Market Overview

According to the Japan Meteorological Agency, Japan's average annual temperature has increased by 1.35°C over the past century. The summer of 2024 (June to August) saw the hottest temperatures on record in western Japan, Okinawa, and Amami since statistics began in 1946, with eastern Japan also experiencing its highest temperatures on record. The world is enduring increasingly intense heatwaves. The United Nations Environment Programme's "Emissions Gap Report 2024" warns that, under current policies, the global average temperature could rise by as much as 3.1°C by the end of the century.

Agriculture, forestry, and fisheries are susceptible to climate change. Heatwaves have degraded farm produce, and heavy rainfalls have turned into catastrophe in areas that tend to be affected severely by natural disasters.

In the FY2022, the total emissions of greenhouse gases (GHG) in Japan amounted to 1,135 million tons of CO2 equivalent. According to MAFF, the total emissions by agriculture, forestry, and fisheries accounted for 47.9 million tons, representing 4.2% of the total emissions. The majority of the farming-related methane gas emitted is associated with paddy fields and animal husbandry (gastrointestinal fermentation and excreta). Against this background, enriching soil and storing more carbon dioxide in soil through carbon farming and regenerative agriculture is garnering attention.

Noteworthy Topics

“Rice Crop Consortium” Facilitates Participation of Carbon Farmers in J-Credit System

In March 2023, the J-Credit System Steering Committee approved the "Extension of Medium Drying Period in Paddy Cultivation" as a new methodology. While there is growing anticipation for farming carbon credits, several challenges remain. To register for J-Credit, carbon farmers must not only demonstrate the ability to reduce or absorb at least 100 tons of carbon dioxide, but also pay several million yen for registration and credit issuance. Additionally, the application process is complex and cumbersome, making it too difficult for producers to navigate on their own.

Under these circumstances, the “Rice Crop Consortium” was launched in April 2023, which invites farmers that wish to participate in J-Credit scheme into a group and apply for J-Credit paddy field credits collectively. This makes it easier for carbon farmers to meet the prerequisite. As of May 2024, there are more than 300 entities participating in the consortium, including farmers, agricultural corporations, and business corporations such as major agricultural manufacturers, major trading companies, regional banks, major consulting firms, major tech companies, agricultural ventures, JA agricultural cooperatives, and IT firms providing farm management tools.

Future Outlook

The size of the domestic carbon farming market (based on the amount paid to producers/production organizations by offset providers) in FY2024 is expected to be 396 million yen.
While paddy field credits (from the extension of mid-season drainage in rice paddies) are expected to drive the market through FY2025, biochar credits (from the addition of biochar to cropland soil) are projected to see significant growth starting in FY2026. As regenerative agriculture continues to expand in response to growing demand for GHG emissions reductions, the carbon farming market is forecast to exceed five billion yen by FY2029, reaching 9,221 million yen by FY2030.

Research Outline