Voluntary Carbon Offset

in Japan, FY2016

March, 2017

Office of Market Mechanisms

Climate Change Policy Division, Global Environment Bureau

Ministry of the Environment, Japan

Contents

Introduction ................................................................................................................. 1

Chapter 1 Overview of Carbon Offset ..................................................................... 3

(1) What is Carbon Offset? .................................................................................... 3

(2) Three Steps of Carbon Offsetting Efforts .......................................................... 3

(3) Significance and Effect of Carbon Offset Activities ........................................... 5

(4) Carbon Neutral ................................................................................................. 6

(5) Highly Reliable Carbon Offset .......................................................................... 6

(6) Credits Used for Carbon Offset......................................................................... 7

Chapter 2 Trends in Carbon Offset Efforts in Japan .............................................. 9

1. Overview of Carbon Offset Efforts in Japan ....................................................... 9

(1) Number of Carbon Offset Initiatives and Their Trend.............................. 9

(2) Dissemination of Carbon Offsetting Information .................................... 13

(3) Offset Declaration .................................................................................... 14

(4) Subsidy System ........................................................................................ 15

(5) Green Purchasing and Carbon Offset ...................................................... 16

(6) Awareness and Understanding of Carbon Offset and Consumer Action 17

2. Carbon Offsetting Scheme in Japan .................................................................... 19

(1) Carbon Offsetting Scheme ......................................................................... 20

(2) J-Credit Scheme ........................................................................................ 23

(3) Joint Crediting Mechanism ......................................................................... 24

Chapter 3 Global Carbon Offset Trends................................................................. 26

1. World Voluntary Carbon Market Overview ...................................................... 26

(1) Trends in Voluntary Markets .................................................................. 26

2. Global Carbon Offset Related Schemes ............................................................. 29

(1) Overview of Global Warming Measures Utilizing Market Mechanisms 29

(2) Voluntary Carbon Offset Schemes ........................................................... 40

(3) Global Carbon Credit Schemes .................................................................. 43

Conclusion: The Outlook for Carbon Offset .............................................................. 48

Appendix: Carbon Offset/Carbon Neutral Certification Schemes of Various

Countries (Comparison Table) .................................................................................. 49

1

Introduction

Japan’s domestic carbon offset initiatives began spreading from its introduction at the 2008

Toyako Summit in Japan. The State of Carbon Offsetting in Japan (Guidelines) was compiled

by the Ministry of the Environment in 2008 with the purpose of promoting the highly reliable

carbon offsetting efforts from among the many initiatives being implemented. In the same

year, the “Offset Credit (J-VER) Scheme” was established to create credits to be used for

offsetting and the “Carbon Offset Certification Scheme” was created to certify reliable carbon

offset initiatives. At the same time, as opportunities for carbon offset efforts gain momentum,

a foundation to promote carbon offset initiatives, such as establishing the Carbon Offset

Forum (J-COF) and founding the Carbon Offset Network (CO-Net), was developed, and

many initiatives have been implemented up to now.

While carbon offsetting is a global warming measure that can be implemented

comparatively easily by using credits, it is also a social contribution activity that can, using

this scheme, support greenhouse gas reduction/absorption projects such as renewable

energy introduction and reforestation projects. In addition, since consumers can also support

greenhouse gas reduction/absorption activities through purchasing carbon offset products or

environmentally friendly products, it becomes possible, by using this scheme, to widely

promote global warming measures involving various actors including consumers.

Recently, abnormal weather, considered to be affected by global warming, has been seen

in various regions around the world, and a lot of damage due to the weather have been

reported. The recognition of the importance of global warming measures is only increasing.

Although it is necessary to lower our greenhouse gas emissions below the ability of the

natural world to absorb them in order to stop global warming; in 2013, the daily mean

concentration of carbon dioxide in the atmosphere of Mauna Loa in Hawaii was observed to

exceed 400 ppm for the first time, and in January 2016 the carbon dioxide concentration was

402.52 ppm (one month mean), and in January 2017, 406.13 ppm (one month mean),

indicating an upward trend.1 The National Aeronautics and Space Administration (NASA)

and National Oceanic and Atmospheric Administration (NOAA) in the US announced that

2016 was the hottest year recorded in observed history and reported that global warming is

clearly still on the rise for the long term2.

Because global warming is intimately related to economic activity and to the people’s

lifestyles in general, measures against global warming must be promoted through effective

use of various policy means for all actors that constitute society, including citizens,

1 NOAA Earth System Research Laboratory（https://www.esrl.noaa.gov/gmd/ccgg/trends） 2 National Aeronautics and Space Administration（https://www.nasa.gov/press-release/nasa-noaa-data-show-

2016-warmest-year-on-record-globally）

2

corporations, NPOs/NGOs, local authorities, and the national government. Unlike information

disclosure pertaining to greenhouse gas emissions and emissions trading by legally binding

regulations, Japan's "Carbon Offset" is a method that promotes proactive emission reduction

not based on regulations; and as one of various initiatives that further drive measures against

global warming in the future, various efforts are being carried out within this scheme.

The purpose of this report is to provide an accurate description of and to disseminate

information on Carbon Offset. Chapter 1 introduces the definition and importance of carbon

offset and its general overview; Chapter 2 gives an overview on carbon offset in Japan; and

Chapter 3 introduces trends in global carbon offset. Finally, the outlook of carbon offset is

discussed in the conclusion.

3

Chapter 1 Overview of Carbon Offset

(1) What is Carbon Offset?

Carbon offset is an action to partially or entirely offset emissions generated from certain

activities through constituent members of society (e.g. citizens, businesses, NPOs/NGOs,

and local or national governments) through (1) recognizing the amount of their own GHG

emissions, (2) proactively making efforts to reduce their GHG emissions; and (3)

compensating for unavoidable emissions by purchasing GHG emission reduction/sinking

generated elsewhere (hereafter referred to as “credits 3 ”) or by implementing

projects/activities elsewhere that lead to achieving reduction/sinking. In other words, carbon

offset means these efforts to “recognize, reduce, and offset emissions4."

Figure 1-1 Overview of Carbon Offset

Various activities can be the targets for carbon offset activities, such as citizens’ daily

electricity use, companies’ production/distribution/sales, local and national governments’

holding of meetings, and corporate activities themselves. Any of these GHG emitting

activities can be considered as targets of carbon offsetting efforts.

(2) Three Steps of Carbon Offsetting Efforts

Carbon offsetting efforts are carried out through the following three steps of “recognize,

reduce, and offset.”

3 Credits are also called offset credits, carbon credits, emission rights, etc. 4 MOE “Guidelines for Carbon Offsetting in Japan: the second edition” (March 2014) (in Japanese) (http://www.env.go.jp/earth/ondanka/mechanism/carbon_offset/guideline/140331guideline.pdf) (in Japanese)

4

Three Step of Carbon Offsetting

2

Recognize １

２

３Offsetting

Reduce

Calculate CO2 Emissions

Make efforts to reduce CO2

Offset unavoidable emissions by purchasing credits generated from GHG reductions/sink projects.

Figure 1-2 Three Steps of Carbon Offset

(Source: Dissemination Tool of Carbon Offset Forum (J-COF))

1) STEP1 Recognize:

Recognize the amount of greenhouse gas (GHG) emissions from houses, offices, holding

of events, factories (in manufacturing processes), and travel/transport.

2) STEP2 Reduce:

Reduce GHG emissions through introducing energy saving equipment, practicing energy

saving activities, using transportation with low environmental burdens, etc.

3) STEP3 Offset:

Offset unavoidable emissions with credits created by GHG emission reduction/sinking

projects implemented by others elsewhere.

In general, one can find out how much GHGs is emitted from one’s own activities by “Amount

of activity x Emission factor”5 (STEP 1). “Amount of activity” is how much GHG emitting

activities were conducted, such as electricity use, water use, etc. Emission factor is the

emission amount per unit of activity. In most cases, the amount announced by public

agencies can be used as the emission factor6. On the Internet, there are various tools that

can easily help calculate how much GHGs is emitted from a general household by inputting

the amount written on the utility bills (electricity, water, etc.).

5 “Amount of activity x Unit heat emission x Emission factor” can also be used. 6 There are cases when the amount calculated by the emitter itself is asked to be used.

Three Steps of Carbon Offset

Offset

5

For Step 2, that is to reduce emissions as much as possible, there are various emission

reduction methods, such as efforts to turn off lights after every use, to put on Cool Biz clothing,

as well as various efforts introduced by public agencies.

Then, to offset (Step 3), credits created by emission reduction/sinking projects in and out of

Japan are used. In order to make carbon offset efforts more reliable, it is essential to use

highly reliable credits, that is, to use credits created by the Kyoto Mechanism7, which requires

third party-verification, J-Credit Scheme and Joint Crediting Mechanism. There are also

credits from the Verified Emission Reduction (VER) Schemes that satisfy certain criteria.

(3) Significance and Effect of Carbon Offset Activities

Carbon offsetting activities are the global warming preventive measures that each constituent

of society can participate in according to their social status and role. In other words, these

activities provide people with opportunities to proactively participate in the global warming

preventive measures of one’s choice, such as through purchasing products or participating

in events. Furthermore, these activities give those who had no previous interest in global

warming a chance to think about the issue.

Recognizing one’s own GHG emission amounts and identifying the areas he/she can reduce

emissions would further motivate them to reduce emissions. Furthermore, by purchasing

credits, one can recognize the fact that the GHG emission is actually the cost, and this would

lead them to continue their emission reduction efforts.

Carbon offsetting activities will lead to investment in GHG emission reduction/sinking projects

implemented in and out of Japan, providing opportunities to contribute financially to the

implementation of these projects. Projects in developing countries, in particular, can also

expect additional effects of improvements in natural resources or pollution issues, as well as

community revitalization, since use of credits created domestically would bring about money

flow in the country, which in turn leads to promotion of domestic investment and more job

opportunities.

