On July 29, the Ministry of Economy, Trade and Industry (METI) announced the outline of the nationwide mandatory CO2 emission trading system (ETS). From April 1, 2026, Japan's ETS will enter the compulsory phase, with the central mechanism allocating emissions based on the emission intensity of leading companies in each industry. The core allocation principles of the Japanese carbon dioxide trading system include three elements. The first is the establishment of standards, where the standards for each industry in the country are calculated based on the average emission intensity of the leading companies within the industry in terms of emission efficiency, and a declining target is also set to drive sustainable emission reductions. The second is the calculation of allowances, where the initial allocation for companies is calculated as the average production volume of the past three years × the annual standard emission volume. For industries that are difficult to set standards for, the calculation is based on the average emission volume of the past three years × the assumed emission reduction rate. On the other hand, the country does not rule out the possibility of additional adjustments to the total allocation of each industry's distribution. The Ministry of Economy, Trade and Industry expects that the standard allocation system will cover more than 80% of the total carbon dioxide emissions. According to this preliminary outline, the first target industries are refining, basic oxygen steelmaking, general red hearth steelmaking, special steelmaking, chemical petro, carbon black, and paper and paper pulp.Concrete, lime, and automobile production are included. The total amount of emissions and the raw material composition of the emission structure are used to prioritize. The target companies are 500 to 600, accounting for 60% of Japan's total greenhouse gas emissions. The Japanese manufacturing industry's benchmark working group (WG) plans to focus on the above industries, hold three meetings (each meeting will consider about three industry proposals), and announce the final standards in the fall (usually by December 31) of the 2024-2025 fiscal year (April 1, 2024 - March 31, 2025). The Ministry of Economy, Trade and Industry has announced measures to fill the gaps in non-compliance regulations and the overview of the trading standards. The government predicts that if the increase in the allocation fee leads to difficulties in compliance with domestic regulations, the Minister of Health, Labour and Welfare may issue a notice. In such cases, Japanese companies that do not have enough allocations will need to pay the fee at the maximum price according to the total allocation amount. Once the payment is made, it is considered compliance with regulations. On the other hand, if the market price continues to fall below the lower limit of the stable price, the GX Auction promotion organization will consider reducing the excess allocation amount through reverse bidding or revising the allocation standards. This emission rights trading platform promotes transactions among experienced traders and intermediary organizations representing the target corporations.