Australia: Issue 1: Asia Pacific climate change policy series: Japan


The Copenhagen Accord called on Annex I countries to make their climate change pledges, and on Annex II countries to identify their nationally appropriate mitigation actions by 31 January 2010.

In this edition of the Asia Pacific climate change policy series we examine the Copenhagen Accord commitments made by Japan, an Annex I country to the Copenhagen Accord. We also examine the regulatory framework that Japan intends to implement to meet its Copenhagen Accord commitments, and the climate change investment opportunities that are available in Japan.

Key points on Japan:

  • has pledged to cut emissions by 25 per cent by 2020 with an 80 per cent reduction by 2050
  • is one of the world's leading nations in energy efficiency
  • has a number of existing voluntary trading schemes
  • provides fertile ground for investment opportunity

Japan's Copenhagen Accord commitments

Japan's proposed target under the Copenhagen Accord is to achieve a 25 percent reduction of CO2 from 1990 levels by 2020, subject to agreement of a "fair and effective" post-2012 international regime.

The proposed target was submitted by then Prime Minister Yukio Hatoyama of the Democratic Party of Japan and was significantly more onerous than the target proposed by Mr Hatoyama's predecessor.

Japan's regulatory framework

Japan will need a robust regulatory framework to deliver its ambitious Copenhagen Accord commitments. We examine Japan's climate change regulatory regime below.

New legislation

The "Basic Act on Global Warming Countermeasures" (the Bill) was drafted by the Japanese Government following Copenhagen to provide the legislative architecture for achieving Japan's 25 per cent emissions reduction target by 2020 and 80 per cent emissions reduction target by 2050. The Bill proposes a mandatory domestic emission trading scheme (ETS), a global warming tax, together with a range of measures to promote the use of renewable energy through a feed-in tariff system and energy efficiency.

Though the Bill was approved by cabinet on 12 March 2010, the resignation of Prime Minister Yukio Hatoyama on 2 June 2010, the results of the July 2010 Upper House Elections, and the continued political uncertainty in Japan has created uncertainty as to the progress of the Bill in its current form and the establishment of an ETS for Japan and the other basic measures proposed therein.

Existing voluntary trading schemes

Though the establishment of a compulsory ETS is currently in limbo, Japan does have a number of existing voluntary trading schemes in place.

The Japanese Voluntary Emissions Trading Scheme (JVETS) was introduced in September 2005 by the Ministry of Environment, Japan to support CO2 emissions reduction activities by Japanese business operators. JVETS provides for a voluntary cap and trade system and in its first phase (financial year 2006) JVETS involved 31 participants with targets and seven trading participants. JVETS is now in its fifth phase and involves over 80 target participants.

In October 2008, the Japanese Government sought to introduce a "Domestic Integrated Market". This included the establishment of a trial Voluntary Carbon Credit Trading Scheme (VCCTS) which incorporated JVETS and other participants into a voluntary cap and trade system. A domestic CDM scheme was also introduced as part of the VCCTS whereby major companies can assist small and medium sized companies to reduce their green house gas (GHG) emissions and in turn acquire the reduced emission rights. Kyoto Protocol credits can also be used in connection with the VCCTS participants' obligations. Presently VCCTS has over 700 participants from a wide range of industrial sectors including the utilities, automobile, steel and electronic industries.

Energy efficiency and renewable energy

For the last thirty years Japan has been one of the world's leading nations in energy efficiency. Japan's high level of energy efficiency is attributable to its lack of domestic fuel resources and, consequently, its technological innovation. Japan's energy efficiency has been assisted by government regulation through legislation requiring energy management in manufacturing and commercial sectors and setting out energy efficiency standards for houses, buildings, machinery and equipment and through government financial, tax and budgetary support.

Renewable energy also has the potential to play a central role in Japan's energy policy. For more information on renewable energy in Japan please refer to our comprehensive "Renewable Energy in Asia Pacific" publication.

Investment opportunities

If the proposed mandatory emissions trading scheme is introduced, it is likely to generate investment opportunities as a result of an increased number of Japanese companies being subject to binding emissions reduction targets and seeking to meet those targets either by adopting measures to reduce their own emissions or purchasing carbon credits from domestic or foreign projects. Even if the mandatory scheme is not adopted, the current voluntary scheme is likely to generate ongoing investment opportunities.

We also expect that there will be a growing number of investment opportunities relating to the domestic energy efficiency and renewable technology, given Japan's Copenhagen Accord commitments of a 25 percent decrease in CO2 by 2020. Japanese companies are also likely to seek increased investment opportunities in foreign renewable energy transactions.

Many of the opportunities for investors to generate emission reductions in the Asia Pacific region may be eligible for compliance in Japan. However as our ongoing series will demonstrate, these opportunities will have to interface with the domestic regulatory regime and it is unclear how this interface will work under the "bottom up" approach implicit in the Copenhagen Accord.


A selection of our recent climate change related work in Japan includes:

  • Acting for a number of Japanese trading houses in connection with the purchase of greened Assigned Amount Units (AAU) from Central and Eastern European countries.
  • Acting on behalf of numerous Japanese trading houses, banks and compliance buyers in connection with the purchase of Certified Emission Reductions (CER) from Clean Development Mechanism (CDM) projects and Emission Reduction Units (ERU) from Joint Implementation projects in a wide variety of jurisdictions. Advice includes due diligence on the underlying projects, structuring advice, regulatory advice in respect of relevant local laws and regulations and drafting and negotiation of emissions reduction purchase agreements and other transaction documents. We have also advised both buyers and sellers in respect of a number of secondary market transactions involving Japanese companies.
  • Advising a variety of Japanese clients in respect of miscellaneous regulatory queries including, a detailed review of global emission trading schemes, review of local and international law in respect of sale and purchase of AAUs and in-depth analysis of the provisions of IETA and ISDA precedents.

  • Advising on several plantation projects in Australia, involving the generation of credits for use in Japan's voluntary emissions trading scheme.

Our Japanese clients include major trading houses (Mitsui & Co., Mitsubishi Corporation, Marubeni Corporation, Sumitomo Corporation and ORIX) and financial institutions (Nomura, Mizuho Corporate Bank, Mitsubishi UFJ Securities and Japan Carbon Finance). Norton Rose Group has also acted for non-Japanese clients selling carbon credits into the Japanese market.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions