Kyoto Protocol which was adopted in 1997 to prevent global warming is the most effective and practical international framework today. According to this Protocol, as one of commitments, Japan has to reduce Green House Gases to 94% of the 1990 level in terms of CO₂ by the years between 2008 and 2012 on the average. However it is very difficult to control the emission below that level considering the influence to the economy. Therefore the emission trading is expected to achieve the target efficiently. In this study, we developed the simulation model concerning the Japanese emission trading under Kyoto Protocol. We verified the feasibility of emission trading. This model controls CO₂ emissions and maximizes GDP. The simulation model is based on a dual input-output model which is based on the material and value balances. We analyzed three cases on conditions that emission permit prices are from 500 to 1,000 thousands yen. Case 1 is free control emission. Case 2 aims at the target of Kyoto Protocol by emission trading, and Case 3 assumes more moderate restriction of emission which involves the forest deposit. These simulations are based on the data of 2000. As a result of the simulation, critical price in Japan was about five or six thousands yen per ton-CO₂. GDP decreased as emission permits price increased. However the reduced rate was less than 0.53% for Case 1. Furthermore on the condition that emission permits are under ten thousands yen, the reduced rate was only 0.04%. On the other hand, CO₂ emissions were the same or more than that in Case 1. This result shows that reduction in the gross CO₂ emissions only by a restriction of emissions is very difficult. Therefore trading emissions permits is considered as an effective measure and makes incentives to reduce net emissions of CO₂. JEL Classification: Q52, Q56, Q58