Results of Public Comments Received on "Establishment of the Carbon Credit Market"
July 14, 2023
Tokyo Stock Exchange, Inc.
Tokyo Stock Exchange, Inc. (TSE) announced the establishment of a Carbon Credit Market on June 9, 2023 and sought public comments until June 23. We appreciate
the cooperation of those who have submitted valuable comments in reviewing this matter.
The summary of comments gathered, TSE’s responses to the comments, and its final review based on them are as follows:
Summary of comments gathered and TSE’s responsesNo.
1Comments

TSE’s response

・ Registration requirements

・ Registration requirements(1) Please consider whether it would be possible in the future to(1) TSE requires that Participants have a J-Credit account in theiraccept individual investors. Their entry can vitalize the market.

own name where the usage authority identified in the account(2) It says that to ensure stable operations, multiple officers andinformation in the J-Credit Registry System is "account holder

employees are required to be engaged. Would you clarify

only," and Participants must be a corporation, government orwhether this means that two or more persons are required?

local government, or voluntary organization that can open such(3) There is a requirement that the applicant must not bea credit account.

insolvent. Please consider providing a special rule to allow(2) As you indicated, multiple means two or more persons.

such an applicant to participate if, for example, they deposit(3) The requirement that the applicant must not be insolvent is"Participant security money."meant to ensure stable settlement in the Carbon Credit Market.
As you have stated, the risk of settlement defaults can be
reduced to a certain extent by depositing Participant security
money, but we have set this requirement because it is not
1

No.

Comments

TSE’s response
possible to limit the trading value to the amount deposited as
Participant security money.

・ Order types

・ In order to prevent erroneous order placement or extreme price

Please consider whether it is possible in the future to accept market

volatility, market orders will not be introduced at the time of launch.

orders.

We will consider introducing them in the future when the number oforders increases and the above risks are reduced.

2・ It would be better for a buyer of a J-Credit to have some way of・ From the perspective of ensuring smooth transactions and collective

obtaining information about the seller (project participant) before

price formation as should be the case for exchange trading, thebuying. (If it is difficult to disclose such information automatically,

counterparty to a transaction will not be shown (even if information

there should at least be a way to obtain it upon request, foris disclosed after the execution, if, for example, cancellation is

instance.) Even if a trade is executed, if the seller does not

accepted based on such disclosure, there will be no difference fromcompletely transfer the credits, the trade will not be effected. In

individual OTC transactions). To protect against counterparty

this case, there will be a significant impact on the buyer, such as not

defaults on settlement, TSE will act as an intermediary for the

being able to purchase credits within the planned budget. It would

settlement of funds and the transfer of credits, thereby eliminating

be better to be able to confirm information on a seller (project

the risk of loss of principal. In addition, in order to prevent

participant) in advance (at the time of sale) to see whether theunnecessary settlement defaults, TSE may impose sanctions on aseller is reliable and conduct a reliable transaction.

Participant who has defaulted on settlement such as suspending its
permission to trade or cancelling its registration.

・ Please provide execution information and settlement informationfor export not only in CSV format but also in PDF format. Data in
CSV format can be edited, so the format is flexible but the data isunreliable, whereas data in PDF format is reliable as it cannot beedited. If there are two formats, either of them can be used asneeded, which would be convenient for asset management.
2・ Thank you for your comments on the specifications of TSE's Carbon
Credit Market System.
・ We will use these comments as reference for future systemdevelopment.

No.

Comments

TSE’s response・ I would like to be able to download the screen with information on
the "Settlement Date, Total Payment, and JPX Deposit Account"after execution in PDF format since it is likely that many companies
process settlements based on such information.
・ Although I probably should log in to the market system every day
to check sell orders on the order list, it is impossible to monitor thesystem all the time. So, it would be useful to have a function thattells us by e-mail or some other means when a sell order that meetsthe specified conditions is placed.
・ It is possible to narrow down orders by category on the order list

