Tokyo Stock Exchange begins trade in carbon credits

Yuka Obayashi

A man works at the Tokyo Stock Exchange after market open in Tokyo, Japan, Oct. 2, 2020. REUTERS/Kim Kyung-Hoon/

TOKYO, Oct 11 (Reuters) – Japan’s Tokyo Stock Exchange (TSE) started trading carbon credits on Wednesday, as the world’s fifth-largest carbon dioxide (CO2) emitter put in place a key element of its strategy to tackle climate change.

Seeking to become carbon neutral by 2050, Japan is following a similar path to other major economies. In April, it began the phased introduction ofa carbon pricing schemeto encourage companies and cities to curb emissions.

“Japan’s industry ministry has been cautious about implementing emissions trading, but we have made a major turn to utilize the carbon credit market to achieve our carbon neutral goal,” Yasutoshi Nishimura, the minister of economy, trade and industry, said after the opening ceremony at the TSE.

“We will leverage the power of the new market to encourage companies to cut emissions and invest in decarbonisation, with an aim to achieve both carbon neutrality and economic growth,” he told reporters.

Via the new market, registered members can trade the existing carbon credit, known as J-Credit, on the TSE, a unit of Japan Exchange Group Inc(8697.T).

Under the J-Credit system, the government certifies as a “credit” the amount of greenhouse gas emissions, such as CO2, reduced or removed through efforts to introduce renewable energy or energy-saving equipment or managing forests.

The credit had been traded individually between companies and other organisations, but it was difficult for them to find buyers or sellers on their own.

The new TSE market will make it easier for companies to buy and sell credits and provide transparency in carbon pricing, according to a TSE official.

A total of 188 entities had registered as participants as of Sept. 19, with the number still growing, according to the TSE.

Trading hours are 9:00-11:29 a.m. (0000-0229 GMT) and 12:30-2:59 p.m. (0330-0559 GMT). Transaction prices are set twice a day and published after trading hours.

For the first day, trading volume came to 3,689 metric tons of CO2, with the transaction price for J-Credit on energy-saving at 2,850 yen per ton-CO2, for J-Credit on forest at 9,900 yen in the morning session and 7,000 yen in the afternoon session.

A total of five categories of J-Credits were trading at the TSE on Wednesday, including two for renewable energy.

To boost trade liquidity, the TSE, with support from the government, will introduce a market maker mechanism later this year, it said.

Under the scheme, designated securities firms, banks or trading companies have obligations to quote a certain volume of simultaneous buy and sell orders within a certain price range during a pre-determined time period, the TSE said, adding details will be decided soon.

(This story has been corrected to say that two, not one, renewable energy J-Credits were traded on Wednesday in paragraph 12)

Reporting by Yuka Obayashi Editing by Katya Golubkova and Michael Perry & Simon Cameron-Moore

Yuka Obayashi reports on Japan’s energy, metals and other commodities. Signal phone number: 81-90-2520-3273