In 2023, the government laid out a plan to realize more than 150 trillion yen in combined public and private green transformation (GX) investment over the following decade, aimed at achieving carbon neutrality by 2050. Efforts to decarbonize are spreading beyond large corporations to local governments and small and medium-sized businesses as well.
Amid this trend, "carbon credits" are seeing growing use. This is a mechanism that certifies activities contributing to CO2 reduction or absorption — such as forest conservation or the adoption of renewable energy — and makes the resulting reduction amount tradable as a "credit."
Japan's flagship program in this space is the government-certified "J-Credit Scheme." Companies can purchase credits and register them as used (retiring them) to offset emissions they were unable to reduce on their own (carbon offsetting).
At the same time, as credit trading expands both domestically and internationally, ensuring the reliability of that trading has become a challenge. Systems are in place to prevent the same credit from being used twice, but because multiple certification schemes and trading services exist both in Japan and abroad, it's currently difficult to verify a credit's origin and usage history across those different systems.
Efforts to use NFTs are emerging to address this challenge. The idea is to record the rights and usage history associated with a carbon credit as an NFT and link it to a registry, making it easier to trace credits across different schemes. Here we introduce two examples that take different approaches.