On Wednesday, the fifth-largest emitter of carbon dioxide (CO2) in the world began trading carbon credits on the Tokyo Stock Exchange (TSE). This move was part of Japan’s commitment to combat climate change.

Japan is on the same road as other big economies in its goal to achieve carbon neutrality by 2050. To incentivize businesses and localities to reduce emissions, a carbon price mechanism was gradually introduced starting in April.

“Japan’s industry ministry has been cautious about implementing emissions trading, but we have made a major turn to utilise the carbon credit market to achieve our carbon neutral goal,” Yasutoshi Nishimura, the minister of economy, trade, and industry, said following the opening ceremony at the TSE.

“We will leverage the power of the new market to encourage companies to cut emissions and invest in decarbonisation, with an aim to achieve both carbon neutrality and economic growth,” he stated to reporters.

Registered members can trade the current carbon credit, known as J-Credit, on the TSE, a division of Japan Exchange Group Inc (8697.T), through the new market.

The government recognizes as a “credit” under the J-Credit system the amount of greenhouse gas emissions, such as CO2, that are decreased or eliminated due to initiatives to implement renewable energy sources, energy-saving technology, or forest management.

Although the credit had been privately exchanged between businesses and other organisations, it was challenging for them to locate buyers or sellers on their own.

According to a TSE spokesperson, the new TSE market would simplify the buying and selling of credits by businesses and increase pricing transparency for carbon emissions.

According to the TSE, 188 organisations have signed up as participants as of Sept. 19, and that figure was still rising.

The trading window is from 9:00 to 11:29 (0000 to 0229 GMT) and from 12:30 to 2:59 (0330 to 0559 GMT). After trading hours, the two daily transaction prices are disclosed.

Later this year, the TSE would implement a market maker mechanism to increase trade liquidity, with support from the government, it was announced.

The TSE announced the scheme, adding that specifics will be settled soon. Designated securities firms, banks, or trading corporations are required to quote a specific volume of concurrent buy and sell orders within a specific price range during a predetermined time period.