・ In order to increase liquidity, TSE has adopted a system whereby

screen and other screens, but it would be useful to add “region” totrading is conducted according to the trading categories establishedthe categories to contribute to local consumption of local

by TSE, rather than by individual carbon credits, such as by region.
・ In terms of individual credits, only information designated by a seller

production, for example.

at TSE upon order placement can be confirmed after the trade is
executed, and individual credits cannot be narrowed down when anorder is being placed.
・ Please make it so that purchase amounts (in total and per ton) are

・ We understand that your comments are about the "J-Credit Registry

shown on the J-Credit account. Companies will need to manage

System." Although this system is not operated by TSE, we will use

their J-Credit assets, but the amounts are not indicated on the

your comments as a reference for future market operations.

account, making it difficult to manage assets. Execution
information and settlement information can be exported in CSV
format to use as purchase amount information, but because they
are CSV data that can be edited, the information is not reliable as
written evidence of purchase amounts.
3

No.

Comments

TSE’s response

・ Please make it so that the credit type (trading category layers: referto the Appendix of the Outline of Specifications for the Carbon
Credit Market) is shown on the J-Credit account. Currently, it isdifficult to tell which credit is which at a quick glance, so if you holdmultiple types of credits, you may select the wrong credit to retire.
3・ Please create a system that allows business operators which haveparticipated in the market to exit at their own discretion.

・ A business operator registered as a Carbon Credit Market Participant
may apply for the cancellation of its registration at its own discretion

・ If estimated costs associated with market participation are not

・ We will announce in advance the amount of money and the start

known by the fall of the fiscal year prior to the fiscal year in whichdate of collection as pointed out in (1) and (2), so that Carbon Credit

the expenditures are to be made, please consider the following

Market Participants can fully consider them.
・ Participant security money will be deposited as collateral for fees formatters in light of the difficulty in deciding budgets.
(1) Regarding item (2) Participant registration (d) Payment ofregistration fee and deposit of Participant security money,

market participation. We will announce the requirement (theamount) when the fees for market participation are determined.

please indicate at the earliest possible time when and how
often the registration fee and Participant security money will
be required and the amounts. Please also indicate therequirements for Participant security money.
(2) Regarding item (3) Participant obligations (b) Fees for market
participation, please indicate at the earliest possible time
when the basic fee, transaction fee, and settlement fee will becharged and the amounts.
4・ Please extend the no-fee period for as long as possible, and evenafter fees are introduced, keep them low to stimulate trading.

・ Fees such as those related to market participation will be zero for thetime being, as we consider it desirable to vitalize the market andimprove its convenience by inviting as many investors as possible to

4

No.

Comments

TSE’s response
participate and trade in the market from early on.
・ We will consider how we can offer fees related to market
participation, such as trading fees, at appropriate prices, and will
announce them in advance.

・ In the event of settlement defaults, will you apply sanctions otherthan public announcement?

・ In the event of settlement defaults, TSE may, after requesting an
explanation from the Participant as necessary, suspend or restrict its
permission

totrade,

cancelits

registration,orrequestimprovements.
・ A call auction will be conducted once in the morning and once in・ J-Credits will be the items eligible for trading when the market isthe afternoon, and only limit orders will be accepted. Do you thinkestablished, which is the same as in the demonstration projectthat trading will not be that active?

conducted in 2022. As such, the trading rules will basically be thesame as those in the demonstration project.

・ I understand that credits related to emissions reduction and・ We understand that your question as to whether it is possible toabsorption are separately treated in terms of trading categories. Is

place limit orders on individual credits means whether it is possible

it possible to place limit orders on individual credits?

to trade project-based carbon credits separately. As the number ofindividual projects is so large, allowing orders to be placed on an
individual project basis may spread out liquidity, and therefore, wewill not adopt this approach.

・ TSE will only notify buying Participants of defaults three days after
the execution. I think this measure is overly protective of credit
sellers. Why will it take four days in total from the day of theexecution?

・ We do not intend to protect or give preferential treatment to credit
sellers.
・ In order to minimize the impact of settlement defaults and probabledefaults, TSE requires the selling Participant to promptly report toTSE any errors in the credit certification number or inability totransfer the quantity of carbon credits that have been executed.

