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Introduction

The Asia Zero Emission Community (AZEC) initiative was proposed by the Japanese government in January 2022. Faced with a prominent EU-led movement to take a one-size-fits-all approach to decarbonization, the Japanese government proposed the AZEC initiative with the aim of achieving decarbonization, economic growth, and energy security simultaneously (a "triple breakthrough") in Asia through various pathways tailored to the circumstances of the respective countries. AZEC held its first Ministerial Meeting in March 2023, attended by its partner countries comprising nine Southeast Asian nations and Australia, which had all endorsed the initiative.

In July 2024, Keidanren published its Recommendations for Advancing the AZEC Initiative^#1 (referred to hereinafter as the "first set of recommendations"), appealing to the partner countries to work on both AZEC-wide policy and institutional cooperation, and support for individual decarbonization projects (referred to hereinafter as "individual projects"), as two complementary approaches. At the second AZEC Leaders Meeting held in October 2024, the Action Plan for the Next Decade^#2 was put together in a form that broadly reflected the content of Keidanren's first set of recommendations.

Turning to the international situation, energy costs remain persistently high as stable supplies of oil and gas are threatened by increased geopolitical risk stemming primarily from Russia's invasion of Ukraine and developments in the Middle East. Moreover, with population growth, economic development, and advancing electrification, demand for electricity is steadily on the rise and the importance of energy security is increasing globally. The EU, like Asia, is currently diversifying its energy supplies while also shifting to a pragmatic approach of pursuing decarbonization and improved industrial competitiveness in tandem. This new approach was driven by concern over deterioration in the EU's international competitiveness prompted by the Draghi report of September 2024. Thus, understanding of the need for the "various pathways" that Japan has been proposing now appears to have gained greater currency. Meanwhile, in the United States, despite having once again declared its withdrawal from the Paris Agreement, the federal government has continued to provide support aimed at bolstering the country's energy security, as well as its technologies including carbon capture and storage (CCS), and nuclear power. Likewise, individual companies and states have continued to pursue measures to address climate change.

Amid worsening climate change leading to increasingly intense natural disasters and rising temperatures, AZEC is gaining in importance as an organization that targets various pathways and a triple breakthrough. The AZEC initiative is beginning to show promising signs as its individual projects progress, with developments including the signing of a financing agreement for the Muara Laboh Geothermal Power Expansion Project, which was the first ever AZEC project to be undertaken.

AZEC partner countries are facing increasingly intense competition with other countries over energy-efficient products, decarbonization technologies, and the like. We therefore call on the government of Japan, the country that initially proposed AZEC, to steadily put the initiative into practice by continuing to demonstrate leadership and building up a track record of individual projects with a greater sense of urgency.

The Japanese business community has high hopes for AZEC. With these recommendations, Keidanren once more presents measures to promote both policy coordination and individual projects in preparation for the upcoming AZEC Leaders Meeting and Ministerial Meeting.

1.Opinions and Issues Regarding AZEC

Before compiling these recommendations, Keidanren conducted a survey^#3 to ascertain what the Japanese business community expects of AZEC and the issues it perceives. Around 100 companies responded.

In terms of the AZEC initiative's progress, 34% of respondent companies replied that the initiative was progressing well, while 35% replied that although the initiative was showing progress, the progress was slow. Thus, the results indicated that companies perceive issues and have further expectations regarding prompt advancement of individual projects and implementation of effective measures to that end.

Regarding measures to be prioritized under the AZEC initiative, the most frequent response was "Unify standards/certifications and harmonize regulations/systems" (70%), followed by "Establish high-quality carbon markets (including a Joint Crediting Mechanism [JCM])" (46%), "Visualize greenhouse gas (GHG) emissions" (39%), and "Establish green transformation (GX) product markets" (39%).

When asked about the promotion of individual decarbonization-related projects at their own companies or group companies, around half of respondents (46%) replied that their company or a group company was planning or implementing a decarbonization-related project. Of these, many individual projects were taking place in Indonesia and Vietnam in particular, and in both these countries individual companies were planning or implementing multiple projects.

Of the 220 decarbonization-related projects being planned or implemented at the time of the survey, respondents described specific issues for 79 projects^#4 that had given rise to particularly significant problems or requests.

