Tokyo’s Emission Trading Program

The Tokyo Emissions Trading Scheme: Lessons from a Pioneering Jurisdiction

In 2010, Tokyo launched a pioneering cap- and-trade program for its buildings known as the Tokyo Metropolitan Government Emissions Trading System (ETS). The Tokyo ETS was innovative both for the scope of sources covered – industrial factories, large public buildings, educational institutions, and large commercial buildings – and for being the first local-level ETS in the world to target carbon emissions. Given the innovative nature of the program, this issue brief examines the workings of the Tokyo ETS and seeks to identify lessons that it holds for other cities, such as New York, that are contemplating adopting their own cap-and-trade program for buildings. The Tokyo ETS has generally been deemed a success in so far as participating buildings have largely met or exceeded their reduction goals. As such, the program set an important precedent that commercial buildings, in addition to industrial buildings and factories, can successfully participate in emissions trading regimes. However, Tokyo took some steps in the name of political expediency to achieve its goal that may have caused relatively few emissions permits to change hands. As a result of the anemic trading marking, participants in the Tokyo ETS did not take full advantage of the cost efficiencies that cap-and-trade schemes can provide. This issue brief sheds light on the mechanisms of the Tokyo ETS, including its successes and challenges. The brief begins with an overview of the general theory behind cap- and-trade and then examines the particularities of the Tokyo ETS. It concludes with a discussion of the outcomes in Tokyo and issues that other jurisdictions interested in reducing building emissions through an ETS should consider in setting up such a program.

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