The JCM is a bilateral carbon crediting mechanism, jointly operated by Japan and its partner countries in accordance with Article 6 of the Paris Agreement. Its full name is the Joint Crediting Mechanism.
This article explains how companies outside Japan can participate in the JCM and what they can gain from it. It is written for businesses in partner countries and for companies that develop or invest in emission reduction projects outside Japan.
The JCM is a mechanism through which Japanese decarbonisation technology and finance are deployed in partner countries, and the resulting greenhouse gas emission reductions are shared between Japan and the partner country as credits. Each country uses those credits towards its own emission reduction target, known as its Nationally Determined Contribution (NDC).
An NDC is the greenhouse gas reduction target that each country sets for itself under the Paris Agreement. Japan’s target for FY2030 is a 46% reduction compared with FY2013.
For overseas companies, the JCM has three defining features.
A corresponding adjustment under the JCM is the process of adding the reductions transferred to Japan back onto the emissions of the partner country (the host country), so that the same reduction is not counted twice by both countries. For companies in the host country, it is an important rule because it affects the emissions their country reports.
Suppose a host country emitting 300 t reduces its emissions by 100 t and transfers 40 t of that reduction to Japan as credits.
| Item | Partner country (transferring) | Japan (acquiring) |
| Initial emissions | 300 t | 500 t |
| Actual reduction | Reduced by 100 t to 200 t | ― |
| Reported emissions after corresponding adjustment | 240 t (40 t added back) | 460 t (40 t used) |
| Reduction counted | 60 t | 40 t |
Table 1: Example of how emissions are counted under a corresponding adjustment
In this example, although the host country actually reduced its emissions by 100 t, it can count only 60 t as its own reduction. Partner countries transfer credits in full knowledge that their reported emissions will increase. Thanks to this rule, JCM credits are treated internationally as “correctly counted” emission reductions.
Allocation under the JCM divides a project’s total emission reductions into a portion that becomes credits and a portion that does not, and then divides the credits between Japan and the partner country. The allocation is decided by the Joint Committee, made up of both countries, taking into account each party’s contribution.
| Category | Definition | Contributes to |
| Reductions not credited | The difference between BaU emissions (emissions without the project) and the conservatively set reference emissions | The partner country’s NDC |
| Credits issued to the partner country | The partner country’s share of the difference between reference emissions and project emissions | The partner country’s NDC |
| Credits acquired by Japan | Japan’s share of the same difference | Japan’s NDC, Japanese companies’ GX-ETS compliance, etc. |
Table 2: Allocation of emission reductions and removals under the JCM
Reference emissions are set taking into account the partner country’s latest NDC. As a result, part of the reduction always remains with the host country and continues to contribute to the host country’s NDC even after the corresponding adjustment.
The “contribution” considered in the allocation includes not only financial contribution but also technology provision and operational contribution. This means overseas companies that operate projects on the ground may also have room to seek an allocation that reflects their contribution.
JCM partner countries are the countries that have signed a bilateral JCM document with Japan. As of 14 July 2026, a total of 303 projects were being implemented across 32 partner countries. Whether your home country is a partner country is the starting point for participation.
| Region | Countries | Number |
| Asia | Mongolia, Bangladesh, Maldives, Viet Nam, Lao PDR, Indonesia, Cambodia, Myanmar, Thailand, the Philippines, Sri Lanka, Uzbekistan, Kyrgyzstan, Kazakhstan, India | 15 |
| Africa | Ethiopia, Kenya, Tanzania, Senegal, Tunisia | 5 |
| Europe and the Caucasus | Azerbaijan, Georgia, Moldova, Ukraine | 4 |
| Middle East | Saudi Arabia, United Arab Emirates, Oman | 3 |
| Latin America | Costa Rica, Mexico, Chile | 3 |
| Oceania | Palau, Papua New Guinea | 2 |
| Total | 32 |
Table 3: JCM partner countries by region (as of 14 July 2026)
| Partner country | Number of projects |
| Indonesia | 62 |
| Thailand | 59 |
| Viet Nam | 51 |
| The Philippines | 23 |
| Chile | 17 |
| Mongolia | 12 |
| Cambodia | 11 |
Table 4: Number of projects by partner country (top 7, as of 14 July 2026)
The top three countries alone (Indonesia, Thailand and Viet Nam) account for around 60% of all projects, making Southeast Asia the core region of the JCM.
Participating in the JCM means partnering with a Japanese company to become a project participant and moving through the cycle of “preparing a Project Idea Note (PIN) → deploying technology → achieving reductions → measuring and verifying reductions → issuing credits.” Each procedure is overseen by the Joint Committee, made up of Japan and the partner country.
Because each stage involves its own procedures, there is a certain lead time between achieving reductions and the issuance of credits. Some rules, including the PIN procedure, are still being coordinated with individual partner countries, so the latest rules for your country should be checked on the relevant country page of the JCM website.
Demand for JCM credits rests on two uses: helping the Japanese government achieve its NDC, and allowing Japanese companies to offset their emissions. Particularly important is that JCM credits are recognised as eligible credits under Japan’s emissions trading scheme, the GX-ETS.