2.Promotion of AZEC-Wide Policy Coordination

The Japanese business community is generally very interested in promoting individual projects. Therefore, the governments of Japan and other AZEC partner countries should work on both the promotion of individual projects and the AZEC-wide policy coordination upon which it depends, as two complementary approaches. In doing so, it will be essential to clarify the timescales for achieving the objectives in each policy area, including the areas below, and to implement policy coordination in line with those timescales.

(1)Unified calculation rules on GHG emissions and utilization of data

Unified calculation rules on GHG emissions provides the foundation for companies and governments to take emission reduction measures and is the first step toward decarbonization. For companies, visualization is important in addressing the internationally growing demand for Scope 3 disclosure and in complying with the standards governing disclosure of sustainability-related information set by the International Sustainability Standards Board (ISSB). Moreover, it plays a vital role in attracting to Asia various international investors that can identify the investment opportunities in decarbonization.

On a separate note, linking emissions data across national borders is expected to contribute to the efficiency of efforts to reduce emissions by enabling visualization of emission reductions in supply chains and ensuring traceability.

(i) Unified calculation rules on GHG emissions

In order to unify calculation rules on GHG emissions, AZEC partner countries (referred to hereinafter simply as "partner countries") should improve systems for calculating and reporting GHG emissions. Companies entering new markets are required to take differing approaches according to the laws and regulations in each country, which duplicates the burden for such companies. In future, therefore, calculation rules within the AZEC region should be unified, as recommended in last year's first set of recommendations.

When unifying the calculation rules, we consider it pragmatic to ensure compatibility with the GHG Protocol, which is widely employed internationally; however, outstanding issues within the GHG Protocol need to be resolved. These include the recognition of carbon credit offsets and the deduction of direct CO₂ emissions when waste is used as a fuel source. We think that discussions on establishing unified calculation rules should be started, taking these issues into account. At the same time, effective use should be made of various private-sector initiatives, as well as forums such as the AZEC International Conference to Develop Carbon Markets launched in May this year.

Given that most companies operating in Japan already face the need to perform two types of calculations^#5—according to both the SHK system^#6 and the GHG Protocol—the system within Japan itself also requires improvement to reduce the burden associated with calculating emissions.

(ii) Expansion and deployment of data use cases

Industrial data spaces are a mechanism enabling a diverse range of trustworthy data to be linked among different countries, industries, and organizations and they are the focus of increasing international interest. Against this backdrop, Japan too is progressing with discussions involving both the public and private sectors on the creation of an internationally interoperable industrial data space. It is essential to move ahead urgently with creating this data space and establishing data use cases, then deploying the expertise acquired through the practical experience of Japanese companies and industries in partner countries.

In specific terms, the public and private sectors should cooperate on expanding and deploying use cases in areas of cooperation where industry associations are taking the lead,^#7 as well as use cases selected for the Ouranos Ecosystem project, with a view to generating needs during deployment in partner countries and providing support. When doing so, it will be essential for partner countries to determine common rules regarding the storage of each other's data and cross-border data use.

Discussions should be started regarding linkage of GHG emissions data with a view to creating internationally interoperable industrial data spaces in partner countries in the future.

(2) Promotion of green products, etc.

As part of efforts to achieve carbon neutrality, it is essential to promote outstanding energy-efficient products and decarbonization technologies (referred to hereinafter as "green products, etc.") throughout the AZEC region with a sense of urgency. Effective means of doing so include unifying decarbonization-related standards and certifications, and harmonizing associated regulations and systems, throughout the AZEC region as far as possible, and making use of indicators that effectively highlight the environmental value of green products, etc. First, under the framework of AZEC, efforts should be directed toward creating a green market in which environmental value is evaluated fairly and equitably, reflecting the diverse approaches of each country toward achieving carbon neutrality. Furthermore, consideration should be given to expanding this initiative to other countries and regions.

(i) Unification of standards/certifications and alignment with regulations/systems

As indicated in the survey results above, Japanese companies are very interested in standards and certifications, as well as regulations and systems.

The Japanese government has devised its New Strategy for International Standards (June 2025), setting the environment and energy as one of eight strategic areas, and has stated that it will strengthen its international collaboration, particularly with ASEAN countries. In addition, the ASEAN Economic Community Strategic Plan 2026–2030 (May 2025) stated that the ASEAN Economic Community would promote the adoption of international standards and alignment with such standards to boost its industrial competitiveness.^#8 The Japanese government should make use of international mutual approval systems and work to align with regulations and promote adoption of standards while closely monitoring initiatives in other countries and regions.

