#Japan #Tokyo #carbon emissions #EY Japan #GX-ETS

EY Japan Launches Third-Party Verification for Emissions Trading System

In an important move toward facilitating a sustainable economy, EY ShinNihon LLC has announced that its Climate Change and Sustainability Services (CCaSS) team will commence third-party verification services for Japan's upcoming emissions trading system, effective August 19, 2026. This initiative aligns with the Green Transformation Promotion Law (GX Promotion Law), which mandates a structured approach to emissions reporting and trading as part of the national effort to transition to a low-carbon economy.

What is GX-ETS?

GX-ETS, or the Green Transformation Emissions Trading System, is set to officially launch in 2026 after a preliminary phase that took place between 2023 and 2025, known as the GX League. This system is designed to manage CO₂ emissions among businesses, particularly those exceeding a specified emissions threshold. Under this structure, the government allocates emission allowances, and companies are required to hold allowances corresponding to their actual emissions. The system fosters an environment where excess allowances can be traded between entities, promoting investment in emissions reduction while balancing industrial competitiveness and decarbonization efforts.

As such, it is crucial for companies to maintain high reliability in their reported emissions and targets. Therefore, EY ShinNihon will play a pivotal role as a registered verification agency, ensuring that reported figures meet the necessary standards for accuracy and reliability. This verification process is essential to maintain the integrity of the emissions trading system and to bolster trust among participants.

Importance of Reliability in Sustainability Information

In recent years, there has been a growing focus on the disclosure and assurance of sustainability information, particularly regarding climate-related data. The emissions data and internal controls established through compliance with GX-ETS will serve as a crucial foundation for future sustainability disclosures and assurance processes. EY’s expertise not only in financial audits but also in sustainability assurance positions them advantageously to guide organizations through this transitional period.

The CCaSS team will assist companies in various ways, including:

• - Preparation Advisory Services: Prior to the verification process, the team evaluates the current state of data relating to emission targets and performances.
• - Identification of Key Issues: They will identify relevant concerns related to GX-ETS compliance as well as potential challenges for future disclosure and assurance frameworks.
• - Clarification of Response Strategies: With a focus on prioritizing necessary actions and responsibilities across departments, the team will help outline the response strategy in line with regulatory requirements.
• - Review of Readiness for Verification: EY will assess the readiness of companies for the verification process by examining data, evidence, and internal controls.

Third-Party Verification Services

EY’s verification services will specifically target the third-party confirmation of both emission reduction targets and actual emissions figures. As an official verification body, they will provide reports to participants in the system, ensuring compliance with the established guidelines of GX-ETS. This guarantees stakeholders that the reported data is valid and trustworthy, contributing significantly to the broader aims of sustainability.

About EY

EY, a global leader in assurance, consulting, strategy, transactions, and tax services, aims to create new value for clients, employees, and society at large through innovative solutions. Driven by advanced technologies such as data analytics and artificial intelligence, EY’s global teams are focused on helping clients navigate their pressing issues and realize their potential.

Operating in over 150 countries and territories, EY combines industry knowledge with a global framework of varied ecosystems and partnerships, enhancing service delivery across all regions.

Future Prospects

As FY Japan engages as a registered verification agency within the GX-ETS, it commits to facilitating the correct operation of emissions trading and supporting companies in their efforts to create lasting value and enhance competitiveness in a decarbonized society. EY's ongoing efforts highlight a significant commitment to sustainability initiatives, paving the way for businesses to thrive in a changing environmental landscape.