7 Kyoto Mechanism Information Platform (http://www.kyomecha.org/e/index.html)

6

Figure 1-3 Money Flow of Carbon Offset Activities

While businesses can improve their energy efficiency and cut costs by calculating their GHG

emissions, they can also demonstrate their carbon offsetting efforts as part of their CSR

activities through information provision in PR activities and by making the appeal to the public

that they are environmentally highly motivated to stop global warming together with citizens.

Citizens and businesses’ carbon offsetting activities are expected to create jobs and help

drive local economies in the long run, which in turn will bring about great benefits to their

economy as a whole.

(4) Carbon Neutral

Carbon neutral consists of the following two parts: 1) constituents of society recognize their

emissions within the scope that they should be responsible for those emissions from an

objective point of view, and proactively make efforts to reduce those emissions; and 2) for

the part that they cannot reduce, they offset that remaining amount through the purchase of

credits or implementation of emission reduction/sinking projects elsewhere.

(5) Highly Reliable Carbon Offset

Highly reliable carbon offsets satisfy the following criteria:

1) Amounts of GHG emitted from the activities subject to carbon offset are calculated with

certain accuracy.

2) Highly reliable credits (see the following) are used to offset.

7

In order to further raise the reliability of carbon offset efforts, it is desirable to have a third

party, etc. to verify the projects. To ensure the reliability, there are various standards and

institutions established and in operation in and out of Japan8.

(6) Credits Used for Carbon Offset

Credits used for carbon offset

Credits used for carbon offset are GHG emission reduction/sinking realized by others and

used for “compensation” in carbon offset activities.

While there are various types of credits, those primarily used for carbon offset can be

classified into two types. One of them is the credit called the Verified Emission Reduction

(VER). Generally, a credit trading market for voluntary carbon offset activities is called a

voluntary market, and VER credits are developed to be traded in such markets by national

governments or private organizations based on their specific standards.

The other is the Kyoto units designated by the Kyoto Mechanisms. There are 4 types of Kyoto

units: Assigned Amount Units (AAU), Emission Reduction Units (ERU), CER, and Removal

Units (RMU). CER issued under CDM, in particular, is also widely used for voluntary carbon

offset activities.

Those that carry out carbon offset can freely choose which type of credit to use, taking into

consideration the contents of their offsetting efforts, together with requirements in certification

schemes, etc.

Reliability of Credits

In order to ensure reliability of credits, it is necessary for credit generation mechanisms to

comply with the following standards.

1) Projects that offer credits must ensure that they actually generate reduction/sinking

(ensure certainty).

2) It must ensure that emissions that have been offset through reduction/sinking realized

under a project would not have otherwise been offset by other existing measures (ensure

additionality). And it must be ensured that once emissions have been sunk, they are not

going to be released again into the atmosphere (ensure permanence).

3) The same credits must not be used multiple times (avoid double counting).

8 See Chapter 2 and after for details.

8

Regarding 1) and 2), in a project of a forest sink, for example, it is necessary to consider the

possibility of CO2 absorbed and fixed in trees being released again in the atmosphere due

to natural disasters or inappropriate forest management. In order not to lose value of credits

issued even if these events happen, systems such as compensatory measures are crucial.

Regarding 3), to avoid double counting of credits, the compilation of credits registry and

implementation of proper invalidation of credits must be carried out appropriately.

9

Chapter 2 Trends in Carbon Offset Efforts in Japan

1. Overview of Carbon Offset Efforts in Japan

(1) Number of Carbon Offset Initiatives and Their Trend

According to media reports, the accumulated total number of domestic carbon offset

initiatives was 1,414 since December 2007 (by the end of February 2017). Among them,

offsetting goods and services accounted for the majority (about 40%) of initiatives, followed

by offsetting personal activities (12%), and then meeting and event offsets (9%).

Figure 2-1 Trends in the Number of Carbon Offset Initiatives in Japan

(based on media coverage)

When viewed by industry type, the manufacturing industry related to goods and services,

service industry, and retail and wholesale industry occupy the top spot followed by the finance

and insurance industries.

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

(cases) ■Total of non-market circulated type ■Goods and services with credits

■Personal activities (market circulated type) (market circulated type) [April 2010～]

■Goods and services (market circulated type) ■Meetings and events (market circulated type)

10

Figure 2-2 Number of Carbon Offset Initiative in Japan by Industry

(based on media coverage)

According to media coverage, types of credits used for carbon offset from December 2007

until the present (accumulated) was led by CER (62%) followed by J-Ver accounting for 29%

(see Fig. 2-3). On the other hand, of the credits used over the last 3 years, J-VER accounted

for 70 to 80 percent. (see Fig. 2-4).

Figure 2-3 Ratio of Credits Used for Carbon Offset Initiatives

(cumulative total since 2007) (based on Media Coverage)

0 50 100 150 200 250 300 350

製造業

サービス業

卸売・小売業

金融・保険業

情報通信業

運輸業

不動産業

建設業

公務

飲食店・宿泊業

その他

62%

29%

2%2%

5%

■ Use of market circulated

type credits

■ Use of non-market

circulated type credits

Manufacturing

Service

Retail and wholesale

Finance and insurance

Info-communication

Transportation

Real estate

Construction

Official duty

Restaurants and hotels

Other

■CER ■J-VER ■Prefectural J-VER ■J-Credit ■Other

11

Figure 2-4 Percentage of Credits Used in Carbon Offset Efforts in Japan

over the Last 3 Years (based on media coverage)

The “Survey on emissions trading status surrounding carbon offset9,” presented a survey to

6 companies10 participating in the provider program for Carbon Offsetting Scheme. The

survey asked about “the type/price of credits, intended purpose of use, and future initiatives”

as an indication of trends of credit use in 2016.

9 The “Survey on emissions trading status surrounding carbon offset” as a tool to understand market trends of carbon

offset and carbon credit has been carried out by Japan Bank for International Cooperation (JBIC—what used to be the Japan Finance Corporation’s International Division) between 2009 and 2011, and thereafter by the Overseas Environmental Cooperation Center (OECC). This year’s survey was carried out with the cooperation of 6 companies participating in the offset provider program of the Carbon Offsetting Scheme. These companies responded to the questionnaire asking about trends in 2016 and future prospects. Note that since there are other companies that carry out emissions trading related to carbon offset, the results of this survey do not portray the entire carbon offset market but rather the trend of 6 companies that responded. Also it must be noted that not all companies answered all questions in the questionnaire.

10 Responded companies (in alphabetical order): CARBON FREE CONSULTING CORPORATION, Green Blue Corporation, ITOKI CORPORATION, Mitsubishi UFJ Lease & Finance Co. Ltd., myclimate Japan Co. Ltd., WasteBox Co., Ltd.,

4%

10%

88%

79%

56% 11%

4%

28%

8%

7%

6%FY2016

FY2015

FY2014

■CER ■J-VER ■Prefectural J-VER ■J-Credit ■Other

12

Credits Purchased Amount Purchased (t-CO2）

Kyoto Credit 1,000 0.25%

J-Credit (Other than forest related) 329,150 82.32%

J-Credit (Forest related) 81 0.02%

Offset Credit (J-VER) 5,388 1.35%

Domestic Credit 61,776 15.45%

Tradable Green Certificate 1,000 0.25%

Total 399,855

Figure 2-5 Credits Purchased for Carbon Offset

図 2-6 Intended Purpose of Use for the purchased credits

Figure 2-7 Credits expected to be used for carbon offset in the future

No. of companies

responded

Kyoto Credit

Credit Issued under J-Credit Scheme

Offset Credit (J-VER)

Prefectural J-VER

Domestic Credit

Tradable Green Certificate

Other Voluntary Credit

Municipal Credit (Tokyo Metropolitan Government Credit, etc)

13

(2) Dissemination of Carbon Offsetting Information

The Ministry of the Environment (MOE) provides carbon offset information and promotes

collaboration between various networks so that anyone can participate in the carbon offset

efforts. By raising public awareness of carbon offset efforts and promoting efforts and

equitable market formation, the MOE tries to encourage the actors of society to engage

proactively in emission reduction efforts. It also supports emission reduction/sinking projects

in and out of Japan.

[Carbon Offset Forum (J-COF)]

To build a low-carbon society, the Carbon Offset Forum (J-COF) was established on April 1,

2008 to gather/provide information, disseminate, and provide consultation and support for

carbon offset initiatives. J-COF serves as an integrated contact point for providing online

information, creating and providing tools to generate public awareness on carbon offset, and

managing and exhibiting at events and seminars.

Table2-1 Events J-COF had put up a display booth in 2016

Toyama Environmental Exhibition May 13-16, 2016

Eco-Life Fare 2016 June 4-5, 2016

Kankyo Hiroba Sapporo 2016 August 5-7, 2016

EcoPro 2016 December 8-10, 2016

Super Market Trade Show 2017 February 15-17, 2017

[Carbon Offset Network (CO-Net)]

The Carbon Offset Promotion Network (CO-Net) established in April 2009 is a voluntary

organization in which companies, NPOs and local governments participate for the purpose

of achieving a low carbon society through carbon offsetting. Their activities include planning

seminars and study sessions, planning and implementing carbon offsetting lectures, and

presenting Carbon Offset Awards.

14

Table 2-2 Winners of Minister’s Prize in the Fifth Carbon Offset Awards

Award Name of

Receiving Organization

Activity

Minister's Prize, the Ministry of the Environment

Super Hotel, Co. Ltd.

Carbon offset for overnight stays reserved on the Super Hotel official website (Eco-Stay)

Minister's Prize, the Ministry of Economy, Trade and Industry

Miyakojima Tourism Association Miyakojima Triathlon Committee

Dissemination of carbon offsetting through sports events

Minister's Prize, the Ministry of Agriculture, Forestry and Fisheries

Nichinan Town

Japan's first! Carbon offset roadside market “Nichinan Hino River Hometown”

(3) Offset Declaration

The carbon offset declaration scheme was established in March 2015 to supply information

about individual carbon offset initiatives to society. This mechanism allows implementers of

carbon offset initiatives to provide information about the content of their initiative by making

a self-declaration on the dedicated website that includes inputting and registering their

carbon offset initiative details, thereby allowing them to improve transparency and reliability

of their initiatives.

