Implementation of an emission trading scheme in Japan

The research evaluates the transition from voluntary to mandatory emissions trading in Japan using the CASE-ASIA model. It compares two primary designs—one including the electricity sector in the ETS and one applying a CO2 tax to it—across various allocation modes including full auctioning, border adjustments (BA), and output-based allocation (OBA). The findings highlight a critical trade-off between electricity prices and industrial product prices, noting that border adjustments for exports are essential for Japan due to its high export volume of steel and cement. While OBA is most effective at limiting production decreases, the study concludes there is no single superior design, and policy choices will depend on government priorities regarding revenue and competitiveness.

• Including the electricity sector in the ETS (Design 2) increases the allowance price because the sector's demand pushes it upward, which in turn forces industrial sectors to implement more specific emission reductions than under Design 1.
• There is a fundamental trade-off between the cost of electricity and the cost of industrial goods: excluding the electricity sector from the ETS (Design 1) results in higher electricity prices but limits the increase in industrial product prices.
• Border adjustments (BA) are only effective at limiting carbon leakage in Japan if they cover both imports and exports; a BA covering only imports performs similarly to a scenario with no BA at all.
• The steel sector is the most vulnerable to carbon leakage, while the cement sector is the most impacted in terms of production loss regardless of the scenario.
• Output-based allocation (OBA) is the most efficient mechanism for limiting the decrease in production levels for the steel and cement sectors.
• Public revenue potential is highest when the electricity sector is targeted with a CO2 tax (Design 1), whereas output-based allocation significantly reduces these revenues.

APA

Monjon, S. (2011). Implementation of an emission trading scheme in Japan. Climate Strategies. https://climatestrategies.org/wp-content/uploads/2014/11/cs-working-paper-monjon-2011-japanets.pdf

Chicago

Monjon, Stéphanie. Implementation of an emission trading scheme in Japan. Climate Strategies, 2011. https://climatestrategies.org/wp-content/uploads/2014/11/cs-working-paper-monjon-2011-japanets.pdf.

Wikipedia

{{cite report |last1=Monjon |first1=Stéphanie |title=Implementation of an emission trading scheme in Japan |publisher=Climate Strategies |date=October 2011 |url=https://climatestrategies.org/wp-content/uploads/2014/11/cs-working-paper-monjon-2011-japanets.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{monjon2011implementation, author = {Monjon, Stéphanie}, title = {{Implementation of an emission trading scheme in Japan}}, institution = {Climate Strategies}, year = {2011}, month = oct, url = {https://climatestrategies.org/wp-content/uploads/2014/11/cs-working-paper-monjon-2011-japanets.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }