The Reuters news agency is reporting that a compulsory emissions trading scheme is set to start in Japan in April 2013. The scheme will cover large CO2 emitting companies.
Many details have yet to be worked out according to a draft of the government's proposals obtained by Reuters, which will be presented to an expert committee at the Environment Ministry this week.
That Committee will finalize proposal for Japan's cap-and-trade scheme by the end of this year.
Issues to be discussed include how CO2 emission quotas should be allocated, how big they should be, CO2 emissions from electric power generation, and whether to link the scheme with similar ones abroad according to Reuters.
While heavy emitters will bear the brunt of the new regulations, some concessions will be made to carbon-intensive industries that face stiff international competition.
Low-carbon sectors, such as solar panel manufacturing, that help to curb greenhouse gas emissions will also be given some latitude.
Japan's parliament considered various policy initiatives in a draft Bill earlier this year designed to cut greenhouse gas emissions by 25 percent by 2020 from 1990 levels. No decisions were reached at that time.
It is not yet certain if Prime Minister Naoto Kan's administration will present the same bill later this year.
The draft proposals suggest starting trading in two phases, one from April 2013 and the other three years later.
'It is in the Environment Ministry's interest to present the same bill at an extraordinary parliament session and help to have it passed smoothly, so that we will have domestic measures ready and be accountable in international climate talks,' a government official told Reuters.
Japan, the world's fifth-biggest emitter of greenhouse gases.