However, not every JCM credit can be used; eligibility depends on when the reduction was achieved.
| Period of reduction or removal | Condition on issuance date | SHK / GX-ETS | NDC |
| 1 January 2021 – 31 December 2030 | None | Eligible | Eligible |
| Up to 31 December 2020 | Issued by 31 March 2025 | Eligible | Not eligible |
| Up to 31 December 2020 | Issued on or after 1 April 2025, provided the PDD public input began by 31 March 2025 | Eligible | Not eligible |
Table 5: Eligibility of JCM credits by period of reduction or removal
In addition, upper and lower price limits for GX-ETS emission allowances were announced in December 2025, and credit prices are also expected to be maintained at a certain level. The government plans to establish a trading market for JCM credits usable in the GX-ETS at an early date.
Note that in Japanese government systems, a fiscal year (FY) runs from April to the following March.
The JCM credit vintage issue refers to the fact that credits usable for the 2030 NDC are subject to issuance and cancellation deadlines, so delays in issuance may narrow the range of possible uses. For overseas companies that create credits and supply them to Japan, it is an issue that directly affects business planning.
“Cancellation” is the procedure that puts a credit into a state in which it can no longer be transferred to others, so that it cannot be used twice.
The key deadlines to be aware of when working on the JCM are currently as follows.
| Period | Description |
| 2021–2030 | Only credits derived from reductions or removals achieved in this period can be used for the 2030 NDC (decided at COP26) |
| June 2031 | Cancellation deadline for credits used for FY2030 results under the GX-ETS |
| Around summer 2032 | Cancellation deadline for counting JCM credits derived from 2021–2030 reductions towards Japan’s FY2030 NDC (a 46% reduction from FY2013), as this must be completed in time for the submission of BTR5 |
| Around October 2032 | Expected timing of the Japanese government’s submission of its fifth Biennial Transparency Report (BTR5) to the United Nations |
Table 6: Key deadlines relating to the 2030 NDC
Regarding these deadlines, the Japanese government recognises the concerns raised by businesses and intends to continue its deliberations, including on the treatment of credits from FY2031 onwards. For now, it is asking, on a voluntary basis, for cooperation in cancelling JCM credits that can be issued in time for the reporting deadline.
The government has also stated its intention to improve the predictability of business as far as possible. Credit creators should plan their issuance schedule backwards from these deadlines and proceed while keeping track of the latest developments.
Source: MOEJ, “The Vintage Deadline Issue for JCM Credits” (Japanese)
JCM support programmes are schemes offered by Japan’s MOEJ, METI, the JCM Implementing Entity (JCMA) and the New Energy and Industrial Technology Development Organization (NEDO) that support projects from studies and demonstrations through to crediting. More than 200 projects have been realised so far with government support.
| Provider | Main support |
| MOEJ | Hands-on support for private-sector JCM projects, including developing guidelines and methodologies and responding to partner countries’ legal systems |
| METI | JCM feasibility studies (FS); support for large- and small-scale demonstrations and FS through GS subsidies |
| JCMA | Advance consultation on private-sector JCM projects; support for negotiations with partner countries |
| NEDO | Overseas demonstrations using the JCM and similar schemes; crediting support programmes; methodology research programmes |
Table 7: Main JCM support provided by the Government of Japan
These are Japanese government programmes, so for overseas companies, working together with a Japanese company is the entry point to using them. Eligibility requirements for each programme should be checked in the relevant provider’s call for proposals.
The rules are also being developed. The “JCM Application Standards” were published on 8 December 2025, and the “Guidance for Forming JCM Projects Centred on Private Finance (2026 revised edition)” on 21 May 2026, creating an environment that makes it easier for private companies to participate.
The benefit of the JCM is that companies can draw on Japanese technology and finance while simultaneously advancing their own country’s decarbonisation and building a connection with the Japanese market.
The key considerations for the JCM are that procedures take time, that Japan’s framework from 2031 onwards has not yet been finalised, and that the process differs depending on the rules of your own country.
On these points, the Japanese government has said it will work to improve business predictability and continue its dialogue with businesses. Consulting experts and the JCMA in advance can help companies proceed while keeping risks under control.
The JCM is a mechanism that reduces emissions in partner countries using Japanese technology and finance, and shares the results between the two countries. With demand underpinned by Japan’s government targets and domestic schemes, it is a mechanism that overseas companies can also find worth considering.
Because issuance under the JCM takes time, the earlier companies begin preparing with the deadlines in mind, the easier it becomes to make use of the framework through 2030. For companies seeking to combine their own country’s decarbonisation with a connection to the Japanese market, joining the JCM with a Japanese partner is an option worth exploring now.
References
All sources below are published in Japanese. English translations of the titles are provided for reference.
Disclaimer
This commentary is for informational purposes only and should not be considered financial, investment, or regulatory advice.. No assurances or guarantees are made regarding its accuracy or completeness. Views expressed are our own and subject to change
The JCM (Joint Crediting Mechanism) is a bilateral carbon crediting mechanism jointly operated by Japan and its partner countries in line with Article 6 of the Paris Agreement. Japanese decarbonisation technology and finance are deployed in partner countries, and the resulting emission reductions are shared between the two countries as credits.
Yes. Companies in partner countries can participate by partnering with a Japanese company and becoming project participants. Participation is limited to projects in countries that have signed a bilateral JCM document with Japan.
The allocation is decided by the Joint Committee, made up of both countries, based on each party’s contribution. This includes financial contribution as well as technology provision and operational contribution.
Yes. Reference emissions are set taking into account the partner country’s latest NDC, so part of the reduction always remains with the host country. Reductions that are not credited, as well as credits issued to the partner country, contribute to the host country’s NDC.
