The project, once it is up and running next year, is expected to be the broadest emissions market in the country. But some say it still falls short of what Japan needs to make deep emission cuts and could backfire.

Under the United Nations-sponsored Kyoto Protocol, Japan is obliged to cut greenhouse gas emissions during the 2008-2012 period by 6 percent of the levels of 1990. As of 2006, Japan's emissions were 6 percent above 1990 levels.

The Japanese government and large companies have been active in buying carbon offsets to help the country meet its Kyoto target. But the powerful Keidanren business lobby has resisted mandatory emissions targets as well as full-scale emissions trading systems like those already in place in the European Union.