5

No.

Comments

TSE’s response
The notification deadline is set for three trading days after that of
the execution.

・ Will qualified invoices be issued in the late afternoon of the sameday?

・ Invoices and settlement statements will be issued on the settlement
date. Settlement information will be available on the Carbon Credit
Market System from the business day following the execution date.

5・ Please separate solar credits held by the government from otherelectricity-based renewable energy credits. The market will be very・ Based on this feedback, we will consider how government-held
credits should be sold in the future.

difficult to use if government-held credits and other electricitybased renewable energy credits are all mixed up, because wecannot guarantee the vintage or technology used until after we buyit.
・ There is significant demand for J-Credits in particular, for specificreasons such as reporting for RE100, but there may be barriers toparticipation without user-friendliness.
6・ We wish to express our congratulations to JPX for your plans toestablish trading on the CCM later in 2023.

・ As you mentioned, only J-Credits will be available for trading whenthe market is established, but we will consider adding other carbon

・ We note the initial planned availability of CCM trading tocredits to be traded in light of future conditions and other factors.

commence with J-Credits. So as to expand the range ofopportunities available to CCM participants in 2024 and beyond,Puro.earth (which operates the Puro Standard - an ICROA endorsed
independent carbon standard) will welcome the future expansionof CCM trading to also include credit types from the international,
independent standards.
7・ IETA is a non-profit business organization created in 1999 to
6

・ The requirements for participation are listed in the Outline of

No.

Comments

TSE’s response

establish a functional international framework for trading inSpecifications and do not exclude overseas corporations. The

greenhouse gas emission reductions. Our membership includes

requirements for overseas and Japanese companies are the same,

more than 300 leading international companies operating in

but overseas companies should pay particular attention to thecompliance and voluntary carbon markets. Since its foundation infollowing points:

1999, IETA has been the leading voice of business on market-based(1) Establishment of a bank account in the applicant's own nameambitious solutions to climate change. We are a trusted adviser to

The bank account must be one at a financial institution locatedgovernments to support them build international policy and market

in Japan to enable transfers to and from TSE's bank account toframeworks to reduce greenhouse gases at lowest cost, increased

be conducted on the settlement date.

ambition, and build a credible path to net-zero emissions.

(2) Establishment of an account with the J-Credit Scheme Registry

・ We warmly embrace the establishment of a carbon market in Japan

Overseas business operators should be able to open a J-Credit

and eagerly anticipate its development. Against this backdrop, I

account, but please check with the J-Credit Scheme Secretariat,

would like to raise the following two points.

as there are certain documents that are needed to open the・ Firstly, I understand that foreign companies not registered in Japan
can also participate, but the conditions for participation, as

account.
(3) Being a qualified invoice issuer

published, do not clearly indicate this. Given the substantial

Foreign business operators also can register as qualified invoiceinterest from overseas, it would be advantageous to communicate

issuers (registration must be made with the tax office where thein a manner that unequivocally demonstrates inclusivity towards

tax is paid).
・ We will continue to provide more documentation in English.

foreign companies.
・ Secondly, the publication of announcements such as this one, alongwith any other public documents, in both Japanese and English
would be highly appreciated. Consequently, we kindly request that
all carbon Credit market rules and activities, encompassing tradedcredits, be made available in both Japanese and English to thegreatest extent possible.
7

No.

Comments

TSE’s response

8・ We would like to first acknowledge the diligent work that has done

・ Thank you for your valuable feedback on the quality and creation of

in developing the J-Credit Scheme. These programs have helped
reduce over 6.1 mil. t-CO2 emissions over the past decade for Japan

J-Credits.
・ We understand your comment is about the J-Credit methodology.

and have developed over 60 individual methodologies for

Rules for the methodology are determined by not TSE but by the J-

generating, certifying, and verifying these offsets have taken place.

Credit Steering Committee.