(a) Technological areas where Japan is leading the way

Where new technologies are concerned, various relevant standards may not yet have been developed because the technology is still at the R&D stage. For example, perovskite solar cells are a technology that originated in Japan and this is an area that has an advantage in terms of the raw material used.^#9 However, there are few organizations with the technology to assess the performance of such solar cells and their methods are not standardized. Among new technologies, there are some cases in which Environmental Production Declaration (EPD) certification^#10 has already been acquired through pioneering efforts on the part of Japan, such as in the case of carbon-recycled concrete. Using such examples of meeting international standards for reference, the Japanese government should encourage partner countries and other countries worldwide to adopt Japanese standards in areas where Japan is leading the way.

(b) Automotive fuel

It is becoming increasingly important to implement pragmatic CO₂ reduction measures when pursuing decarbonization, and in this context, fuels with low CO₂ emission coefficients are attracting more attention. Biofuel is one such fuel that can be used even in vehicles with internal combustion engines, enabling immediate reduction of CO₂ emissions.

Promoting more widespread use of biofuel requires the utmost care, both to control impacts on food supply and the environment, and to ensure that such fuel can be supplied continuously. If it is possible to successfully link promotion of biofuel to agricultural policy and promote more widespread use of biofuel sustainably, this could not only provide an affordable option for reducing CO₂, but could also contribute to regional employment and economies, as well as to energy security. We therefore ask the Japanese government to take the leading role in designing and establishing systems for promoting more widespread use of biofuel through dialogue with the governments of partner countries and other nations. Initiatives could include promoting common calculation standards for low-carbon fuels including biofuel and developing an international certification system.

Furthermore, for automobiles especially, it is also very important to contribute to carbon neutrality and nature positivity through resource recycling. Partner countries should collaborate to jointly consider and implement measures to promote recycling of resources such as plastics and battery materials from scrapped automobiles.

(c) Aviation fuel

GHG emissions in the international aviation sector are excluded from nationally determined contributions (NDCs); instead, private-sector airlines assume responsibility for reducing CO₂ emissions in accordance with the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) established by the International Civil Aviation Organization (ICAO). Meanwhile, in some cases, individual countries or regions introduce regulations or taxation to achieve their NDCs by curbing GHG emissions or promoting the transition to new forms of energy, and international private-sector airlines bear the costs of such measures.

In the EU, for example, the enforcement of the ReFuelEU Aviation regulation has made it compulsory for fuel suppliers to supply sustainable aviation fuel (SAF), and while international private-sector airlines registered outside the EU also bear the costs of SAF, they are not permitted to declare the environmental value of SAF under CORSIA. The International Air Transport Association (IATA) regards the way the cost burden is structured and the inability to transfer environmental value as problematic, while calling for the continuation and maintenance of CORSIA for international aviation.

Given that many countries in Asia and elsewhere are now planning to make the supply of SAF compulsory, the partner countries should pursue decarbonization in international aviation based on CORSIA. Initiatives to that end to be pursued under the AZEC framework should include engaging in technical cooperation and encouraging investment bearing in mind the utilization of Asia's abundant raw materials, as well as establishing an environmental value transfer scheme. In doing so, the partner countries should avoid a medley of separate regulations and systems for each country.

(d) Shipping fuel

In international shipping, a proposal by the International Maritime Organization (IMO) to create new regulations on fuel by amending the International Convention for the Prevention of Pollution from Ships (MARPOL) achieved basic agreement (i.e., was approved) in April 2025. If the proposed amendments are adopted at the extraordinary session of the IMO Marine Environment Protection Committee to be held in October 2025, the amended convention is expected to go into effect in 2027 and will become applicable from January 2028. The proposed amendments include changing the regulation on GHG fuel intensity (GFI)^#11 so that it would apply over the entire fuel life cycle (well-to-wake), targeting not only maritime emissions but also emissions during the fuel's production. Another proposed amendment stipulates that a list of certification systems for sustainable fuels should be published by March 1, 2027 and updated regularly thereafter.

