JP GX Promotion Act — Fossil Fuel Levy (Carbon Surcharge) Scheme
ENFORCEMENT TIMELINE
Scheduled for introduction and collection starting FY2028
Overview
This is the core carbon pricing measure under the Act on Promotion of a Smooth Transition to a Decarbonized Growth-Oriented Economic Structure (the GX Promotion Act), scheduled to be introduced from fiscal 2028. Importers and extractors of fossil fuels will be required to pay a fossil fuel levy, or carbon surcharge, based on the carbon content of the fossil fuels they import or extract. The funds collected will be used to redeem GX Economic Transition Bonds, forming part of a growth-oriented carbon pricing strategy designed to front-load corporate investment in decarbonization.
Enforcement Timeline
May 2023: The GX Promotion Act is enacted and promulgated.
Fiscal 2024 to fiscal 2026: The levy rate per unit of carbon content for each type of fossil fuel and the specific collection scheme are worked out in detail.
Fiscal 2028: Full collection of the fossil fuel levy from fuel importers and other designated businesses begins.
Fiscal 2033: A charge on designated power generation businesses, based on the auctioning of emission allowances, begins to be introduced in stages.
Business Impact
Businesses directly subject to the levy, such as oil wholesalers, gas companies, and coal importers, will face direct costs, but rising procurement costs are also expected across manufacturing and service industries that use fossil fuel-derived energy such as electricity and fuel. As the cost of carbon becomes explicit, the economic case for investing in energy-efficient equipment, electrification, hydrogen and ammonia adoption, and conversion to non-fossil energy sources becomes stronger. Because cost increases tied to the carbon content of products and materials will be reflected in product prices, managing supply chain (Scope 3) emissions and sourcing lower-carbon materials will increasingly affect competitiveness.