JQA Registered as a Verification Body for Phase 2 of the 'GX-ETS' (Emissions Trading System)

The Japan Quality Assurance Organization (JQA; Headquarters: Chiyoda-ku, Tokyo; President: Hiroaki Ishii) has been registered as a verification body for the second phase of the 'GX-ETS' (Emissions Trading System), which will commence in fiscal year 2026, continuing its role from the first phase.

What is GX-ETS? GX-ETS is an emissions trading system introduced by the Japanese government within the GX League, a public-private framework where companies, government, academia, and finance collaborate to achieve carbon neutrality by 2050 while balancing decarbonization with economic growth. The system, which began as a voluntary emissions trading scheme in FY2023, will be updated to a legally binding form with the transition to the second phase in FY2026.

Key Points of Phase 2: - From Phase 2, companies with an average direct CO2 emission of 100,000 tons or more over the last three years will be required to participate in 'emissions trading' and 'third-party verification.' The target GHG (greenhouse gas) will be limited to direct CO2 emissions (Scope 1). - In fulfilling these obligations, companies can act in conjunction with closely related parties (subsidiaries, affiliates, brother companies) in addition to acting as a standalone entity.

Role of Third-Party Verification Bodies: - Target companies must undergo third-party verification by a registered body for the following two items: Emission target amounts (the basis for emission quota allocation) and Annual actual emission amounts. - For the first three years of the system, registration requirements for verification bodies will focus on business experience with listed companies rather than specific certifications. From the third year onwards, it is expected that requirements will include ISO 14065 accreditation, an international standard for GHG verification bodies, or registration under the sustainability assurance provider system for securities reports. The level of assurance will be 'limited assurance' for the first three years, with plans to gradually raise it to 'reasonable assurance' for large-scale facilities from FY2029.

JQA's Strengths: - First in Japan to obtain ISO 14065 accreditation: JQA obtained this accreditation from the Japan Accreditation Board (JAB) in March 2011. We have established a system to continue providing services even after the third year of the system when registration requirements are expected to be restricted. - Track record in reasonable assurance verification: While third-party verification in Phase 2 will be at a limited assurance level, high-level (reasonable) assurance is expected in the future. JQA has been conducting third-party verification for the J-Credit and SHIFT schemes, which require reasonable assurance, for over 20 years. We will continue to provide highly reliable third-party verification services to contribute to corporate GX promotion and the realization of a carbon-neutral society.