Although Europe has institutionalized well-to-wake fuel regulations for oceangoing vessels calling at European ports, no unified international standards exist for calculating GHG emissions during the production of shipping fuel. It is desirable that globally unified regulations on GHG emissions in international shipping be established; however, if well-to-wake regulations are introduced, as in the proposed amendments to MARPOL, the scope of global regulations will encompass not only the maritime GHG emissions that should be overseen globally, but also the terrestrial GHG emissions that should normally be overseen by the individual fuel-producing countries.

It is likely that AZEC's discussions on calculating GHG emissions and the IMO's discussions on well-to-wake fuel regulation will proceed in parallel. The Japanese government should consult particularly with partner countries that have plans to produce shipping fuel on how to reconcile the two discussions.

(e) Low-carbon hydrogen and ammonia

Regarding hydrogen, the Japan Hydrogen Association (JH2A) is working to obtain ISO certification for a carbon intensity calculation method that will be needed for low-carbon certification, while also participating in discussions on a low-carbon hydrogen certification system for which its calculation method will be used. Where ammonia is concerned, meanwhile, the Clean Fuel Ammonia Association (CFAA) is leading efforts toward international standardization of equipment such as combustion boilers. The Japanese government should acquire an overview of the relevant supply chains as a whole, then provide systematic, strategic support for these private-sector efforts toward international standardization,^#12 in part to advance the use of low-carbon hydrogen and ammonia throughout the AZEC region, including the rollout of Japanese companies' technologies and products in various countries.

(ii) Environmental value indicators

To successfully promote green products, etc., it is crucial for consumers, companies, and governments inside and outside Japan to understand their environmental value and actually pay to purchase them. However, decarbonization-related products in particular generally require high levels of investment for their development and production, while consumers and others may be unable to discern any performance-related advantages of using such products (e.g., cost reductions) in the way they can with energy-efficient products. Accordingly, it is difficult for companies to judge how predictable the return on their investment might be. Thus, a major challenge is devising and promoting widespread use of indicators that will enable consumers and others to determine the environmental value of green products, etc.

Currently, however, the reality is that the situation varies from one partner country or individual industry to another with regard to energy-related policymaking, progress on measures to address climate change, market environments, areas targeted for investment, marginal abatement costs, and other considerations. Consequently, the value of green products, etc. also varies. During the energy transition period, therefore, it is preferable to use not only the internationally well-known Carbon Footprint of Product (CFP) indicator, but also Allocated CFP—which accounts for appropriate allocation of the effects of emissions reduction—as well as Avoided Emissions^#13 and other indicators.

In considering environmental value indicators, it is important to bear in mind that environmental value derives from emissions reductions throughout the entire product life cycle and includes efforts such as process and fuel conversion in raw material production, reduction of energy consumption at the product usage stage (energy efficiency), and reduction of GHG emissions through resource recycling when disposing of products. These decarbonization efforts by companies must be appropriately reflected in environmental value and it should also be borne in mind that the timescale over which the results of those efforts materialize may vary among countries, industries, and products. In addition, it is important to consider how environmental value should be employed in evaluations of companies by financial institutions and investors to link it to funding.

3.Promotion of Individual Decarbonization Projects

(1)Formulation and enhancement of roadmaps and establishment of frameworks

To make green investment by companies more predictable, it is essential for all the partner countries to formulate and enhance roadmaps including the timings for introduction of green products, etc., priority sectors for investment, and the country's expected energy mix. The Asia Zero Emission Center established within the Economic Research Institute for ASEAN and East Asia (ERIA) has been tasked with promoting energy transitions in partner countries and supporting their development of visions, roadmaps, or policies for decarbonization,^#14 and we hope the center will fulfill this role. It is also essential to foster and strengthen experts to promote decarbonization. The Japanese government too should draw on its expertise and experience in areas such as investment strategies for specific sectors to assist the governments of partner countries.

Furthermore, when promoting individual projects, it is extremely beneficial to hold discussions with the public and private sectors in the countries in question. Japan has established frameworks for bilateral discussions involving both the public and private sectors with Vietnam, Indonesia, the Philippines, and Thailand. In Vietnam, a degree of progress is evident, the most notable example being the selection of the first set of pilot projects by the AZEC/GX Promotion Working Team set up under the Viet Nam-Japan Joint Initiative in a New Era. It is essential to continue making active use of such frameworks, and to extend them to other partner countries. The Japanese government's efforts should include establishing the appropriate business environments for formation and implementation of projects by progressing bilateral policy coordination, institutional improvements, and promotion of individual projects simultaneously to create models for success, and deploying these throughout AZEC.

