What’s GX-ETS?

From April 2026, Japan’s Emissions Trading System (ETS) will move beyond its voluntary phase. Participation of 300 to 400 companies will be mandatory, covering approximately 60% of Japan’s greenhouse gas (GHG) emissions. The system will become a core policy instrument for achieving carbon neutrality in Japan. 

This report outlines the framework of Japan’s Emissions Trading System (GX-ETS) and analyzes the outlook for carbon prices. 

Contents

Introduction 
Key points of this report 

1.　Background to the GX-ETS

1. History of deliberations 
   Box 1. What is an emissions trading system (ETS)? 
   Box 2. Existing related systems 
2. Design process and establishment of the GX-ETS
3. The three phases of GX-ETS 

2.　Phase 1

1. Phase 1 design 
   Box 3. Direct versus indirect emissions 
2. Preliminary evaluation of Phase 1

3.　Phase 2

1. Phase 2 design  
2. Phase 2 timeline
3. Benchmark-setting methodologies
   Box 4. 2030 reduction outlook for the power sector (case study) 

4.　Phase 3 

1. Phase 3 design 
2. Outlook for carbon pricing levels
   Box 5. Redemption schedule and financing for GX Transition Bonds 
   Box 6. Impacts on gasoline prices 

5.　Comparison with international systems  

6.　Key features of the GX-ETS and future outlook 

1. Key features of the GX-ETS 
2. Future outlook 

Conclusion