・ We would like to humbly recommend that the relevant officials
form Government bodies / the Tokyo Stock Exchange Inc. consider
aligning the J-Crediting mechanism with The Oxford Principles for
Net Zero Carbon Offsetting. Following the outlined steps ofaFirst cutting emissions, use high quality offsets, and regularly
revise offsetting strategy as best practice evolvesbSecond shift to carbon removal offsettingcThird shift to long-lived storage (credits with high durability)

・ In line with the principles listed above, we believe developing
potential removals ramps or quotas that scale overtime to be inalignment with the Paris Agreement will ultimately benefit theJapanese Carbon Exchange and help achieve climate objectives.
Carbon removals with high durability will be critical to achievethese goals around mid-century. Luckily, these types of carbon
removal credits are anticipated to becomes less expensive overtime with accelerating commercial deployments, and as more
traditional carbon reductions from nature-based solutions are
anticipated to potentially become more expensive overtime due toscarcity of natural resources required.
8

No.

Comments

TSE’s response

・ The addition, by the relevant government organization(s) of a
specific category for technology-based carbon dioxide removal(CDR) approaches, such as direct air capture with geological storage(DACCS), to the categories outlined in the “Appendix: Table ofTrading Categories” of this consultations’ “Outline of Specifications
for the Carbon Credit Market” would accordingly help to ensurethat the Japanese exchange has the foundational structure toaccommodate

theseapproaches,

which

are

rapidlycommercializing today. This would add considerable value andstrengthen the carbon credit market.
・ The inclusion of a technology-based CDR pathway would align with
updates currently underway to the Rules and Guidelines for the
Joint Crediting Mechanism to include carbon capture and storage
approaches in its scope. We believe it would be most efficient fordomestic and international carbon markets to be aligned in thisregard.
・ Additionally, the inclusion of a technology-based CDR pathway
within the J-Credit market would align with the leadership that theJapanese government has shown to-date in recognizing theimportance of negative emissions technologies (NETs) for achieving
net zero emissions in Japan.
・ Finally, introducing a credit rating system in line with systems suchas those proposed by BeZero and acknowledging the possibility ofcarbon reversals, insurance policies, and recourse requirements
9

No.

Comments

TSE’s responsethat need to be in place to support a growing carbon trading market
should be considered today to prepare for tomorrow.
9・ The number of transactions was smaller than expected, and the・ In order to ensure fair price formation and smooth settlement, TSE

number of sales in particular, which could be a problem. For thiswill monitor orders, trades, and settlements of Carbon Credit Market

reason, I did not use the demonstration market as a price indicator.

Participants in this market.

However, considering that the market will play a role providing

・ Specifically, we will indicate in the rules the types of orderreference prices for OTC transactions in the future, please considertransaction patterns that could be viewed as manipulation, as you

any possible measures to prevent the kinds of manipulation thatpoint out, and supervise these activities.

happen on exchanges.
・ In addition, when procuring J-Credits for reporting to comply with
the GHG Protocol, the value of tCO2 converted into kWh/GJ is・ As you mentioned, we recognize that the value of carbon credits canvary depending on their usage.

important. However, with the current method, these values cannot

・ There are two types of trading: the one close to OTC, where

be confirmed until execution. Please discuss the pros and cons ofindividual carbon credits are traded, and the one where carbon

treating items with different intrinsic values as the same product ascredits are traded on a standardized basis. TSE will adopt

well.

standardized trading when the market is established.
・ We will use your comments as reference for future market
operation.

・ While there is a growing demand for high-quality credits involuntary credit markets, OTC trading is still going strong, and there
are some negative views about trading markets. However, I think it
is a positive thing that TSE is going to establish Japan’s market tokeep up with other countries.
・ As they are compliant with the GX (green transformation) League,
the demand for J-Credits is expected to increase in the future. I
10・ Thank you for your interest in TSE. We will continue our efforts tofacilitate trading.

No.

Comments

TSE’s response

hope that this market will help facilitate smooth trading.
10・ 1. Outline of Specification 1. (1) Items eligible for trading

・ The specific method and timing for trading of surplus reduction

Can I understand that surplus reduction allowances allocated byallowances allocated by the GX-ETS have not yet been decided, but

the GX-ETS will be available for trading in the future? Or will thewe expect to make them available in the future as simulated trading

scope go beyond that, and is there a possibility that voluntary

was conducted in the demonstration project.

carbon credits from Japan and overseas will be available fortrading?