In the year since March 2015, about 730 carbon offset declarations have been made.

15

Figure 2-8 Carbon Offset Declaration Registration Website (in Japanese)

(4) Subsidy System

In FY2015, a system was set up in which MOE grants subsidies to entities that is responsible

for consultation service and business matching for companies promoting environmentally

friendly products using carbon offsets was set up.

<Environmentally Friendly Products (definition in the subsidy program)>

Products that allow consumers to support initiatives for CO2 emissions reduction or

absorption increase by purchasing those products.

Using this subsidy’s funds, the number of products sold as carbon offset products exceeded

600 in FY2015, and a wide variety of carbon offset and environmentally friendly products

went into the market.

16

Figure 2-9 Overview of Environmentally Friendly Product Development

and Sales Promotion Support Program

(5) Green Purchasing and Carbon Offset

The Green Purchasing Premium Standards Formulation Guidelines (MOE) created in 2013

includes carbon offset certification as an environmental consideration recommended as an

addition to the criteria for specific procurement items for green purchasing. In response, the

MOE mentions procurement of products receiving carbon offset certification in the “2014

Policy for Improving the Promotion of Procurement of Environmental Goods, etc.” and local

governments are also reviewing carbon offset certification to be added as an environmental

label to be considered during procurement. In addition, the “Eco Product Net (Japan's largest

database of eco-friendly products that reports environmental information on eco-friendly

products and services such as products conforming to the Law Concerning the Promotion of

Procurement of Eco-Friendly Goods and Services by the State and Other Entities) 11

operated by the Green Purchasing Network is being expanded to include carbon offset

activities linked to green purchasing such as allowing reporting on products receiving carbon

11 Eco Product Net (http://www.gpn.jp/econet/) (in Japanese)

Promotion of environmentally friendly product development and sales

(Examples of agricultural products with credits)

Local Economy Revitalization Program using Credit Schemes (FY2016, the MOE partially in collaboration with the MAFF)

Overview of Environmentally Friendly Product Development and Sales Promotion Support Program

Promote Product Development by assisting entities responsible for

product development consultation and business matching

Local community (credit producer)

Use of biomass Solar energy

Credit creation by GHG emission reduction

Revitalization of local economy

Circulation of private funds

Credits

Funds

Manufacturer, retailer, etc.

Consumers

--Promotion of funds circulation from urban areas to local communities

--Local area revitalization by getting higher name recognition --Environment conservation of local communities

Purpose

17

offset certification.

(6) Awareness and Understanding of Carbon Offset and Consumer Action

In 2016, CalNeCo, Inc. conducted a survey on the environmental awareness of 2000 male

and female consumers between the ages of 20 and 69, who shopped one or more times a

month at a supermarket, convenience store, department store, or drug store. The results of

the survey are described below.

For awareness and understanding of terminology related to global warming measures,

consumers showed a high level of awareness for the term “greenhouse gases” with 35%

answering “detailed understanding,” and this figure increasing to 85% when the “have heard

of” answers were added. On the other hand, the responses for “carbon offset” was 12%

answering “detailed understanding” and 46%, less than half, even when the “have heard of”

answers were added. In addition, over 80% of consumers answered “do not know” for

“credits.” To improve future awareness and understanding of carbon offsetting, the

awareness of credits, which is an element for carbon offset mechanisms, must also be

improved.

Figure 2-10 Awareness and Understanding of terminology related to global warming

measures

Consumers answering that they “continuously purchase or use” or “have purchased or used”

18

environmentally friendly products, such as products using the carbon offset mechanism,

accounted for 32%, and this figures increases to 55%, more than half, when consumers

answering “would like to purchase or use in the future” are added.

Figure 2-11 Status of Purchase/Usage of Environmentally Friendly Products

In addition, when purchasing a product, consumers who answered that their willingness to

purchase “increased” or “increased slightly” when a product was environmentally friendly

exceeded 60%, but consumers who were willing to accept the price when “selecting an

environmentally friendly product even if the price is 10% higher or more” or “selecting an

environmentally friendly product even it a little more expensive” when actually selecting or

purchasing a product remained at about 20%.

19

Figure 2-12 Change in Willingness to Purchase

Figure 2-13 Effect to Product Selection and Decision to Purchase

Responses to a question about requests to corporations selling or providing environmentally

friendly products (multiple answers allowed) were “more PR about actions (how the product

ties into environmental protection activities) (33%), and “increase target products” (35%).

From this, it is clear that proactive provision of information and a wide range of

environmentally friendly products is required. It is hoped that making various environmentally

friendly products available on the market in a way that is easy to communicate to consumers

will lead to an improvement in awareness and understanding of carbon offset.

2. Carbon Offsetting Scheme in Japan

20

(1) Carbon Offsetting Scheme

Initiated by the government of Japan, the Carbon Offsetting Scheme12 was launched in

Japan as of May 2012 to certify Carbon Offset activities. This scheme consists of two

programs: the Third-Party Certification Program and the Carbon Offset Provider Program.

[Carbon Offsetting Scheme Management Structure]

The Carbon Offsetting Scheme consists of the three independent committees: the Carbon

Offsetting Scheme Steering Committee, the Registration and Certification Committee, the

Monitoring Committee.

The Steering Committee is in place to deliberate on establishment, revision or abolishment

of standards, etc. necessary to carry out the scheme. The Registration and Certification

Committee is responsible for the registration of verification and certification bodies as well as

the approval of “Carbon Neutral Certification”. The Monitoring Committee checks the conflicts

or fairness of the Committees, the violations against the standard by applicants who have

been given “Carbon Offset/Carbon Neutral Certification,” etc. and illegal use of certification

labels by others than those certified under the Third Party Certification Program.

Figure 2-14 Japan Carbon Offsetting Scheme Management Structure

[Third Party Certification Program]

The Third Party Certification Program for Carbon Offset consists of two categories: Carbon

Offset Certification for carbon offset activities and Carbon Neutral Certification/Plan

Registration for carbon neutral activities.

12 The Carbon Offsetting Scheme was launched as a succeeding scheme of the Carbon offsetting Certification Scheme

started in 2008 and Carbon Neutral Certification Scheme in 2011.

21

Figure 2-15 Changes in the Number of Certified Cases

in the Carbon Offsetting Scheme

Carbon Offset Certification

A certification body certifies whether a carbon offsetting initiative meets the Third Party

Certification Standards for Carbon Offset.

Under the Carbon Offset Certification, all the GHG emitting sources are not necessarily

subject to emission calculations, and reduction efforts are evaluated in a qualitative way,

making it easier to obtain certification even for those carrying out carbon offset activities for

the first time.

Once Carbon Offset Certification is obtained, applicants are allowed to display the

certification labels and widely demonstrate that their efforts have acquired the Carbon Offset

Certification based on the criteria of the Ministry of the Environment, Japan, and are also

allowed to use the labels in sales promotions or CSR activities to show that their carbon

offsetting effort is reliable. Many cases that have been certified are for products/services13,

and the cumulative total is 320 as of the end of December 2016.

13 List of Carbon Offset Certification Projects (http://www.jcs.go.jp/companylist_window.html) (in Japanese)

(case)

2009 2010 2011 2012 2013 2014 2015 2016

■Carbon Offset Certification ■Carbon Neutral Certification

22

Figure 2-16 Carbon Offset Certification Labels

Carbon Neutral Certification

For Carbon Neutral Certification, verification bodies verify whether the carbon neutral

activities of organizations meet the Third Party Certification Standards for Carbon Offset and

then the Registration and Certification Committee certifies those activities to be carbon

neutral.

For carbon neutral certification calculation, scope 1 and 2 emissions 14 are essential

boundaries (scope 3 is voluntary). A base year must be determined, and quantitative analysis

must be carried out. Also, overall efforts must be verified. In other words, carbon neutral

certification is more severely judged than the carbon offsetting certification. Since the

standards are set in compliance with the ISO14061s, applicants can make an appeal in and

out of Japan that their efforts are recognized as being in compliance with international

standards. Moreover, since GHG emissions from the entire operation are quantified, the

organization can find out the potentials for emissions reduction and operation cost saving.

The total number of certified organizations is 21 as of the end of December 2015.

Figure 2-17 Carbon Neutral Certification Labels

[Carbon Offset Provider Program]

The Carbon Offset Provider Program is an information disclosure program designed for those

14 Scope 1: direct emissions related to applicants’ activities or operations, Scope 2: indirect emissions for energy

consumption, Scope 3: other indirect GHG emissions (quoted from carbon offset third party certification standards (http://www.jcs.go.jp/pdf/20120829/20120829.pdf) (in Japanese)).

23

who use offset providers when carrying out carbon offset to check their reliability.

Offset providers applying for the program are examined (preliminary screening) to determine

whether their management system and ongoing handling of emission credits meet the carbon

offset provider standard. Then, after being validated by the Registration and Certification

Committee, they are listed on the Carbon Offsetting Scheme website as offset providers in

the Offset Provider Program.

(2) J-Credit Scheme

The J-Credit Scheme is the J-VER Scheme and Domestic Credit Scheme combined to seek

further progress. It has been in operation since April 2013, administered by the Ministry of

the Environment (MOE), the Ministry of Trade, Economy and Industry (METI), and the

Ministry of Agriculture, Forestry and Fisheries (MAFF).

In establishing this new crediting scheme, MOE, METI, and MAFF jointly set up a “Study

Group for a New Crediting Scheme”. It held 3 meetings from April 16, 2012 to June 18, 2012.

The report titled “Direction of the New Crediting Scheme” published on August 2, 2012 by

the three ministries recommended that a new mechanism adopt merits of both the Domestic

Credit Scheme and the J-VER Scheme to complement each other, and integrate them into a

new mechanism, in which various entities can participate. The contents, which are taken from

the Domestic Credit Scheme and applied to the new mechanism, include simple

measurement and application forms to make the application process easier; and those

passed on from the J-VER Scheme include a highly reliable MRV (Measurement, Report,

and Verification) that complies with ISO and an idea that no limits for participants should be

imposed.

