Outlook for the Carbon Market in Japan After 2012

Over the past decade, Japan has an emerging carbon market,
which was non-existent before the Kyoto protocol. While
there have been discussions regarding cap-and-trade at the
national level, compulsory policies remain extremely controversial
with particularly strong opposition from the industrial
sector. Currently, Japan has decided neither to immediately
introduce a compulsory cap-and-trade system at the national
level nor to join the second commitment period of the
Kyoto Protocol. Therefore, the future of carbon markets in Japan
is uncertain.
This paper outlines the evolution of the Japanese carbon market
over the past decade and provides an outlook of the possible
carbon market in Japan after 2012.Our analysis divides the
Japanese carbon market into the following four areas: 1. international
credit under the Kyoto Protocol, 2. domestic carbon
trading at the national level, 3. voluntary carbon offsets and 4.
local government initiatives for carbon trading. In the following
sections, these four areas are examined individually.