New Perspectives on Climate Finance for Cities report: Case Study

Driving down building emissions in Tokyo

Tokyo has a population close to 35 million. In 2006, Tokyo emitted 59.6 million tons of CO2e, 95 percent of emissions were from energy-related activities. Electricity generation accounts for 50 percent of emissions, oil 28 percent and gas 17 percent. Tokyo generates around one-fifth of Japanese GDP. The Tokyo Metropolitan Government’s Bureau of Environment developed the world’s first city level emissions trading scheme. The scheme came into effect on April 2010 and covers around 1,340 large buildings and facilities including:

  • Industrial factories
  • Public facilities
  • Educational facilities
  • Commercial buildings

The Tokyo emissions trading scheme started as a voluntary program that evolved into a cap-and-trade program with mandatory targets for Tokyo’s biggest emitters. Credits can be banked by entities but not borrowed. The City aims to reduce emissions from buildings by 25 percent from 2000 levels by 2020. CO2 reductions are aimed at 6-8 percent of 2000 levels in the first compliance period (2010-2014) with a possible further 17 percent reduction by the end of the second compliance period (2015-2019).

On top of GHG reductions the scheme has made a significant impact on Tokyo’s electricity consumption. Peak power demand has reduced by 10 gigawatts from Tokyo’s previous peak demand of 60 gigawatts. Energy efficiency efforts are now taken jointly by tenants and building owners, which has led to an increased public awareness of climate change issues. In developing the program, the Tokyo Metropolitan Government (TMG) held public meetings to engage stakeholders. Including stakeholders from the beginning afforded TMG the chance to tailor the ETS to the actual everyday workings of each individual company while simultaneously developing a program responsive to the ambitious reduction goals. TMG benefited from already having in place mandatory emissions reporting and were able to use this to assess what reduction targets were possible. The ETS effectively was a logical next step from the existing arrangements in place. Strong top-down leadership backed by legally binding and enforceable measures strengthened the process for planning effective actions in Tokyo. In order to gain acceptance a simple reporting system was developed which relies on existing data from electricity, gas and fuel bills, and equipment inventory lists. This also gave the ETS a reliable source of data. Submissions are audited by third parties who ensure the facilities are reporting correctly, and market participants are ensured that the credits they are buying are accurately calculated.