[Management Structure of the Scheme]

The three ministries of MOE, METI and MAFF administer the scheme. In order to carry out

efficient system management and credit certification, 2 committees for operation and

certification have been set up. A secretariat is also established to support administrators and

the two committees of the scheme.

[Methodology15]

In this scheme, 61 methodologies for 6 areas (energy saving, etc.: 40, renewable energies:

9, industrial processes: 5, agriculture: 3, waste: 2, forest: 2) have been announced as of

15 J-Credit Scheme: List of Methodologies (https://japancredit.go.jp/english/methodologies/)

24

March 2016.

[Amount of Certified Credits and Invalidated Credits]

As of January 2017, the number of registered projects is 567, and the number of credits

certified is 299 and the total amount of them is 1,972,703 t-CO2. The amount of invalidated

credits is 1,122,132 t-CO2.

[Regional J-Credit Scheme]

The Regional J-Credit Scheme is a system in which local authorities certify/issue GHG

reduction/sinking as credits that have also been approved by the J-Credit Scheme Steering

Committee as being in compliance with the J-Credit Scheme. The credits created are

managed under the J-Credit registry, in the same way as J-Credits.

There are the Niigata Prefecture-version J-Credit Scheme run by Niigata prefecture and the

Kochi Prefecture-version J-Credit Scheme run by Kochi prefecture.

(3) Joint Crediting Mechanism16

Japan establishes and implements the joint Crediting Mechanism (JCM) in order to evaluate

contributions from Japan to GHG emission reductions or removals in a quantitative manner

achieved through the diffusion of low carbon technologies, products, systems, services, and

infrastructure as well as implementation of mitigation actions in developing countries, and to

use them to achieve Japan's emission reduction target.

*MRV：Measurement, Reporting, Verification

Figure 2-18: Basic Concept of the Joint Crediting Mechanism (JCM)

(Source: Figure from New Mechanisms Information Platform)

The three basic concepts of the JCM are as follows:

16 New Mechanism Information Platform (http://www.mmechanisms.org/e/index.html)

Operation/management by the

joint committee of representatives

from the both sides MRV*

25

Facilitate diffusion of leading low carbon technologies, products, systems, services, and

infrastructure as well as implementation of mitigation actions, thereby contributing to

sustainable development of developing countries.

Appropriately evaluate Japan’s contributions to GHG emission reductions or removals

in a quantitative manner, by applying the measurement, reporting and verification (MRV)

methodologies, and use them to achieve Japan’s emission reduction target.

Contribute to the ultimate objective of the UNFCCC by facilitating global actions for GHG

emission reductions or removals.

Japan has held consultations for the JCM with developing countries since 2011, and signed

bilateral agreement for the JCM with a total of 17 countries (Mongolia, Bangladesh, Ethiopia,

Kenya, Maldives, Viet Nam, Laos, Indonesia, Costa Rica, Palau, Cambodia, Mexico, Saudi

Arabia, Chile, Myanmar, Thailand and the Philippines) as of January 2017. Japan has also

signed a memorandum with the Philippines toward the establishment of the JCM.

In addition, COP decisions including the Paris Agreement, which is a new post-2020 legal

framework to address climate change, has been adopted in the COP21 held in December

2015. Article 6 of the Paris Agreement defines the use of market mechanism including the

JCM as cooperative approaches in which mitigation outcomes achieved overseas are used

to achieve domestic emission reduction targets.17

17 The 21st Session of the Conference of the Parties to the United Nations (UN) Framework Convention on Climate

Change (COP21) The 11th Session of the Conference of the Parties Serving as the Meeting of the Parties to the Kyoto Protocol (CMP11) (Summary and Evaluation) (http://www.env.go.jp/earth/cop/cop21/cop21_h271213.pdf) (in Japanese)

26

Chapter 3 Global Carbon Offset Trends

This chapter surveys the general situation of global carbon offset, the measures against

global warming by nation, and carbon offset related schemes in the world. Unless otherwise

noted, descriptions in this chapter are primarily based on the most recent information from

the World Bank, “State and Trends of Carbon Pricing 2016” from ECOFYS18, “State of the

Voluntary Carbon Markets 2016” from Ecosystem Marketplace19, and Intended Nationally

Determined Contributions (INDC) submitted by each nation to the UNFCCC20. In addition,

descriptions of backgrounds of the schemes are based on “Mapping Carbon Pricing

Initiatives” from the World Bank.

1. World Voluntary Carbon Market Overview

(1) Trends in Voluntary Markets

The trends in the 2015 voluntary market will be viewed from the following four points: overall

transaction volume, total transacted value, share of transaction volume of each VER system,

and trade trends.

[Overall Transacted Volume]

The overall transaction volume for credits in the voluntary market in 2015 was 84.1 million t-

CO2. This marks a 10% increase over 2014.

18 World Bank「State and Trends of Carbon Pricing 2016」

(http://documents.worldbank.org/curated/en/598811476464765822/State-and-trends-of-carbon-pricing) 19 Ecosystem Marketplace, Raising Ambition: State of the Voluntary Carbon Markets 2016 (http://forest-

trends.org/releases/p/raising_ambition) 20 UNFCCC INDC Portal (http://unfccc.int/focus/indc_portal/items/8766.php)

27

Figure 3-1 Changes in Overall Transaction Volume of Credits in the Voluntary Market

Figure 3-2 Transacted Volume by Project Category and Type

[Transaction Volume for Each VER System]

In the 2015 voluntary market, the Verified Carbon Standard (VCS) system had the most

transaction within the VER system accounting for 17.6 million t-CO2. Note that VCS + CCBS,

which is VCS with co-benefit certification, had 5.7 million t-CO2 of transaction. The total

transaction volume of these combined accounts for about 48% of total volume in the

voluntary market. VCS is followed by the US-focused Climate Action Reserve (CAR)

accounting for 8.8 million t-CO2.

28

Figure 3-3 Market Share by Standard

[Total Transacted Value and Transaction Price]

The total transacted value for credits in the voluntary market in 2015 was $278 million, a

6.7% decrease from 2014. The average price for credits transacted in the voluntary market

was $3.30/t-CO2, a slight decrease from the $3.80/t-CO2 in 2014. More than half, 52%, of

all 2015 offsets transacted at less than $3/ton.

[Trade Trends]

From the beginning, most of the demand of credits originates in countries with high GHG

emission, such as North America and Europe. In 2015, US buyers purchased the most (16.0

29

Mt-CO2) offsets of any country, nearly the equivalent of combined demand stemming from

all European countries combined (16.1 Mt-CO2). Within Europe, buyers from the United

Kingdom, the Netherlands, and France purchased the most tons in 2015.

When it comes to purchasing offsets, most buyers looked to close-by project developers

or retailers for guidance. Suppliers headquartered in Europe sold the majority (68%) of offsets

to European buyers: ditto for North American suppliers (90%), Oceania (88%), Latin America

(94%), and Asia (84%).

With US buyers typically favoring local projects, offsets originating from the US transacted

the most of any country (15.4 Mt-CO2). Other major project locations include India (6.7 Mt-

CO2), and Indonesia (4.6 Mt-CO2).

2. Global Carbon Offset Related Schemes

This chapter first gives an overview of the global warming measures utilizing market

mechanisms in major countries and regions, then provides the most updated information

about voluntary carbon offset systems and credit systems of the world.

(1) Overview of Global Warming Measures Utilizing Market Mechanisms

Recently, measures that utilize carbon pricing have expanded globally as measures to

mitigate climate change. Currently, about 40 countries and 24 cities, states, and regions are

implementing emissions trading systems or carbon tax initiatives. About 7 Gt-CO2,

representing 13% of global GHG emissions, are covered by these systems. Here, the major

national and regional initiatives, such as emissions trading systems and carbon taxes, are

described.

[Europe]

European Union Emission Trading Scheme (EU-ETS)21

The European Union Emission Trading Scheme (EU-ETS) was started in 2005 as the world’s

largest emissions trading system to reduce GHG emissions in the European Union (EU)

region. Currently 31 nations (28 EU nations, Iceland, Liechtenstein, and Norway) are

participating.

According to the INDC submitted in March 2015, the EU has set a target of reducing CO2

emissions by 40% below 1990 levels by 2030 through implementation of intra-regional

policies. The EU-ETS targets 45% of the overall EU GHG emissions and is the primary policy

for reaching reduction targets.

21 The European Commission, The EU Emission Trading System (http://ec.europa.eu/clima/policies/ets/index_en.htm)

30

After completing the first phase (2005-2007) and the second phase (2008-2012), the third

phase (2013-2020) is currently in progress. For Phase 4 (after 2021), planned to begin after

phase 3, a system revision was proposed by the European Commission in July 2015 to aim

at achieving the 2030 targets.22

The targeted sectors and GHG are expanded with each phase. The third phase is targeting

CO2 emissions from electricity and heat generation, oil refining, energy-intense facilities such

as steel and cement production, and the civil aviation sector, as well as N2O emissions from

industrial processes, and PFC emissions from aluminum production.

At first the method for allocating emissions allowances focused on grandfathering, but after

the third phase, the benchmark method was defined as the standard rule for some sectors.

Also, under a policy to gradually reduce free allocation of allowances, the percentage of

allocations by auction is being increased.

Currently, for regulations covering the aviation industry, the system targets only airlines that

operate within the region.

CERs and ERUs can be used as external credits that can be used for emissions trading, but

qualitative restrictions that determine whether they can be used according to the project type

and quantitative restrictions that determine an upper limit for volumes used are stipulated as

rules.23

To provide greater price stability and predictability in the EU ETS, the market stability

reserve was legislated in October 2015 and will start shaping the supply of allowances from

January 2019. In addition, in July 2015 the European Commission put forward a proposal to

revise the EU ETS post-2020. The key changes include an increase in the annual cap

reduction factor from 1.74 to 2.2 percent, better targeted and updated rules for free allocation

of allowances to sectors at the highest risk of carbon leakage, and the establishment of funds

to finance low-carbon innovation in industry and modernization of the energy sectors in lower

income member states.