・ Only J-Credits will be available for trading when the market isestablished, but we will consider adding other carbon credits to be
traded in light of future conditions and other factors.

・ 2. Outline of Specification 2. (2) Registration requirements b.

・ To ensure stable operations, two or more officers and employees are

The specifications require having a system in place to ensure stable

required to be engaged. If the SPC’s business agent establishes aoperations. For example, in a case where a special purpose

system in which two or more officers and employees are engaged,

company (SPC) such as a limited liability company is involved in thewe will determine that the requirement is fulfilled.

transaction (e.g., a case where the SPC is involved in the transaction
as the vehicle of a fund for carbon credits), would it be possible todetermine whether the requirement is fulfilled by focusing on thesystem of the SPC's business agent rather than the SPC itself? I am
sorry that this is a hypothetical question.
・ 3. Outline of Specifications 2 (2) (b) Application for registration as a・ Applicants for the demonstration project were required to submit an

Participant

application form for registration and a written confirmation

Do we understand that we are not specifically required to submit a

indicating that they have no relationship with anti-social forces by

written confirmation indicating that we have no relationship withplacing their signatures and seals on both documents. However,anti-social forces? (I think that this was required at the time ofwhen the market is established, applicants will be required to agree

application for participation in the demonstration project.)to the written confirmation indicating that they have no relationshipwith anti-social forces and then submit an application form for the
11

No.

Comments

TSE’s response
Carbon Credit Market registration with their signature and seal.

・ 4. Outline of Specifications 2 (2) (d) Payment of registration fee and・ We are envisaging Participant security money to be deposited as

deposit of Participant security money

collateral for fees for market participation. However, as you pointed

The Participant security money will be zero for the time being. I

out, the rules also allow for the collection of Participant security

understand that this measure is to encourage more investors tomoney as collateral for settlement. We will consider whether suchparticipate when the scheme launches. However, you could also

money is required in light of the future settlement situation.

consider that the introduction of Participant security money willsecure safety of settlement, which may give confidence toParticipants. (Even in such a case, the level and scope of such ameasure should remain appropriate so as not to discourage
Participants). To the extent possible, please tell us why you havedecided that the Participant security money will be zero for thetime being (such as results of the demonstration project, interviews
with related parties, etc.).
・ 5. Outline of Specifications 3 (4) Categories of trading

・ The categories of trading were changed once during the・ For example, in reporting under “Act on the Rational Use ofdemonstration project. Since the new categories were preferred by

Energy”, only J-Credits in the field of energy saving that use themost, they will be used when the market is established. However, of

methodologies EN-S-019, 043 and 044 can be calculated as use ofcourse, this does not mean that we will not review the categories in

non-fossil fuel energy, but I understand the initial trading categories

the future based on trading demand and other factors.

in this market are not in line with this classification. I do not knowwhether there is any actual demand for trading categories to match
this classification as of now, but can I understand that there is stillroom to review the trading categories in the future based on the
categories of credits eligible under various schemes and actual
12

No.

Comments

TSE’s response

・ 6. Outline of Specifications 5 Treatment of settlement defaults and・ The treatment of trading fees when a settlement is not conductedtrading demand?
probable defaults

and the execution is cancelled will be clearly indicated when the・ Do I understand that if a trade is executed but the settlement is notconducted and the execution is cancelled, the trading fee alreadyamount and collection method of fees related to market
participation are determined in the future.

paid by the Participants will not be refunded?
Comments submitted by individuals (Nos. 1, 2, and 4); Hokkaido Electric Power Co., Inc. (No.3); Gaia Environment (S) Pte Ltd. (No. 5); Puro.earth (No. 6); International
Emissions Trading Association (No. 7); 1PointFive and Carbon Engineering (No. 8); Sumitomo Corporation (No. 9); and Mori Hamada & Matsumoto (No. 10)13