Assessing the designs and effectiveness of Japan's emissions trading scheme

After years of discussions and trials, Japan's domestic emissions trading scheme remains purely voluntary. The newly elected Democratic Party of Japan (DPJ) has taken a firmer stance on climate change, initially intending to establish a nationwide mandatory cap-and-trade as early as 2011. This has promoted several questions regarding the possible designs and feasibility of such a scheme. This article describes the key features of the two trial schemes implemented, thus far, assesses the effectiveness of their implementation and discusses what will be the likely areas of contention should the Japanese government introduce a mandatory cap-and-trade in the future. The analyses indicate that the initial years of 'Japan's Voluntary Emissions Trading Scheme' (JVETS) implementation have shown positive performance, although its scale has remained limited. The 'Trial Implementation of an Integrated Domestic Market for Emissions Trading' emerged as a hybrid scheme, one that incorporated varying interests. Significant institutional developments have taken place in recent years, however the effectiveness of the present trial scheme also seems restricted.