22 The European Commission News, 2014/1/22 (http://ec.europa.eu/clima/news/articles/news_2014012201_en.htm) 23 EU-ETS Hannadbook

(http://ec.europa.eu/clima/publications/docs/ets_handbook_en.pdf)https://ec.europa.eu/clima/sites/clima/files/docs/ets_handbook_en.pdf)

31

Switzerland

In May 2011, the Swiss parliament approved and announced “Energy Strategy 2050,” which

includes the gradual discontinuation of nuclear power that accounts for 40% of the national

power supply. The CO2 law sets a GHG emission reduction target of a 20% reduction from

1990 levels by 2020. Furthermore, the Intended Nationally Determined Contributions

(INDCs) submitted in February 2015 anticipates a 35% reduction from 1990 levels by 2025

and sets a long-term goal of a 50% reduction by 2030.

In addition, the CO2 law cites, as primary GHG reduction measures, carbon taxes, emissions

trading systems, building renovation programs, and automobile fuel consumption regulations.

A carbon tax was introduced in 2008 for fossil fuels excluding fuel used for transportation.

The carbon tax is so designed as to be able to increase tax rates depending on the status of

reaching reduction targets for CO2 emissions from fuel. Because the target was not achieved

in 2014, the tax was increased in 2016 from CHF60/t-CO2 to CHF84/t-CO2. In March 2016,

a revision to the CO2 law was announced and included an increase of the carbon tax to

CHF240/t-CO2 to be implemented gradually after 2020. The carbon tax rate may be adjusted

again in January 2018 depending on 2016 emissions.

Swiss ETS24 was first implemented as a voluntary phase (2008-2013) for five years, then as

the mandatory phase (2013-2020) during which participation of large-scale energy

consuming industries is mandatory and participation by mid-size industries is voluntary.

During the mandatory phase, about 10% of domestic GHG emissions are subject to this

system. In addition, participants in the emissions trading system are exempted from the

carbon tax.

Swiss ETS allows CER and ERU to be used as external credits, but imposes qualitative

restrictions by the implementation region of the project and the project type and quantitative

restrictions on volume limits.

Switzerland and the EU are working toward linking their emissions trading systems and have

been reviewing this since 2011, and a mutual agreement was reached in January 2016. The

Swiss ETS currently excludes GHG emissions from the aviation industry, but after the EU-

ETS linkage begins, the same rules as EU-ETS are to be applied.25

24 Federal Office for the Environment (http://www.bafu.admin.ch/klima/13877/14510/14719/index.html?lang=en) 25 Federal Office For the Environment

(http://www.bafu.admin.ch/dokumentation/medieninformation/00962/index.html?lang=en&msg-id=60425）

32

France

France introduced a carbon tax in April 2014, and fossil fuels that were not subject to EU-

ETS became taxable. In terms of the power supply configuration, the current share for

nuclear power generation of 75% is to be reduced to 50% by 2025 and renewable energies

be increased to 40% by 2030.

[The United States of America]

Although President Obama sought to introduce a national cap and trade system, this course

was abandoned in 2010. After that, the United States Environmental Protection Agency

(EPA) was instructed to set emissions regulations for CO2 from power generating facilities,

and announced a limit for new power plants in September 2013. In July 2013, the President's

Climate Action Plan was announced, and the Executive Order-Preparing the United States

for the Impact of Climate Change was officially announced in November 2013.

In the INDC submitted in March 2015, a GHG emissions reduction target of 26-28% from

2005 levels by 2025 was set, and use of market mechanisms was not included for meeting

the target.

On the other hand, the California Cap-and-Trade Program and the Regional Greenhouse

Gas Initiative (RGGI) have been implemented at the state and city level. In addition, the state

of Washington is positively considering introducing emissions trading schemes.

California Cap-and-Trade Program

The California Cap-and-Trade Program started in 2012 has completed the first compliance

period (2013-2014) and is currently in the second compliance period (2015-2017). The

second compliance period targets 85% of California’s GHG emissions, and the emissions

trading system is considered a measure to achieve the stipulated GHG reduction target

(same levels as 1990 by 2020, 80% reduction from 1990 levels by 2050).

Credit use is allowed by imposing a quantitative restriction of an upper limit of 8% for

emissions allowance granted to the subject facility and a qualitative restriction of six types of

projects implemented in the US.

In addition, the linkage to the cap and trade systems for Quebec, Canada, officially started

in January 2014, and participants from both systems can trade emission allowances and

credits. Furthermore, both systems have expanded the targeted sectors to include fuel use

33

in the transportation sector starting in 2015.26

Regional Greenhouse Gas Initiative（RGGI）27

Beginning in January 2009, the Regional Greenhouse Gas Initiative (RGGI) began a cap and

trade program for the power industry and currently enjoys participation from nine states

(Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York,

Rhode Island, and Vermont).

After completing the first compliance period (2009-2011) and the second compliance period

(2012-2014), the third compliance period (2015-2017) is currently underway. The program

targets power generation companies using 25 MW or more of fossil fuels. As of the beginning

of 2016, there were 163 companies participating. The cap for 2015 was set to about 80.5 Mt-

CO2, and year-over-year reduction was set to 2.5% up to 2020.

Credit use is allowed for an upper limit of 3.3% of reduced emissions (quantitative restriction),

and for five types of projects implemented within the participating RGGI regional states

(quantitative restriction).

Washington State Clean Air Rule

In January 2016, Washington State released a draft Clean Air Rule which would establish

an ETS in the form of a baseline-and-credit system in 2017, covering about 60 percent of the

state’s GHG emissions.

[Canada]

According to the INDC submitted in May 2015, a target to reduce GHG emissions by 30%

from 2005 levels by 2030 was set, and international market mechanisms are to be used along

with additional domestic measures.

At Provincial and Municipality level, Quebec Cap-and-Trade System, Alberta Greenhouse

Gas Reduction Program, Greenhouse Gas Industrial Reporting and Control Act）for British

Columbia, etc., are in place. Ontario started its ETS from January 2017 that would eventually

be linked to ETSs in California and Quebec. Manitoba, Ontario, and Québec signed a

memorandum of understanding (MoU) that stated their intention to link their ETSs under the

26 Air Resource Board Facts about the Linked Cap-and-Trade Programs

(http://www.arb.ca.gov/cc/capandtrade/linkage/linkage_fact_sheet.pdf) 27 RGGI (http://www.rggi.org/)

34

Western Climate Initiative, however the timing has not been announced.

Quebec Cap-and-Trade System

Quebec established the “2013-2020 Climate Change Action Plan” in 2012 as a measure

to mitigate climate change. As the GHG reduction target, a reduction of 20% from 1990 levels

by 2020 was set and an emission trading system was established as a market mechanism.

The Quebec Cap-and-Trade Program started in 2012 has finished the first compliance

period (2013-2014) and is currently in the second compliance period (2015-2017). In addition,

linkage to the California Cap-and-Trade Program started in January 2014.

During the first compliance period (2013-2014), the power generation and industrial sector

companies with emissions of over 25,000 t-CO2 annually were targeted, and during the

second compliance period (2015-2017), the transportation, agriculture, and waste sectors

are added to the targeted sectors. As the result, about 85 percent of the province GHG

emissions are targeted.

Credit use is allowed by imposing a quantitative restriction of an upper limit of 8% for

emissions allowance granted to the subject facility and a qualitative restriction of four types

of projects implemented within the country.

Alberta Greenhouse Gas Reduction Program28

Alberta implemented a mandatory Specified Gas Emitters Regulation based on base unit

targets (Specific Gas Emitters Regulations) in 2007. Industries emitting 100,000 t-CO2 or

more were to reduce emissions by 12% by 2015, by 15% by 2016, and are expected to

reduce by 20% by 2017, from average emissions during 2003-2005. About 45% of GHG

emissions for Alberta are covered by this regulation. The following four methods are

approved for businesses to reach their targets: (1) GHG reduction activities in the company;

(2) Trading excess reductions as Emissions Performance Credits; (3) Purchasing offset

credits created from projects implemented in Alberta; and (4) Contributing to funds related to

climate change in the province.

British Columbia GGIRCA

In British Columbia, GGIRCA（The Greenhouse Gas Industrial Reporting and Control Act）

28 Alberta Government (http://www.alberta.ca/climate-carbon-pricing.cfm)

35

was commenced in January 1, 2016. This established a baseline-and-credit system that will

cover liquefied natural gas (LNG) facilities currently under construction, once they become

operational.128 Facilities under the GGIRCA are required to meet a GHG emission intensity

target. Facilities can reduce their emissions intensity to meet the target, or purchase

compliance units. Three types of compliance units are available: earned credits can be

purchased from facilities that outperform the emissions intensity target, local offset credits or

funded units, purchased from the province at a set price of CAN$25/t-CO2 (US$19/t-CO2).

The revenues from funded units will go to a technology fund focused on accelerating market

adoption of innovative clean technologies to reduce GHG emissions in British Columbia. The

facilities will continue to be subject to the British Columbia carbon tax.

Ontario Cap-and-Trade System29

Ontario began the first phase of a cap-and-trade system that covers 82% of annual emissions

in January 2017. This system is similar to the cap-and-trade systems in California and

Quebec. Targeted are facilities, power generation companies, and natural gas distributors

that discharge 25 kt-CO2 or more of greenhouse gases annually, and power importers and

fuel suppliers that handle 200 liters or more of fuel annually. Of the emissions allowance, 5%

goes to the strategic reserve with three different price range levels linked to the reserve price

for Quebec and California and can be used only for compliance purposes with emissions in

Quebec. The remainder is auctioned. The first auction is planned to be held in March 2017.

In addition, industries subject to international competition are assigned free emissions

allowances.

