Carbon Credits and GX Initiatives: Regulation of Environmental Claims and Points to Check in Purchase Agreements

Hello, I'm Noriaki Asato, Representative Attorney at LegalAgent.

Interest in businesses dealing with environmental value, such as GX (green transformation), decarbonization, and carbon credits, is growing among startups as well. Providing environmental value comes with a responsibility to explain its substance concretely. Businesses must be prepared to explain coherently, on their own, what value they are delivering to customers, which credits are used to offset which scope of emissions, when the rights are transferred, and whether any of their external claims go too far.

In this field, it helps to think about the "claims" and the "contracts" relating to environmental value separately. Claims are a matter of external communication on websites, in advertising, press releases, and sustainability reports. Contracts, on the other hand, are a matter of agreement on how the parties will arrange the sale and transfer of rights, certification, and the prevention of double counting. If the two are confused, both the external explanation and the allocation of responsibility in the transaction tend to become vague.

Identifying the Environmental Value You Are Dealing With

Environmental value includes several products based on different systems. They include credits under J-Credits and the Joint Crediting Mechanism (JCM), overseas voluntary credits, as well as non-fossil certificates, renewable energy certificates, and allowances under emissions trading, all of which differ in mechanism and purpose of use. They are not all the same product called a "carbon credit"; the registries that manage them and the trading units differ, and the covered periods, origins, and transfer methods must be confirmed for each system. Therefore, when building a service as a business, you first need to confirm specifically which of these the environmental value your company handles corresponds to.

From the customer's perspective, the boundaries between terms such as "CO2 reduction," "carbon neutral," "offset," "effectively renewable energy," and "decarbonization" tend to be hard to see. In practice, however, efforts to directly reduce one's own emissions and the act of purchasing reduction or removal value created by a third party to offset emissions are clearly distinct. Furthermore, the stage at which credits are purchased and the stage at which they are canceled (retired) on the registry to prevent double use are separate procedures. As for what the credits can be used for, the conditions must also be checked for each system used and each disclosure framework. Explaining things to customers while leaving this vague becomes a cause of later discrepancies in understanding, such as a customer mistakenly believing that "the emissions of our own factory themselves have decreased."

The Risk of Overstated Decarbonization Claims

In environment-related services, the choice of words used externally determines customers' trust. Terms such as "zero carbon," "zero CO2," "zero environmental impact," "achieving decarbonization," and "earth-friendly" have strong appeal, but they also tend to mislead recipients. In reality, the scope differs greatly depending on whether the claim covers only the delivery stage, includes manufacturing and business activities as a whole, or is limited to a particular event. The reality that should be communicated also changes depending on whether the credits have merely been purchased, have already been canceled, or are planned to be canceled in the future.

As for the basis for claims, you also need to pay attention to public guidelines. The Environmental Claims Guidelines, a revision of which the Ministry of the Environment announced on March 31, 2026, are guidance on self-declared claims in which businesses themselves assert environmental consideration. They are not the law itself, nor provisions under which a violation immediately triggers penalties, but drawing on the approaches of ISO and JIS standards, they emphasize avoiding vague expressions, explaining an objective and reasonable basis, considering the entire life cycle, and the verifiability of data and calculation methods.

In B2B transactions that are not directly with general consumers, the Premiums and Representations Act does not always apply immediately. Even so, if you give explanations that differ from the facts or make overstated claims, the risk remains of being held liable under the Unfair Competition Prevention Act or for breach of contract. Above all, you must avoid a situation in which a customer company that made a purchase quotes your explanation as is in its own advertising or sustainability disclosures and is later accused of greenwashing. In sales materials and on websites, confirm how purchasers will use the explanation and show the scope and basis of the claims concretely.

Transfer, Cancellation, and Certification to Be Determined in the Contract

Transactions involving environmental value begin with organizing what is agreed to be delivered and at what point in time. This is because the framework of the contract differs depending on whether it is a sale of the credits themselves, an intermediation or purchase on behalf of the customer, or a service agreement for compiling emissions calculations and reports. Where the system used requires a transfer procedure on the registry, draft the contract taking that procedure into account. The transfer under the system must be distinguished in the contract from the timing of payment and performance and the allocation of risk agreed between the parties. Also confirm that no third-party rights are attached, and decide on the records and the scope of warranties needed to prevent double transfers and double use.

In addition, for the "cancellation (retirement)" that renders the environmental value used, decide who will carry out the procedure, when, and on whose behalf. Whether the procedure can be reversed afterward must also be confirmed for each system. Separately, consider how to respond if certification is revoked under the relevant system, or if the required volume cannot be procured on the market. In preparation for such situations, set out in the agreement how the delivery of substitute credits and refunds of the price will be handled, to what extent the seller represents and warrants the quality, and to what extent the buyer may use the credits for external disclosure. Where a customer company faces audits or must explain matters to its business partners, arrange things so that, rather than merely a message saying "the arrangements have been completed," registry transfer and cancellation logs and certificates can be delivered as objective records.

Legal Issues by Revenue Model

The legal issues a business faces also change depending on its revenue structure. In a purchasing model, where the company buys credits itself and resells them, it takes on the burden of holding inventory, the risk of price fluctuations, and the quality risk of the value procured. On the other hand, in a model where the company procures credits on behalf of customers under their mandate, in addition to designing the contract as a purchase on the customer's behalf, the focus is on how to fulfill its accountability for the criteria for selecting sellers, the transparency of fees, and the absence of conflicts of interest with itself.

In an intermediation or matching model that brings sellers and buyers together, the terms of transactions between participants, the flow of payment settlement, verification of the authenticity of listed credits, measures to suspend transactions in the event of trouble, and the like are set out in advance in the terms of use. In a support model that assists with emissions calculation and disclosure, it is essential to clarify the boundary of responsibility: how far the advice extends and where the customer's own judgment begins. Since the rules surrounding environmental value are updated quickly, whatever the type of transaction, it is helpful to include in the contract provisions on what happens if the referenced system or eligibility criteria change.

LegalAgent drafts terms of use, purchase agreements, and various service agreements and reviews external claims for businesses engaged in environmentally conscious businesses and credit transactions. We would like to begin by confirming the environmental value the customer needs and aligning the transaction terms and explanations with that use.