(2)Enhancement of the Japanese government's information provision and support system

When Japanese companies promote individual projects in partner countries, they require relevant information including the priority sectors for that country's government, the support measures it offers, and market trends. The Japanese government should therefore develop and subsequently enhance a support system to provide such information to companies along with advice. Furthermore, many public support programs are available—including subsidies under the Global South Future-Oriented Co-Creation Project (the Global South Budget), the Japan-ASEAN Integration Fund (JAIF), the international demonstration projects of Japan's New Energy and Industrial Technology Development Organization (NEDO), and the public-private partnerships of the Japan International Cooperation Agency (JICA). But given this abundance of options, some executives tell us that it is difficult to work out which program is right for their company. We therefore ask the Japanese government to summarize the information about these support programs and provide such information in a format that will be easily understandable for corporate executives.

In Japan, when a company applies for funding from the Global South Budget, an individual project that is recognized as an AZEC project may receive additional points in evaluation, but there is still no guarantee that the project will be approved for funding. This is one reason why it has been suggested that corporate executives may not feel the benefits of having an AZEC project. Accordingly, we recommend that a budget specifically for AZEC projects be set up within the Global South Budget, or alternatively the Global South Budget should seek applications for projects to be fully funded or operated as commissioned projects (i.e., funded entirely with public money).

Furthermore, the Japanese government should create a system of preferential support within schemes such as the public support programs described above for individual projects that utilize Japanese-made GX materials like green steel. Such preferential support could apply to loan interest rates and repayment periods, insurance coverage ratios, insurance premiums, or the amounts of subsidies granted. At the same time, the Japanese government should support partner countries in developing systems that facilitate use of such materials. Provision of incentives that exceed the increased costs of using GX materials can be expected to lead to the use of GX materials in individual projects and expand the GX products market inside Japan.

(3)Finance

It has been estimated that green investment opportunities across ASEAN between 2016 and 2030 will reach a cumulative total value of $3 trillion. Currently, however, the barriers posed by instability in politics, exchange rates, and fulfillment of contracts, as well as low profitability and high levels of credit risk, mean that the pace of actual investment is such that it cannot possibly reach this estimated figure. Private-sector financial institutions face challenges in reliably predicting investment returns, determining projects' eligibility for loans, and ensuring the trustworthiness of companies. The advancement of energy transition projects in particular leads to increased financed emissions, so these projects also involve reputational risk.

In Asia, where funds are raised primarily through loans and bond markets remain small, it would be difficult to cater to the vigorous and diverse energy transition-related demand in the region solely using the approaches of organizations such as the International Capital Market Association (ICMA), which are currently becoming the norm internationally. The Japanese government should seek to develop capital markets in partner countries while viewing energy transition from a wider perspective than the ICMA-based approach, with a view to supporting transitions that reflect the circumstances in individual countries. At the same time, it should address concerns such as greenwashing and carbon lock-in appropriately.

In these respects, the public and private sectors in partner countries need to collaborate in clarifying which projects contributing to individual countries' NDCs and the achievement of long-term objectives will receive support through transition finance. They should then seek to enhance the projects' trustworthiness and investment predictability through policies and measures that increase their effectiveness. As one aspect of this, the Basic Guidelines on Climate Transition Finance and the sector-specific roadmaps drawn up and published by the Japanese government need to be amended appropriately as necessary for each sector in light of shifting circumstances including trends in technological development and changes in the policy environment.

When it comes to the actual provision of funds, needs vary according to the country and the project, and may include equity investment, loans, guarantees, grant-like funding, or subsidies. The Japanese government should look into a mechanism that would enable its various public support programs contributing to the promotion of individual projects in the AZEC region^#15 and the funding it contributes to international organizations^#16 to be used in a coordinated and strategic manner, as required for each country and project.^#17 In this regard, even further expansion of minority equity investment, loan guarantees, and the like by public-sector organizations is especially required.

One specific suggestion for moving forward immediately would be if these public-sector organizations and international organizations such as ERIA were to use the forums for discussions involving both the public and private sectors mentioned in 3. (1) above to engage in discussion. Companies could then make use of the support programs provided by these organizations and work toward collaboration on concrete issues. Over the medium- to long term, we hope that a financing framework will be devised that can financially support individual projects within the AZEC region while also attracting private funds, like the blended finance led by multilateral development banks (MDBs) such as the World Bank and the ADB. We also hope to see the creation of a mechanism for mobilizing funds not only from Japan and the international organizations, but also from partner countries, and to see efforts toward implementation of both this framework and the associated mechanism.