[Oceania, Asia, and Other Regions]

Australia

Due to a change in the administration in 2013, Australia discontinued the carbon tax system

that had been introduced in July 2012 as of July 2014. As a replacement measure, a Direct

Action Plan including the Emissions Reduction Fund has been worked out and the plan aims

for a target reduction of 5% emissions reduction from 2000 levels by 2020. In the Emissions

Reduction Fund, offset credits (ACCU) are issued by business reduction activities and the

government purchases them via reverse auctioning. The first auction was held in April

2015.30 As of September 1, 2016, the Australian Government has held three auctions and

contracted 143 Mt-CO2 of emission reductions.

29 Government of Ontario (https://www.ontario.ca/page/government-ontario) 30 Australian Government (http://www.environment.gov.au/climate-change/emissions-reduction-fund)

36

The ERF includes the safeguard mechanism, which came into effect on July 1, 2016,

launching a baseline-and-offset system. The safeguard mechanism requires facilities with

annual emissions of over 100 kilotons of CO2e (ktCO2e) to limit their emissions to their

individual absolute baseline levels. Facilities that exceed their emission baseline levels can

purchase and surrender ACCUs for compliance.

New Zealand Emission Trading Scheme (NZ-ETS)

In New Zealand, due to the 2008 revision to The Climate Change Response Act 2002 related

to climate change policy, NZ-ETS was introduced in 2008 as the main measure targeting

GHG reduction. In addition, the INDC submitted in July 2015 set a GHG reduction target of

30% reduction from 2005 levels by 2030.

China

China achieved the target of 20% emissions reduction in energy consumption per GDP set

in the 11th Five-year Plan (2006-2010), and the 12th Five-year Plan (2011-2015) has also

set a target for reduction of energy consumption (16% decrease from 2010 levels). In addition,

targets were also set for increasing the forested area and for reducing CO2 emissions per

GDP, committed to under the UNFCCC (40-45% decrease from 2005 levels by 2020). The

INDC submitted in June 2015 stated that GHG emissions peak out should be realized by

2030, and set targets for reducing CO2 emissions per GDP (60-65% reduction from 2005

levels), for increasing the ratio of non-fossil fuels for primary energy (20% of the entire

primary energy), and for increasing forested areas (an increase of 450 million cubic meters

from 2005 levels). Promotion of national-level emissions trading system based on an

emissions trading system pilot project currently in implementation was also mentioned as a

measure.31 The time frame for starting this measure is planned for 2017 as stated in the

September 2015 U.S.-China Joint Presidential Statement on Climate Change.32

In October 2011, the National Development and Reform Commission (NDRC) announced

the implementation of ETS pilot projects in two provinces and five cities: Guangdong, Hubei,

Beijing, Tianjin, Shanghai, Chongqing, and Shenzhen. The emissions trading system started

in Shenzhen in June 2013, in Shanghai and Beijing in November 2013, and in Guangdong

and Tianjin in December 2013. The system also started in Hubei in April 2014 and in

Chongqing in June 2014.

31Enhanced Actions on Climate Change: China’s Intended Nationally Determined Contribution

(http://www4.unfccc.int/submissions/INDC/Published%20Documents/China/1/China's%20INDC%20-%20on%2030%20June%202015.pdf)

32 The White House Office of the Press Secretary (https://www.whitehouse.gov/the-press-office/2015/09/25/us-china-joint-presidential-statement-climate-change)

37

On September 25, 2015, the Chinese President announced that the Chinese national ETS

will commence in 2017. The national ETS will cover power generation, petrochemicals,

chemicals, building materials, steel, non-ferrous metals, paper and aviation. The National

Development and Reform Commission (NDRC) is responsible for developing the rules of the

national ETS while the local Development and Reform Commissions (DRCs) are responsible

for the implementation and management in their jurisdiction. Local DRCs will be allowed to

include more sectors in the national ETS and apply more stringent rules for allocating free

allowances.

In addition to the usual emission allowances, the only offset credits that can be traded are

the Chinese Certified Emission Reductions (CCERs) issued based on VER standards that

are developed and operated mainly by the NDRC. As quantitative restriction, the pilot

projects have an upper limit of 5-10% of emissions allowances granted. As qualitative

restrictions, credits from hydroelectric power generation projects are not accepted by most

businesses and, for projects in Beijing, Freon recovery and destruction methodology is

restricted.

South Korea

In South Korea, based on the Basic Law on Low Carbon and Green Growth enacted in April

2010, the GHG and Energy Target Management System (TMS) that implements GHG

emissions reduction targets for businesses came into operation in 2011, ahead of the

emissions trading scheme. In May 2012, the "Act for the Allocation and Trading of GHG

Emissions Allowances" and then in November of the same year the "Enforcement Decree of

the Allocation and Trading of GHG Emissions Allowances" were enacted. In January 2015,

Asia's first national-level emissions trading system started.33 In addition, the INDC submitted

in June 2015 set a GHG emissions reduction target of 37% reduction from BAU levels by

2030.

Approximately 525 large-scale emitting businesses are participating in this system,

accounting for 68% of national GHG emissions. The first phase (2015-2017) is currently

being implemented and all emissions allowances are allocated for free. However, 3% is to

be transitioned to an auction system during the planned second phase (2018-2020) and 10%

during the third phase (2021-2025).

33 Japan’s Ministry of the Environment : A Hearing Investigation in Korea

(http://www.env.go.jp/earth/er-potential/05/mat02.pdf) (in Japanese)

38

As quantitative restrictions for credit use during phase 1 and 2, an upper limit of 10% of

emissions allowances to be granted was recognized, and as the qualitative restriction,

business not participating in the system can use only domestic credits. After phase 3, it is

planned to allow the use of credits from overseas projects with an upper limit of 5%.

Mexico

After introducing a carbon tax in 2014, Mexico has generated almost US$1 billion in tax

revenues. By combining this carbon tax and other climate change policies such as ETS, it is

expected that a carbon marketplace could be formed in 2018. In June 2016, Canada, Mexico,

and the US announced a North American Climate, Clean Energy, and Environment

Partnership. The purpose of the partnership is to urge each of the local governments to share

experience and know-how in effective planning, support policies, etc. for carbon pricing

systems. The German government is also assisting in the development of carbon markets in

Mexico by sharing their experience with ETS. In addition, the Mexican government is

considering a trial run of voluntary ETS by corporations in order for domestic corporations to

be prepared for future climate initiatives. The approximate 60 companies in the electric power,

manufacturing, and transportation sector are expected to participate in this trial ETS. With a

strong interest in the development of the North American carbon market, Mexico, in August

2016, has announced a joint statement with Ontario and Quebec to together promote the

expansion of the North American carbon market initiative by taking cooperative action with

regards to the carbon market.

South Africa

In November 2015, South Africa announced a carbon tax bill, and the introduction of the

carbon tax was postponed until January 1, 2017. The bill allows for mandatory compliance

using offset, and a tax reduction from 60% to a maximum of a 95% can be received for these

activities. In other words, at full price, the statutory tax rate of 120 rand/t-CO2 (US$8/t-CO2)

can be reduced to 6 - 48 rand/t-CO2 (US$0.40 - 3/t-CO2). Currently, the South African

government is accepting public comments and reviewing the bill. In June 2016, the

government announced carbon offset scheme’s proposed regulations that define application

rules, offset standards, and management responsibilities. The system targets only domestic

emission reduction projects for credits and depends on international offset standards such

as CDM, VCS, and GS.

Kazakhstan

39

Kazakhstan has postponed ETS operation for two years from January 1, 2016, and is

resolving inequalities in the system. During this period, the government is planning to revise

the regulations regarding the issuing, free allocation, and price stabilization reserve of

emissions allowances. These new regulations are planned to reflect the economic

development that has occurred since the Kazakhstan ETS regulations were originally

planned. During this postponement, the targeted facilities are not obligated to reduce

emissions but are obligated to report on emissions.

[International Civil Aviation Organization: ICAO]

ICAO is a specialized agency of the United Nations and defines the protocols in countries

signatory to the Convention on International Civil Aviation (Chicago Convention). As of

September 2016, there are 191 ICAO members.

At its 39th Assembly, ICAO has decided to adopt a Global Market-Based Measure, as part

of a basket of measures to achieve carbon-neutral growth from 2020, i.e., to ensure that net

emissions of international flights are stabilized at 2020 levels, with any additional emissions

above 2020 levels to be offset. It is expected that ICAO will adopt technical standards with

criteria that emissions programs would need to meet, including provisions to ensure no

double-claiming. It is also foreseen that ICAO will develop a technical advisory body to make

recommendations on the eligibility of emission units based on those standards.

The Global Market-Based Measure was named CORSIA (Carbon offsetting and Reduction

Scheme for International Aviation）, and will be introduced in 2 steps. If adopted, the CORSIA

will start in 2021,103 commencing with a pilot phase (2021-2023), followed by Phase 1

(2024-2026) and Phase 2 (2027-2035). Countries can participate in the pilot phase and

Phase 1 on a voluntary basis. Phase 2 of the CORSIA will apply to all countries that exceed

a certain threshold based on their share of international aviation activities. Least Developed

Countries, Small Island Developing States and Landlocked Developing Countries are slated

to be exempt from all phases, even if they meet the inclusion criteria for Phase 2.

The CORSIA itself has the potential to generate a cumulative estimated emission units

demand of 3.3–4.5 Gt-CO2 between 2021 and 2035 if all additional emissions from

international flights beyond 2020 levels are covered. This new source of demand for emission

units could exceed the average annual issuance of 293 million CERs during the first

commitment period of the Kyoto Protocol (2008-2012) by 2030.

Because ICAO addresses only international aviation, CO2 emissions from domestic

flights—accounting for 38 percent of global aviation emissions—will not be covered by the

CORSIA.

40

[REDD+]

REDD+ adds the concept of “Conservation of Forest Carbon Stocks, Sustainable

Management of Forest, Enhancement of Forest Carbon Stocks in Developing Countries” to

“Reducing Emissions from Deforestation and Forest Degradation in Developing Countries

(REDD)” which was proposed at COP11 in 2005.

