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The Tokyo Cap-and-Trade Program (TCTP) implemented on the 1st of April 2010 is the first such scheme in Asia and Japan. The programme is a stepped-up measure of the Tokyo Carbon Reduction Reporting Program that started in April 2002. Under the former reporting programme, eligible facilities were required to annually report greenhouse gas (GHG) emissions and reduction plans, and were encouraged to reduce emissions. This initiative resulted in an average reduction in GHG emissions of 2%. By the end of FY2012 the current TCTP reached a total GHG emission reduction of 22% from baseline emissions (2009).

What is it?
TCTP is a mandatory cap-and-trade programme set by the Tokyo Metropolitan Government (TMG), aimed at reducing GHG emissions in the most energy intensive building sector in TMG’s jurisdiction.

How does it work?
TCTP targets existing large facilities from the commercial and industrial sector, including government buildings. Eligible facilities must achieve absolute emissions reductions of either 6% (industrial facilities) or 8% (businesses) from base-year emissions (2009) for the first compliance period (2010-2014), and then either 15% (industrial facilities) or 17% (businesses) for the second compliance period (2015-2019). This goal is derived from the TMG emissions reduction target under the Tokyo Metropolitan Environmental Master Plan of 2008.

The owner of a Compliance Facility holds the responsibility to ensure compliance with the emissions reduction target. However, tenants are also obliged to cooperate with building owners under the scheme. A complete compliance cycle of the programme consists of the following three key elements:

  • Compliance period:

Each compliance cycle lasts five years. Within that period, eligible facilities report energy consumption and GHG emissions by the end of November each year. If the target is not met through internal measures, facility managers or owners will plan the procurement of external carbon credits and implement further reduction measures to ensure that they meet the target by the end of the cycle.

  • Compliance adjustment period:

This period lasts one and a half years, beginning from the end of the first compliance period. During this time, total actual emissions and emission allowances are confirmed. To meet emissions reduction targets, facilities owners or managers are permitted to continue trading credits until the end of the adjustment period.

  • Deadlines for mandatory implementation and Order for Action:

An Order for Action will be issued to non-compliant facilities, obliging them to reduce emissions to an amount up to 1.3 times greater than the target shortfall. If a facility does not fulfill this requirement by the deadline, they will be fined an amount of up to 500,000 yen (£2700). The facility will also have to pay the purchase price for offset credits procured by the Governor of Tokyo to cover the shortage.

Data from participating facilities is currently disclosed publically online. This includes detailed facility-level information on emissions from energy and water consumption, progress towards reduction targets and details of any credit procurement or sale.

Facilities demonstrating outstanding performance in emissions reduction and satisfying high standards (e.g. energy efficient design, equipment, building operations) established by the Governor of Tokyo can apply to be recognised as a ‘top-level’ facility. From April 2010 to March 2014, a total of 35 facilities have been certified as top-level, and 48 as near-top level.

CO2 reduction
A 13% reduction in GHG emissions was achieved in FY2010, growing to 22% in FY2011 and remaining steady at 22% again in FY2012 (total base-year emissions at 13.61 million tonnes of CO2). These results are highly promising as they all exceeded the maximum compliance factors for both the first and second compliance period.

TMG believes that the carbon trading programme has also helped stimulate the retrofit market, as indicated by; an increase in the popularity of building retrofitting technologies and techniques since the programme’s inception; an increase in the number of installations for Building Energy Management Systems (BEMS) and LED lighting; and a rise in the number of Energy Service Companies (ESCOs). In addition to this, most new buildings are designed to satisfy the requirements for a ‘top-level facility’ certification under TCTP.

Next steps
The TMG is now focusing on the second compliance period of the cap-and-trade scheme (April 2015 – March 2019).

Tokyo’s cap-and-trade scheme provides a comprehensive set of measures that have proved effective in reducing carbon emissions and spurring low-carbon market transformation.

Further information
To find out more about Tokyo’s ordinance, the programme’s success factors, challenges and lessons learned please refer to the report Urban Efficiency: A Global Survey of Building Energy Efficiency Policies in Cities, launched by the Tokyo Metropolitan Government and C40 in late 2014 and updated in May 2015.

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