Equilibrium Carbon Price for Future Carbon Pricing in Japan

This technical report discusses the implementation of carbon pricing in Japan as a strategy to achieve net-zero emissions by 2050. It outlines the Japanese government's targets for reducing greenhouse gas emissions by 46% by FY2030 and the associated financial requirements, including the issuance of GX economic transition bonds. The report explains the planned emissions trading scheme set to launch in FY2026, which will allow companies to trade emission credits. It details the current carbon pricing landscape in Japan, including the existing carbon tax and the range of carbon prices established by various initiatives. The report also estimates equilibrium carbon prices based on Japan's carbon budget and emissions targets, highlighting the importance of aligning domestic prices with international carbon pricing mechanisms. The findings suggest that a well-structured carbon pricing system could facilitate investment and behavioral changes necessary for Japan's transition to a low-carbon economy.