For manufacturers seeking to reduce Scope 2 emissions (indirect emissions from purchased electricity), three options are primarily used: J-Credits, non-fossil certificates (FIT non-fossil and non-FIT non-fossil certificates), and PPAs (Power Purchase Agreements). Each differs in cost structure, credibility, and eligibility for international initiatives such as RE100, making it necessary to select the appropriate mix based on the company's objectives and procurement scale. As of 2026, combining multiple options has become standard practice among major manufacturers.
Comparing the Basic Characteristics of Three Options
J-Credit
A program that converts emissions reductions and absorptions from energy efficiency improvements, renewable energy installations, and forest management into credits. While its credibility for Scope 2 reduction is considered more limited compared to GO certificates, it can be obtained relatively inexpensively in the domestic market (equivalent to approximately 1–3 yen/kWh). It can also be used within GX-ETS as a supplementary tool for emissions reduction. However, since it is not recognized as compatible with RE100 or advanced SBTi requirements, a different approach is needed if the goal is compliance with international initiatives.
Non-Fossil Certificates (FIT and Non-FIT)
Environmental value certificates issued by electric utilities for renewable electricity. FIT non-fossil certificates are inexpensive (a few tens of yen per MWh) but make it difficult to identify the specific power plant, and may not satisfy the TRACKER requirements of international initiatives like RE100. Non-FIT non-fossil certificates allow plant-specific designation, carry higher credibility, and can meet certain RE100 requirements. As of 2026, they are widely used as the primary domestic Scope 2 reduction tool, though changes in international rules require careful monitoring.
PPA (Power Purchase Agreement)
A method of entering into a long-term direct contract (10–20 years) with a renewable energy developer. Options include on-site (installed on company premises) and off-site (electricity supplied from a power plant). While initial costs are high, long-term fixed pricing stabilizes energy costs and fully satisfies RE100 requirements. The minimum procurement scale is approximately 500 kW to 1 MW, making this option applicable to mid-size and larger facilities. It is important to verify long-term contract risks (developer withdrawal, price adjustment clauses) before signing.
Alignment with International Initiatives
For companies participating in RE100, international standards are evolving to require a shift toward renewable energy certificates with temporal and geographic matching (granular certificates) in annual reporting. At present, there are pathways where Japanese non-fossil certificates can meet certain requirements, but selections must account for the risk of future rule changes.
Under SBTi (Science Based Targets initiative), switching to renewable electricity procurement is also recognized as a means of achieving Scope 2 reduction targets. However, SBTi recommends "renewable electricity that matches in time, location, and quality," placing greater emphasis on demonstrating actual renewable electricity consumption rather than accumulating certificates. For this reason, PPAs — particularly off-site PPAs within the same grid — have become the most highly regarded option.
RE100
Non-FIT non-fossil certificates (with plant designation) or PPAs are recommended. From 2025 onward, rules are shifting toward recommending T-RECs and time-matched certificates. Relying solely on FIT non-fossil certificates carries an increasing risk of failing annual reporting recognition.
SBTi Scope 2 Targets
Both market-based (certificates) and location-based calculations are permitted, but using certificates with lower emission factors is recommended. Renewable electricity from PPAs carries the highest credibility.
GX-ETS (Domestic)
Can be linked with J-Credits. Both J-Credits and non-fossil certificates can be used to achieve GX-ETS reduction targets, but applicable rules may change depending on the future design of the GX-ETS framework.
Renewable Energy Procurement Selection Framework — Matching Options to Your Situation
Determine based on RE100 and SBTi participation
For companies participating in RE100 or considering doing so, it is safest to anchor on non-FIT non-fossil certificates or PPAs. Relying solely on J-Credits or inexpensive FIT certificates carries the risk of failing to meet requirements in the future. Even for companies not planning to join RE100, the growing Scope 3 reduction demands from major customers make it necessary to select options that provide long-term adaptability.
Determine options based on procurement scale and facility conditions
On-site solar combined with PPAs is a strong option for large factories with available rooftop and parking space. For small-to-medium facilities, purchasing non-FIT non-fossil certificates is a realistic first step. Direct PPA contracts with developers require a minimum scale of at least 500 kW to 1 MW. Companies with multiple factories can effectively manage their overall renewable energy ratio by using different options at each facility and tracking the combined company-wide RE percentage.
Design the balance between cost and credibility
A hybrid approach — using a combination of J-Credits and non-fossil certificates to control costs while covering the portion of electricity that requires high credibility with PPAs — is increasingly becoming the practical solution for mid-size manufacturers. There is no need to cover all consumption with PPAs. A design that covers the portion of total Scope 2 requiring high credibility with PPAs and non-FIT certificates, supplemented by J-Credits for the remainder, maintains the balance between cost and requirement compliance.
Develop a phased transition plan
Companies currently using only J-Credits and FIT non-fossil certificates are advised to begin developing a transition plan now, with a horizon of 2028–2030. Scope 3 reduction demands from major customers are expected to intensify between 2026 and 2028, and early action is effective for spreading transition costs over time.
Cost Comparison — The Reality of Three Options
The cost profile of renewable energy procurement varies considerably by option and scale. The figures below are indicative benchmarks for the domestic market as of 2026, and will vary by contract terms and power plant type.
FIT non-fossil certificates are the cheapest option, reflecting their lower credibility. Non-FIT non-fossil certificates, which allow plant-specific designation, cost approximately five times more than FIT certificates but offer higher compatibility with RE100 requirements. PPA pricing varies with electricity market rates, but the long-term fixed-price nature functions as a hedge against energy cost volatility.
Three Risks Procurement Managers Tend to Overlook
Double-counting risk for certificates
In practice, errors occur where non-fossil certificates and J-Credits are purchased in duplicate for the same electricity volume. It is necessary to manage purchased certificates by target electricity volume and period in a management ledger, and to regularly reconcile them against the electricity volume used in GHG calculations.
Long-term contract risk for PPAs
A 20-year fixed-price PPA carries the risk of becoming overpriced if future electricity market prices fall. It is essential to verify early termination conditions, price adjustment clauses, and provisions for developer insolvency with the legal department before signing.
Lagging response to international rule changes
Certificate requirements under RE100 and SBTi are revised annually. Since options currently in use may fail to meet requirements within one to two years, a system must be in place to verify at least once a year that the certificates currently adopted remain compliant with the latest international rules.
Renewable energy procurement option selection is not a one-time decision — it requires revisiting as international standards evolve, electricity market conditions change, and company RE targets are raised. Procurement managers are advised to confirm at least once a year that their current options continue to satisfy international standard requirements. Building an integrated system (or spreadsheet ledger) to manage certificate types and procurement volumes, and maintaining a state of readiness for external audits as the basis for GHG calculations, is the most effective means of reducing long-term compliance risk.