REDD+ was cited as an independent item in Article 5 of the Paris Agreement. To complement

the Warsaw Framework adopted at COP19, a new framework related to REDD+ was set at

COP21. Also at COP21, Norway, Germany, and the UK announced a joint guarantee of US$5

billion for REDD+ for 2015 - 2020. Many of these types of initiatives are included in the INDCs

and may be the basis for early stage financing necessary to achieve ambitious forest-related

emission targets.

(2) Voluntary Carbon Offset Schemes

Against the background of the spread of CSR activities and higher social environmental

awareness of society as a whole, various carbon offset schemes are being established

overseas as voluntary initiatives. Various types of certification exist, from schemes that exist

as public frameworks to ensure validity and transparency of the carbon offset to those with

which developed standards and certification bodies perform unique services. Global

voluntary carbon offset related schemes are introduced below.

[Initiatives by Public Organizations such as National Governments]

National Carbon Offset Standard (NCOS)34

Australia’s National Carbon Offset Standard introduced by the Australian government in July

2010 is a carbon neutral certification scheme intended for consumer protection. Certification

targets organizations, products, services, and events. In addition, in March 2016 the Ministry

of the Environment of Australia announced consideration to expanding the certification to

cities, regions, and buildings with an aim to create publically-recognized carbon neutral cities/

regions by January 2017.35

The most recent Certification Standards Version 3.0 specifies carbon footprint calculations,

reduction measures, third party verification, and carbon offset implementation. The

calculation standards comply with ISO14064, ISO14040, GHG Protocol, and the National

34 National Carbon Offset Standard (http://www.climatechange.gov.au/ncos） 35 Media Release (http://www.environment.gov.au/minister/hunt/2016/pubs/mr20160308a.pdf)

41

Greenhouse and Energy Reporting Act 2007. Australian Carbon Credit Units (ACCUs), CERs

(though some methodologies are excluded), RMUs from LULUCF activities, VERs issued by

Gold Standard, Voluntary Carbon Units (VCUs) and others can be used for offset.

carboNZero certification36

New Zealand's carboNZero certification is the carbon neutral certification scheme for the

carboNZero programme established by the Landcare Research New Zealand Limited, one

of Crown Research Institutes of the New Zealand government, in 2001 to provide the means

to contribute to GHG and CFP reductions. Currently, the Enviro-Mark Solutions Limited (a

state-owned corporation) operates as the secretariat.

The performance of calculations, management, reduction, and third party verification are

stipulated in order to acquire carboNZero certification. Calculation tools in compliance with

GHG Protocol and ISO14064 are provided, and credits created from Gold Standard, VCS,

CDM, JI, and other such schemes are to be used for carbon offset. Currently, over 200

companies and organizations are participating with the aim of obtaining neutral certification.

The carboNZero programme also provides CEMARS® certification for emissions calculation

and management for organizations, products, and services.37

[Initiatives by Private Corporations]

PAS206038

The UK’s PAS2060 is an international standard issued by the British Standard Institute (BSI)

in April 2010, which specifies the requirements related to achieving and proving carbon

neutrality. Subject to this are activities, events, and manufactured products by practitioners

(including organizations, governments, groups, and individuals). Consistent methods and

requirements are specified for calculating carbon footprints, formulating management plans,

and reducing emissions. The following are to be used for offset: CER generated from carbon

reduction/absorption projects in developing countries through CDM, or credits created from

Joint Implementation (JI), Verified Carbon Standard (VCS), or similar schemes.

Carbon neutrality authentication using PAS2060 is performed by Carbon Clear, an

international offset provider, or others entities.

36 carboNZero certification (http://www.carbonzero.co.nz/) 37 https://www.carbonzero.co.nz/members/carbonzero.asp (members only) 38 BSI(http://www.bsigroup.com/en-GB/)

42

The CarbonFree® Product Certification39

The US's CarbonFree® Product Certification is a carbon neutral certification program

targeting products that is operated by the Carbonfund.org Foundation, a nonprofit

organization. The program requires clarification of CFP (emissions calculations) based on

Life Cycle Assessment (LCA) and formulation of annual reduction planning measures. The

Certification Standards were revised in May 2015, and LCA is now based on GHG Protocol

for Product Accounting & Reporting Standard, PAS2060, ISO14067, ISO14025, and

ISO14040-14044. Credits used for offset include those from projects supported by the

Carbonfund, such as Kyoto Credits, American Carbon Registry (ACR), Climate Action

Reserve (CAR), Climate, Community and Biodiversity Project Design Standards (CCBS),

Gold Standard, and VCS. As of March 2016, a total of 84 products have been certified.

[Miscellaneous]

Voluntary cancellation in the CDM registry

In response to demands at the 7th Session of the Conference of the Parties (CMP7) to the

Kyoto Protocol of the United Nations Framework Convention on Climate Change held in

November 2011, the 68th CDM Executive Board held in July 2012 decided to establish new

voluntary cancellation accounts in order to allow voluntary cancellation of CER by CDM

project participants and CER cancellation for management purposes. 40 The voluntary

cancellation initiative is to bridge the gap for situations in which the GHG reduction initiatives

by each nation to be implemented by 2020 are not sufficient enough to meet the target of

limiting temperature increases to 2°C.41

Also, in order to promote voluntary cancellation by companies, organizations, events, or

individuals, the CDM Executive Board launched the Online Platform for Voluntary

Cancellation of CERs in the CDM registry in September, 2015.42 Also in the same month,

the UNFCCC Secretariat announced the start of an initiative called “Climate Neutral Now”

and the platform was established as part of the implementation of this initiative.43

As a function of the platform, project participants enter a price for credits they own on the

website and credit purchasers can select and purchase projects. The credits are canceled at

the time of purchase, and a cancellation certificate is emailed in 1-2 business days. Also for

39 The Carbonfund.org (http://carbonfund.org/) 40 Executive board of the clean development mechanism 68 meeting Report 41 Annual report of the Executive Board of the clean development mechanism to the Conference of the Parties serving

as the meeting of the Parties to the Kyoto Protocol (http://unfccc.int/resource/docs/2015/cmp11/eng/05.pdf) 42 Online Platform for Voluntary Cancellation of CERs（https://offset.climateneutralnow.org/） 43 Climate Neutral Now (http://newsroom.unfccc.int/unfccc-newsroom/go-climate-neutral-now/)

43

individuals, a calculation tool that can easily calculate GHG emissions for daily activities and

using aircraft is provided.

By March 11, 2016, the amount of CERs voluntarily cancelled from the CDM registry was

9,603,146 t-CO2, and 15,461 t-CO2 of this was purchased and deleted using the platform.

Note that the total CERs issued by the same date were 1,654,065,797 t-CO2.44

(3) Global Carbon Credit Schemes

A large variety of VER credits are traded on the global voluntary market. The recent trend is

to develop and operate, in various parts of the globe, VER systems of a type that limits project

target areas to those in country. Systems that fall under this are Japan's J-Credit Scheme,

South Korea's K-VER Scheme, Brazil's Brasil Mata Viva Programme, and Thailand's T-VER

Scheme.

This section introduces representative VER Schemes that have a large share of trading on

the voluntary market recently and other distinctive VER Schemes.

Tables that appear in this section should be read as follows.

Operation Whether the operating body for the VER scheme is

government or the private sector

Target Region Regions where the project can be implemented

Forest Absorption Methodology Whether absorption credits can be created

Co-benefit Requirement

Whether there is a requirement for a benefit other than GHG

emissions reduction and absorption (such as sustainable

development in developing nations) to be created by project

implementation

Number of Registered Projects

Volume of Credits Issued

Number of projects registered under the VER, the volume of

credits issued, etc.

Verified Carbon Standard (VCS)45

The VCS was made public in 2006 by the Climate Group, IETA, World Economic Forum, and

WBCSD with the goal of providing certification standards for projects and credits in the

voluntary market that have undergone quality assurance. Emissions that have been reduced

or absorbed by implementing projects are issued as Verified Carbon Unit (VCU) credits. VCS

44 Meeting report of the CDM Executive Board eighty-eighth meeting 45 VCS (http://v-c-s.org/)

44

has had the most trading volume in the voluntary market and has provided a wide range of

methodologies covering 15 categories.

In addition, the VCS allows for credits created by other credit schemes to be converted to

VCUs with the condition that the VCS requirements are fulfilled. The Guidance on converting

CERs to VCUs is specifically announced and provides the procedure when converting from

the CDM or EU's national registries.

In case of the CDM registry, a CER holder firstly completes cancellation of CERs on the

corresponding registry, and should then provide a statement that the CERs are being

cancelled in order to transfer to the VCS, and also have not been used for any offsetting

purposes or compliance purposes in the purpose section of the form submitted to the

UNFCCC. Once cancelled, the CER holder submits an application for converting, evidence

of CER cancellation, etc. to a VCS registry administrator. After being checked on the side of

the VCS, the same amount of VCUs as the cancelled CERs is issued. As of 2016, the number

of applications for converting to VCUs that have been confirmed on the CDM registry is 10,

amounting to 1,074,306 t-CO2 in total.

Operation Private sector

Target Region Global

Forest Absorption Methodology Yes

Co-benefit Requirement No

Number of Registered Projects

Volume of Credits Issued

(as of March 1, 2016)

Number of Registered Projects: 1,334

Volume of Credits Issued: 183,300,000 t-CO246

The Gold Standard (GS) for VERs47

The GS was founded by the World Wide Fund for Nature (WWF) in 2003 and is now run with

the support of more than 80 NGOs. This program is distinctive in that it not only assesses

GHG emission reductions as credits, but also provides a mechanism to assess the level of

contribution to sustainable development. Projects are recognized as GS-VER based on CDM

methodologies or methodologies for GS-VER approved by GS. In addition, a mechanism is

provided to disclose CDM or JI projects that meet GS standards in the GS-CDM/JI project

database. In 2012, the Gold Standard absorbed the CarbonFix Standard, which specializes

46 VCS Project data base (http://www.vcsprojectdatabase.org/) 47 The Gold Standard (http://www.cdmgoldstandard.org/)

45

in forest-based projects, and formed a partnership with the Forest Stewardship Council (FSC)

and the Fairtrade Label. 2013 is the first year in which the partnership with the FSC and the

Fairtrade Label has continued throughout the year, and all of the GS's land-related projects

obtained not only the certification of emission reduction/sinking but also other certifications

at the same time. Although the trade volume of credits by the GS's forest-based projects in

the voluntary market was less than 90,000 t-CO248 in 2014, parties concerned expect that

they will play a major role in the future markets.

