale investment funds to companies implementing decarbonization, thereby encouraging corporate participation.

Photo by Yonhap News

In practice, the Japanese government is implementing investment support and incentive-based systems to encourage companies to actively participate in the green transformation. First, separate support measures are in place to help carbon-intensive industries, where decarbonization is inherently difficult, achieve emission reduction results. Nine carbon-intensive industries have been selected, including aviation, cement, electricity generation, gas, petroleum, pulp and paper, and maritime transport, and financial products supporting low-carbon transition activities in these industries are recognized as transition finance. Strategic sectors such as green steel and green chemicals, which require domestic production promotion, are provided with tax benefits not only for research and development and facility investment but also during the production phase. For the green steel and green chemical sectors, up to 40% of corporate tax will be deducted for up to 10 years in proportion to production and sales volume.

Japan’s emissions trading system also promotes a "growth-oriented carbon pricing system," encouraging participation through corporate support. This differentiates it from the emissions trading systems of major countries, which are primarily regulation-centered. Unlike the EU or South Korea’s systems, where participation is mandatory based on company size or carbon emissions, Japan allows companies to decide voluntarily whether to participate. Voluntary participation and withdrawal are guaranteed, and companies set their own reduction targets. Even if companies fail to meet their emission targets, there are no penalties, while companies that actively participate receive financial support and tax benefits.

Based on government support, Japanese companies view pursuing decarbonization as beneficial for strengthening their competitiveness and expanding their business. Despite the lack of legal compulsion, about 747 Japanese companies, including Toyota and Tokyo Electric Power Company, have voluntarily participated in the emissions trading system implemented since October last year. These companies account for 50% of Japan’s total greenhouse gas emissions.

Jang Hyun-sook, head of the Green Transformation Team at the Korea International Trade Association, emphasized, "South Korea also needs a systematic institutional design to create a market environment where companies striving to reduce carbon emissions can benefit and to support industrial growth." She added, "It is necessary to shift the carbon neutrality goal from 'regulation' focused on achieving greenhouse gas reduction targets to 'growth' centered on industrial development and competitiveness enhancement, and to consistently pursue policies that encourage active corporate participation."

This content was produced with the assistance of AI translation services.