Photo/Illutration Prime Minister Fumio Kishida speaks at a news conference on Jan. 14 in Washington. (Sayuri Ide)

The government plans to issue new bonds and impose surcharges on importers of fossil fuels to help move Japanese society toward decarbonization.

These plans were included in the outline of a bill to promote Prime Minister Fumio Kishida’s “green transformation” policy, according to sources.

The legislation will be a key focus of the Kishida administration during the ordinary Diet session to convene on Jan. 23.

According to one estimate, about 150 trillion yen ($1.2 trillion) in investments from the public and private sectors will be needed over the next decade for the green transformation.

The bill has five main pillars: 1) compiling and implementing a green transformation promotion strategy; 2) issuing government bonds to help move toward a green transformation economy; 3) introducing a carbon pricing system; 4) establishing a green transformation agency to oversee the pricing system; and 5) evaluating and reviewing progress in the strategy.

The bill will call for creating a carbon pricing system within two years after enactment of the green transformation promotion law.

The government plans to issue about 20 trillion yen in bonds over 10 years from fiscal 2023, and use the funds to support companies as they move toward decarbonization.

Under the plan, the bonds would be repaid by fiscal 2050 through two measures under the carbon pricing plan.

One measure is the surcharge placed on importers of fossil fuels. The other measure would allow for carbon dioxide emissions trading among companies, including electric power companies.

Under the government’s plan, the surcharges would start from fiscal 2028 and the emissions trading program from fiscal 2033.

A bidding system will be used to determine the carbon dioxide emissions quotas for companies and the price per emission unit to be used in the carbon pricing project.

The evaluation process will also include the possibility of reviewing investment trends for the green transformation and the rate at which emissions are decreasing by referencing economic trends both in Japan and abroad.

Details of the bidding system for the carbon pricing program will be decided within two years of enactment of the law through discussions with the business sector and precedents being set in Europe and elsewhere.

It remains unclear if any measures will be implemented to reduce the future burden on companies. Kishida had said the overall public burden related to energy would not increase in the long run.

(This article was written by Susumu Imaizumi and Shiki Iwasawa.)

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