Tokyo Cap-and-Trade Program

The Tokyo Cap-and-Trade Program, launched on April 1, 2010, is the world's first urban Cap-and-Trade Program requiring CO2 reductions from large commercial and industrial buildings. Owners of these buildings are required to meet the allotted reduction targets through on-site energy efficiency measures or an emission trading scheme.

Source: Tokyo Metropolitan Government

A unique feature of the Tokyo Cap-and-Trade Program is its targeting of office buildings and other buildings in the commercial sector. It covers large CO2 emitting facilities that consume energy in the amount of 1500 kiloliters or more (crude oil equivalent) per year. In effect, the program applies to about 1,300 facilities: in the commercial sector, about 1,000 office buildings, public buildings, and commercial facilities; in the industrial sector, about 300 factories and other facilities. The total emissions from targeted facilities account for 40% of all CO2 emissions from the commercial and industrial sectors in the Tokyo area.



The total cap on the targeted sector was set 6% below base-year emissions for the first compliance period (2010-2014), based on Tokyo's emissions reduction goal for 2020. The cap for the second period (2015-2019) is expected to be a 17% reduction below base-year emissions, taking into account future technological innovations, expected market efficiencies, and planning for long-term investments.



During the first period, covered factories are required to reduce their total CO2 emissions by 6% and office buildings with other facilities by 8 % from their base-year emissions. They are allowed to select the average of any three consecutive years from 2002 to 2007 as their own base-year emissions, an approach that allows flexibility and fairness based on their differing business conditions. A facility that has already achieved high energy efficiency can be certified as a ?Top Level Facility. For such a facility, the compliance factor is reduced to half or three-quarters, depending on a detailed review.



To achieve their required reductions, in addition to the introduction of energy-efficiency measures and renewable energy use at the site of the covered facility, each facility can purchase excess reductions from other facilities, as well as four types of offset credits; emission reductions from small and midsize facilities in Tokyo, renewable energy credits, emission reduction outside Tokyo area, and Saitama credits.

Facility owners that fail to meet the reduction obligations are required to cover 1.3 times the reduction shortfall, are subject to a fine of up to 500,000 yen, and will have their violation published.