The Tokyo Metropolitan Government (TMG)has developed the world's first cap and trade programat the city level targeting energy-related CO2. Called theEmissions Trading System (ETS), the program took effect inApril 2010 and covers 1,340 large facilities includingindustrial factories, public buildings, educationalinstitutions and commercial buildings. Targeting the citylevel for the reduction of Greenhouse Gas (GHG) emissions isof vital importance for climate change mitigation goals.Although there are several ETSs targeting GHGs around theworld, none have operated at the city level untilTokyo's. City-based ETS systems have been largely aimedat enhancing local air quality by targeting local pollutantsthat may also happen to be GHGs. There are threeparticularly relevant cases of ETSs covering localpollutants at the city level. Tokyo's ETS is uniquebecause it is the only one targeting GHGs, with the primaryobjective of mitigating climate change. Emissions tradingare a market-based approach for addressing air pollutionproblems. If designed and implemented well, emissionstrading systems can be economically efficient, providingincentives for participants to reduce their emissions ofspecified pollutants. An ETS, when functioning well, resultsin overall emissions remaining within the cap, whileindividual participants have the flexibility of amarket-based mechanism within which to operate.
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