How Japan’s dual statement technical update signals a broader reimagining of what counts as clean energy

How Japan’s dual statement technical update signals a broader reimagining of what counts as clean energy.

Japan’s greenhouse gas accounting framework is emerging as one of the most important international precedents for the future recognition of e-methane and carbon recycle fuels within mandatory climate reporting systems.

The country’s SHK system, formally known as the System for Calculation, Reporting and Public Disclosure of Greenhouse Gas Emissions, has been in place since 2006 under Japan’s Act on Promotion of Global Warming Countermeasures. Administered by the Ministry of the Environment, the framework requires large emitters to calculate and report their greenhouse gas emissions annually and serves as one of the primary systems feeding into Japan’s national climate reporting and NDC implementation.

Following revisions adopted in March 2025, the SHK system now provides one of the clearest examples globally of how mandatory emissions accounting frameworks are evolving beyond purely physical molecule-based accounting toward more advanced hybrid architectures capable of integrating certificates, contractual instruments, and carbon recycle fuel pathways.

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A dual accounting structure already operating at national scale

The SHK framework applies to companies whose total annual energy consumption exceeds 1,500 kiloliters of crude oil equivalent per year, corresponding to approximately 3,800–4,000tCO₂ annually. The system covers direct emissions from operations, indirect emissions from purchased electricity and heat, and voluntary Scope 3 reporting. Beyond transparency and corporate reporting, SHK also serves as a foundational source of emissions data for Japan’s national climate policy and international reporting obligations.

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One of the most significant aspects of the framework is that it already operationalizes a dual accounting structure through the distinction between “base emissions” and “adjusted emissions.”

Under SHK, base emissions reflect the physical greenhouse gas emissions generated through business activities, while adjusted emissions account for the impact of credits, certificates, and other recognized reduction instruments. This distinction is particularly relevant in the context of the ongoing revision of the GHG Protocol under the Actions and Market Instruments (AMI) workstream.

Some international discussions have questioned whether multi-statement or contractual accounting approaches are workable at scale. Japan's experience suggests they are. A mandatory national accounting framework has successfully operated this type of architecture for nearly two decades, showing that physical and contractual accounting layers can coexist within a regulated system.

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The March 2025 revisions and the pathway for e-methane

The revisions adopted in March 2025 by the Ministry of the Environment introduced several important developments, but one change is particularly significant for the renewable gas and e-methane sectors: the introduction of provisions related to CCU and carbon recycle fuels.

Under the revised framework, where captured CO₂ is used to produce carbon recycle fuels, the resulting reduction value can be transferred by agreement between the parties and deducted from the user's base emissions, subject to traceability and double-counting safeguards being developed by METI. This creates a regulatory pathway for synthetic fuels, including e-methane and other e-fuels, within a mandatory national accounting system.

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The implications are substantial. The revised framework acknowledges that captured carbon reused in fuel synthesis can generate transferable reduction value and that contractual allocation mechanisms can play a role in emissions accounting. In practice, this represents one of the first examples internationally where a mandatory national framework explicitly opens a pathway for the recognition of e-methane within greenhouse gas accounting rules.

The revisions also go further than simple adjusted-emissions accounting. Certain retired environmental attributes, including non-fossil certificates and renewable J-Credits, can now reduce base emissions themselves under specific conditions. This demonstrates that Japan is not only creating a parallel market-based accounting layer but is also progressively integrating certificate logic into core emissions accounting structures.

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Why this matters for synthetic methane deployment

The SHK discussions also recognize an important operational reality for synthetic methane deployment: physical tracking alone is insufficient for large-scale commercialization.

Imported synthetic methane is expected to be physically blended with LNG before entering domestic gas systems. Once blended in the gas grid, synthetic methane molecules cannot be physically distinguished from conventional LNG which is why credible certificate-based tracking systems are essential to allocate environmental attributes correctly and to ensure that the climate value of e-methane is properly recognized. As a result, the Japanese discussions explicitly acknowledge the need for supply-chain management methodologies and tracking systems capable of following environmental attributes across interconnected infrastructure.

This is particularly important for ongoing international discussions around mass balance systems, liquefaction by equivalence, chain-of-custody models, and cross-border renewable gas trade. The Japanese framework therefore reinforces a broader trend already emerging globally: decarbonization accounting systems are increasingly moving toward hybrid approaches that combine physical inventories with contractual and certificate-based mechanisms.

Convergence with broader international frameworks

The SHK system is not yet fully aligned with the GHG Protocol architecture, but the direction of travel is increasingly clear. Japan is actively exploring interoperability between SHK, J-Credit and JCM systems, GX-ETS, clean fuel certificate systems, and future international accounting frameworks.

Discussions are also ongoing regarding the use of SHK data for Scope 1 and Scope 2 reporting under the GHG Protocol framework, while the Japanese government is considering guidance to clarify conversion methodologies and interoperability mechanisms.

For the e-NG Coalition, these developments are particularly meaningful. The SHK reforms demonstrate that governments are already moving toward accounting systems capable of recognizing contractual decarbonization instruments, renewable gaseous fuel certificates, CCU-based fuel pathways, and mass-balance-based supply chains.

As the deployment of e-methane accelerates globally, frameworks such as SHK may play an increasingly important role in shaping how regulators, markets, and international standards recognize the decarbonization value of renewable gaseous fuels.  

The e-NG Coalition is engaging closely with its Japanese members and with the GHG Protocol Secretariat to ensure that the lessons of the SHK reforms inform the development of the future AMI Standard.

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For more information, contact Mariana Tostes, mariana.tostes@eng-coalition.org

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