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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.