1. Joint Crediting Mechanism (JCM)

JCM is a bilateral crediting system led by the Japanese government. It facilitates cooperation between Japan and partner countries to implement GHG reduction projects, with the resulting emission reductions shared as credits between both countries. JCM is an official system used to help Japan achieve its international climate targets, such as those outlined in the Nationally Determined Contributions (NDCs) under the Paris Agreement.

JCM generates credits that are reported by governments to meet national climate goals. Therefore, JCM operates within the framework of international climate agreements, positioning it as a mechanism for government-to-government credit transactions.

2. Voluntary Credits

Voluntary credits are used by companies or individuals who invest in GHG reduction projects on a voluntary basis, without legal obligations. These credits are often used by businesses as part of their corporate social responsibility (CSR) or to achieve carbon neutrality. Voluntary credits are typically traded in the open carbon markets, and they are not bound by government regulations.

Voluntary credits are primarily used for:

• Achieving carbon neutrality or climate action goals by companies
• Offsetting carbon emissions from products or services (e.g., flights, events)
• Supporting environmental contributions from individuals or organizations

3. Relationship Between JCM and Voluntary Credits

Both JCM and voluntary credits aim to reduce GHG emissions, but their relationship can be described as follows:

Different Objectives:

• JCM focuses on credit distribution between nations to help achieve national climate targets. In contrast, voluntary credits are used by companies and individuals to meet personal or corporate environmental goals.
• JCM credits are typically used in official government reporting, but companies involved in JCM projects might also use the emission reductions for voluntary credit markets.

Integration:

• Projects implemented under JCM can sometimes be used in the voluntary credit market. For example, a company participating in a JCM project may utilize part of the resulting emission reductions as voluntary credits for its carbon offsetting strategy. This enables the company to align its internal carbon reduction goals with JCM’s formal emission reduction framework.

Transparency and Reliability:

• JCM is based on bilateral agreements and is more stringent in its monitoring and reporting processes compared to voluntary credits. As a result, JCM-certified projects are often viewed as highly reliable, and credits from these projects may be highly valued in the voluntary credit market.

4. Synergies Between JCM and Voluntary Credits

Benefits for Companies:

By participating in JCM projects, companies can contribute to highly credible emission reduction activities and leverage the results as voluntary credits. This allows them to utilize both systems to meet their climate targets and improve their environmental standing.

Sustainable Market Growth:

As both JCM and voluntary credits coexist, the voluntary credit market can expand, encouraging more projects to be implemented. This contributes to greater overall GHG reductions.

Conclusion

JCM and voluntary credits are different mechanisms aimed at reducing GHG emissions, but they are complementary. While JCM focuses on achieving national climate goals through bilateral agreements, voluntary credits serve as a flexible tool for companies and individuals to meet their environmental objectives. JCM projects can enhance the voluntary credit market, and together they can drive wider adoption of sustainable practices and contribute to significant GHG reductions.