Regulatory Update: Japan’s GX-ETS to Become Mandatory for Large Emitters in 2026
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Japan has formally passed legislation making participation in the Green Transformation Emissions Trading System (GX-ETS) mandatory by April 2026. Previously voluntary, the scheme will now apply to roughly 300–400 major companies across multiple industries.
Does the new legislation apply to your business—and if so, are you ready for it? Read on to learn more about the GX-ETS mandate and how to make sure your business is ready.
What is the GX-ETS, and who is required to participate in it?
The GX-ETS is Japan’s carbon trading program. It’s a key part of Japan’s strategy to reduce 2013 emission levels by 60% by 2035.
Launched in 2023, the GX-ETS is one of the schemes under the GX League and mirrors the EU ETS by using market mechanisms to drive corporate decarbonization. In the GX-ETS, emissions allowances become assets that companies can trade. That includes carbon credits from Japan’s J-Credit scheme or from international projects via the Joint Crediting Mechanism (JCM).
The last few years, Phase 1 of the ETS has been voluntary. Phase 2 will begin spring 2026. Now, GX League member companies emitting more than 100.000 tons of CO₂ per year must participate in the GX-ETS. That affects roughly 300-400 companies—which collectively generate about 60% of the country’s greenhouse gas emissions. The electricity, steel, automotive, and air travel industries will be most significantly impacted.
How to prepare for the GX-ETS
If your business falls under the new mandate, you’re expected to participate in the system by April 2026. You’ll receive an emissions cap that sets your trading threshold. If you exceed the quota, you will be required to buy additional quotas. If you stay under your quota, you’ll be able to sell your surplus.
April 2026 will come quickly. Here’s how to get ready.
1. Assess your emissions exposure
What gets measured gets managed. The first step in compliance is getting an accurate estimate of your total annual emissions across all your operations. This data will inform your compliance budgeting, operational planning, and risk mitigation strategy.
2. Prepare your MRV infrastructure
To stay compliant, you'll need to use a regulated Monitoring, Reporting, and Verification (MRV) framework for tracking your emissions. Once you understand your full emissions footprint, ensure your systems align with the new legal requirements.
Upgrading and developing monitoring systems is complex, and admittedly it can be expensive. However, beyond compliance, the new systems can help ensure accuracy across multiple sites and reporting units. You can use the data to make your operations more efficient.
3. Budget for carbon costs
Under GX-ETS, carbon costs are now a direct input in your operations and procurement plans. You'll need to start forecasting carbon costs and using the data to inform your decisions across the board.
Pay attention to energy procurement costs, production outputs, and capital expenditures. You’ll want to limit your exposure to carbon price fluctuations.
Get ahead and stay compliant with a partner you can trust
Big policy shifts like GX-ETS often come with big questions. It’s a complex shift, but it doesn’t have to be overwhelming.
If you’re looking to get ahead of GX-ETS compliance, a great partner can make all the difference. Partner with ACT today to develop projects that secure a reliable supply of J-Credits and JCM credits—and count on us, as GX League members, to manage and transact them on your behalf.