Operation Private sector

Target Region Global

Forest Absorption Methodology Yes

Co-benefit Requirement Yes

Number of Registered Projects

Volume of Credits Issued49

Number of Registered Projects: 1,100 or more

Volume of Credits Issued: 46 million t-CO2 or more

Climate Action Reserve (CAR)50

The CAR, formerly the California Climate Action Registry established by the State of

California in 2001, has been in operation since 2008. The program guarantees the

environmental integrity of GHG reduction projects and focuses on creating and supporting

financial and environmental value in the U.S. carbon market. Emissions that have been

reduced or absorbed through project implementation are issued as Climate Reserve Tonnes

(CRT) credits. As a VCS linked program, conversion from CRT to VCU credits can be done

freely. In 2012, the program was recognized as a project registry for California's cap and

trade program. In addition, the credits based on the four protocols of CAR are recognized as

credits that can be used within the same program by going through a defined procedure.51

In September 2015, the program announced a comprehensive manual of procedures and

rules for project registration, emission reduction calculation, and credit creation with the aim

of improving the environmental integrity, transparency and reliability of projects.

Operation Government

Target Region North America, Mexico

Forest Absorption Methodology Yes

48 http://forest-trends.org/releases/uploads/SOVCM2015_FullReport.pdf 49 Gold Standard Project Registry (http://www.goldstandard.org/about-us/project-registry)

These volumes also include those of credits other than GS for VERs. 50 Climate Action Reserve (http://www.climateactionreserve.org/) 51 Climate Action Reserve : Compliance Offset Projects (http://www.climateactionreserve.org/how/california-compliance-projects/compliance-offset-projects/)

46

Co-benefit Requirement No

Number of Registered Projects

Volume of Credits Issued

Number of Registered Projects: 168

Volume of Credits Issued: 72,336,937 t-CO252

American Carbon Registry (ACR)53

The ACR was founded by the Environmental Resources Trust in 1996 as the first private

VER system in the U.S. Credits issued from projects are traded as Emission Reduction Tons

(ERT). ERT credits are credits that can be used in the California emissions trading scheme

that had started in January 2013.54 In 2013, the program announced a methodology of rice

management in the agricultural sector, and pilot projects have been implemented in

cooperation with various bodies concerned. The California Air Resources Board (ARB)

approved the rice methodology in the committee held in June 2015. The ACR registered 3

rice-related projects up to the present, and credits will be issued shortly.

Operation Private sector

Target Region Global

Forest Absorption Methodology Yes

Co-benefit Requirement No

Number of Registered Projects

Volume of Credits Issued

Number of Registered Projects: 19455

Volume of Credits Issued: 45,200,897 t-CO256

Climate, Community and Biodiversity Project Design Standards (CCBS)57

The CCBS is operated by the Climate, Community and Biodiversity Alliance, which was

established in 2003. The goal of the CCBS is to support development and marketing of

projects that contribute not only to GHG reductions but also to the preservation of local

communities and biodiversity. The CCBS are effective rules and guidelines for project design

as well as standards to assess environmental and social impacts of projects. Because CCBS

does not quantify GHG emission reductions nor issue credits, when project participants want

to have credits issued, a scheme that issues credits (such as CDM or VCS) can be used in

conjunction. In 2012, VCS-CCB Certification that allows for project approval and credit

issuance in collaboration with VCS was introduced, which improved user convenience. In the

voluntary market in 2014, credits issued by this VCS-CCB Certification Scheme became to

52 Reserve Fact (http://www.climateactionreserve.org/) 53 American Carbon Registry (http://americancarbonregistry.org/) 54 Air Resources Board News Release (http://www.arb.ca.gov/newsrel/newsrelease.php?id=376) 55 ACR Projects Report (https://acr2.apx.com/myModule/rpt/myrpt.asp?r=111) 56 ACR Issued Credits Report (https://acr2.apx.com/myModule/rpt/myrpt.asp?r=112) 57 CCBS (http://www.climate-standards.org/ccb-standards/)

47

hold the second largest share, 22%, after VCS.58

Operation Private sector

Target Region Global

Co-benefit Requirement Yes

Number of Registered Projects

Volume of Credits Issued Number of Verified Projects: 3659

Emissions Reduction Fund (ERF)60

The ERF was announced by the Australian government in April 2014 as a succeeding

scheme of the Carbon Farming Initiative (CFI), with the aim of providing incentives for

promoting voluntary GHG reduction by organizations and individuals. Although the target

sectors in the CFI were limited to agriculture, landfill and forestry, those in the ERF, in addition

to these existing sectors, extend to energy saving, transportation, waste/wastewater

management (totaling 7 sectors). Credits are issued as Australian Carbon Credit Units

(ACCUs).

Operation Government

Target Region Australia

Forest Absorption Methodology Yes

Co-benefit Requirement Yes

Number of Registered Projects

Volume of Credits Issued61

Number of Registered Projects: 558

Volume of Credits Issued: 21,005,579 t-CO2

58 http://forest-trends.org/releases/uploads/SOVCM2015_FullReport.pdf p17 59 CCBA Verified Projects (http://www.climate-standards.org/category/projects/verified-projects/) 60 Emission Reduction Found (http://www.cleanenergyregulator.gov.au/ERF/Pages/default.aspx) 61 Emission Reduction Found project register (http://www.cleanenergyregulator.gov.au/ERF/project-and-contracts-

registers/project-register)

48

Conclusion: The Outlook for Carbon Offset

Global warming measures that use market mechanisms such as carbon offset are being

promoted in various countries and regions. Many corporations, local governments, NGOs,

and NPOs have become interested in carbon offset initiatives, such as seen in the

establishment of “Climate Neutral Now” by the UNFCCC Secretariat in September 2015 to

promote voluntary carbon offset initiatives.

While the debate on carbon pricing that involves elements of compliance, such as emissions

trading and carbon tax introduction, is growing globally, voluntary carbon offset efforts also

have come to use various credits. For example, there have been corporations and others

that target neutrality by using credits and renewable energy while meeting emissions

reduction obligations with emissions trading, etc.

In Japan, the Act on Promotion of Global Warming Countermeasures was revised in May

2016 and included, as one of the pillars to promote global warming measures, the

fundamental enhancement of public awareness in order to bring about change in people’s

awareness and to convert the lifestyles of each person. Currently, multilayered, wave-like

public awareness raising activities are being carried out in the residential and business

sectors under the banner of “Cool Choice” that urges “smart selection” of low carbon

“products,” “services,” and “lifestyles,” such as carbon offset products, and further promotion

of publicizing carbon offset products, etc., through Cool Choice is planned.

In particular, environmentally friendly products incorporating a carbon offset scheme as a

mechanism that can contribute to global warming measures by consumers purchasing the

products have gathered major interest from not only general corporations that manufacture

and sell products but also from corporations responsible for distributing products to general

consumers, such as retailers. This initiative is expected to grow in the future.

Carbon offset is an opportunity for us to review our lifestyles in terms of global warming and

is an initiative that can help create an environmentally-friendly society through credits. We

anticipate that carbon offset and carbon neutral initiatives will permeate society, and the circle

of global warming measures by individuals, corporations, and local communities will continue

to expand.

49

Appendix: Carbon Offset/Carbon Neutral Certification Schemes of Various Countries

(Comparison Table) The following table compares carbon offset schemes operated by different national

governments.

Carbon Offset/Carbon Neutral Certification Schemes (as of March 2017)

Country Japan Australia New Zealand

Implementation Body

Government Government Government

Name Carbon Offsetting Scheme NCOS Carbon Neutral

Programme carboNZero programme

Certification Body Third party certification Third party certification Third party certification

Established (yr.) 2012 2010 2001

Issuing Body

・Carbon offset:

Certification bodies (private) approved by the scheme

・Carbon neutral: Carbon

Offsetting Scheme Registration and Certification Committee

Department of Climate Change and Energy Efficiency

Enviro-mark Solutions Limited (State owned corporation)

Targeted Initiatives

・Carbon offsetting

certification initiatives (products/services, and events)

・Carbon neutral initiatives

(organizations)

Carbon offsetting and carbon neutral initiatives (organization, products, and events)

Carbon neutral initiatives (organization, products, services, and events)

Reduction Efforts

・Carbon Offset: qualitative

・Carbon neutral:

quantitative

Quantitative:

・Use the latest base year

of which data is available, or the average of multiple years.

・Establishment of a GHG

management plan is a must, which contains emissions reduction measures and reduction amounts.

Qualitative: Establishment of a reduction plan is a must. Specific reduction measures are presented.

Credits Kyoto Credit, J-credit, J-VER, Regional J-credit, Prefectural J-VER

Australian certified credits (such as ACCUs), Kyoto Credit, GS, VCS

Kyoto Credit and VER are recognized, but each project must go through quality verification.

Third Party Verification Requirements

Required.

※Valid only by

organizations that are accredited with JIS Q 14065 (Greenhouse gas validation and verification)

Required.

※Valid only by organizations registered in NGER audit framework, or those accredited with ISO14065 or international standards specified in ISO14040

Required.

※Verification body must

have expertise in GHG verification. These bodies are registered after receiving training and passing the test given by the system.

Label Yes Yes Yes

Voluntary Carbon Offset in Japan, FY2016

Date of Issue: March 31, 2017

Issued by: Office of Market Mechanism, Climate

Change Policy Division, Global Environment Bureau,

the Ministry of the environment, Japan

TEL: 03-3581-3351 Direct: 03-5521-8246