Within Japan, discussions about transition finance are taking place in the Asia Transition Finance Study Group (ATFSG), a private sector-led initiative, and the Asia GX Consortium, which is operated by Japan's Financial Services Agency and ASEAN financial authorities. The topics discussed as part of these initiatives and the content of discussions so far should be summarized and shared as an efficient means of furthering discussions regarding the definition of transition, as well as concrete means of support and the timescales for its provision.

(4)Promotion of JCM use and expansion of counterpart countries

The Joint Crediting Mechanism (JCM) is a system that quantitatively evaluates the effects of GHG emissions reduction and removal in a counterpart country following widespread adoption of Japan's outstanding decarbonization technologies, products, services, systems, or infrastructure, and the implementation of Japanese decarbonization measures. The system shares the resulting carbon credits between Japan and the counterpart country, and both countries can use it to achieve their NDCs.

(i) Expansion of counterpart countries

To date, Japan has established JCM agreements with 31 countries and is implementing more than 270 projects. Government-to-government discussions are currently underway regarding a JCM agreement with Malaysia; this agreement should be established as soon as possible. In addition, we hope that agreements will be established with Australia and other AZEC partner countries.

(ii) Promotion of JCM use

The formation and promotion of JCM projects presents challenges in terms of developing common rules regarding procedures and ensuring that the credit approval and issuance process is straightforward and transparent.

Currently, considerable time is required for the series of procedures, which may require repeated approval by a bilateral joint committee, including for the Project Idea Note (PIN), the methodology, and the Project Design Document (PDD), or may require separate submissions for each individual counterpart country. There have been occasions when document formats were changed without warning or the joint committee did not undertake electronic approval because there were too few projects. Accordingly, the predictability of projects should be improved by, for instance, appropriately sharing information between the governments of Japan and the counterpart country, providing advance notification of rule changes, and guaranteeing continuing issuance of credits^#18.

Every time a JCM application is made, it is necessary to obtain approval for the project methodology from the bilateral joint committee formed with each separate counterpart country, even if the project is the same as in a previous application. One suggestion, therefore, is to standardize methodologies and guidelines for all JCM counterpart countries, including AZEC partner countries. In addition, the Institute for Global Environmental Strategies (IGES) and some companies are currently supporting the drafting of methodologies, but efforts to increase the number of people drafting methodologies are also required.

To further enhance the formation and implementation of JCM projects going forward, improving and expanding the Japanese government's existing public support programs and promoting private-sector JCM initiatives is crucial. First, it is necessary to expand the budgets and scope of support for subsidy programs currently implemented by the relevant ministries and organizations such as those relating to equipment subsidies, feasibility studies, and demonstration projects. It is extremely important for ministries to work together in these efforts so that entire project cycles can be seamlessly supported without interruption.

In specific terms, efforts should include the following: clarifying the criteria for JCM approval and how credits are allocated; increasing the number of projects registered for JCM in sectors and technologies where Japanese companies are internationally competitive;^#19 significantly expanding budgets (e.g., by increasing the amounts and rates of individual subsidies, as well as maximum subsidies); making requirements more flexible (e.g., by relaxing restrictions on the duration of projects and making the contracts of Japanese companies' overseas subsidiaries eligible for JCM); and alleviating the burden of monitoring.

It should also be noted that huge burdens are imposed on companies that are first to implement methodologies. The Japanese government should increase its support for companies when they are negotiating with the governments of counterpart countries on issues such as methodology and the allocation of credits. Additionally, it is necessary to promote private-sector JCM initiatives by visualizing the value of JCM credits to increase investment predictability and allowing credits to be acquired through involvement in an offtaking-only capacity that does not require either the use of Japanese technology or equity investment.

Conclusion

Measures to address climate change are a challenge that the whole world must work together to tackle. Achieving carbon neutrality on a global scale requires the necessary measures to be implemented steadily while maintaining various pathways according to the actual circumstances of each country and region.

As an organization targeting various transition pathways and a triple breakthrough, AZEC could play a pioneering role in this endeavor and could also serve as an effective tool for further cementing the relationships between Japan and Asia that have been built up over many years.

Frameworks for putting the AZEC initiative into practice are coming together, including formulation of a medium- to long-term action plan and the launch of the AZEC International Conference to Develop Carbon Markets. Most important in terms of continuously raising the interest of the public and private sectors in partner countries including Japan will be to promptly implement individual projects and build up a track record. This will serve to deepen awareness and understanding of AZEC among more entities. We have high hopes of Japan and the other partner countries regarding their ability to deliver on the AZEC initiative.

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1. https://www.keidanren.or.jp/en/policy/2024/052.html
2. https://www.mofa.go.jp/mofaj/files/100737977.pdf
3. The Survey on Advancing the AZEC Initiative was conducted from April 25 to May 30, 2025. Surveys were sent to 414 companies that are members of the relevant Keidanren committees (the Committee on Environment, the Committee on Energy and Resources, and the Committee on Asia and Oceania), of which 97 companies responded, for a response rate of around 23%.
4. The annex to these recommendations provides details regarding 18 of these 79 projects about which information can be disclosed publicly.
5. The Green Transformation League (GX League) and the Green Transformation Emissions Trading Scheme (GX-ETS; which will be fully operational from fiscal 2026) are due to employ a calculation method based on the SHK system (see footnote 6). It will also be important to prevent the burden of calculation being duplicated between these systems and the SHK system.
6. Japan's GHG emissions calculation, reporting, and publication system. Pursuant to the Act on Promotion of Global Warming Countermeasures, businesses that emit more than a certain volume of GHGs must calculate their emissions and report them to the national government, which publicizes the reported information.
7. For example, the Partnership for Carbon Transparency (PACT) of the World Business Council for Sustainable Development (WBCSD), the Green × Digital Consortium of the Japan Electronics and Information Technology Industries Association (JEITA), and the carbon footprint calculation initiative of the Battery Association for Supply Chain.
8. See p. 8 "Objective 1.8. Advance the harmonisation of standards, technical regulations, and conformity assessment procedures" at
   https://asean.org/asean-economic-community-strategic-plan-2026-2030/.
9. In Deploying a New Policy for Standards and Certification: Japanese-Style Standardization Acceleration Model 2025, compiled by the Basic Policy Board of the Ministry of Economy, Trade and Industry's Japanese Industrial Standards Committee (JISC) in June 2025, perovskite solar cells were designated as one of the five pilot fields for which Japan will aim to secure markets for technology at the commercialization stage.
10. An ISO 14025-compliant international framework for companies to calculate and disclose environmental information about their products with a high degree of transparency.
11. The volume of GHG emissions produced by a vessel's fuel per unit of energy consumed over its life cycle.
12. In Deploying a New Policy for Standards and Certification: Japanese-Style Standardization Acceleration Model 2025, compiled by the Basic Policy Board of the Ministry of Economy, Trade and Industry's JISC in June 2025, hydrogen and ammonia were designated as one of the five pilot fields.
13. Discussions are currently underway regarding regulations governing calculation methods and disclosure, focusing on the WBCSD's Guidance on Avoided Emissions and initiatives by industry associations and others.
14. Asia Zero Emission Community (AZEC) Leaders' Joint Statement and its Action Plan for Next Decade (October 11, 2024)
15. Subsidies provided by the Japan Bank for International Cooperation (JBIC), Nippon Export and Investment Insurance (NEXI), JICA, the Japan Green Investment Corp. for Carbon Neutrality (JICN), the Development Bank of Japan (DBJ), the Japan Organization for Metals and Energy Security (JOGMEC), the Global South Future-Oriented Co-Creation Project, etc.
16. Such as the Asian Development Bank (ADB).
17. For example, robust public support should be provided by organizations such as JBIC, NEXI, and JICA for liquefied natural gas (LNG) supply chains.
18. For example, the continued issuance of credits from a JCM-registered projects, even if the JCM agreement were to be invalidated due to circumstances on the part of a partner country.
19. For example, hydrogen; ammonia; synthetic fuels; biomass; cogeneration; waste-to-energy; boilers; gas turbines; fuel conversion; electricity storage; seawater desalination; manufacturing-related technologies for energy- and resource efficiency, etc.; smart cities; smart mobility; carbon dioxide capture, utilization, and storage (CCUS); forestry; and agriculture.