How will Japan Boost Competitiveness with the New Era of Decarbonization?

Prime Minister Yoshihide Suga announced Japan’s Green Growth Strategy (GGS) for achieving net zero GHG emissions by 2050. In response, the Ministry of Economy, Trade and Industry (METI) put together a plan to achieve carbon neutrality by...

Prime Minister Yoshihide Suga announced Japan’s Green Growth Strategy (GGS) for achieving net zero GHG emissions by 2050. In response, the Ministry of Economy, Trade and Industry (METI) put together a plan to achieve carbon neutrality by maximizing the use of renewable energy and by mobilizing any possible policies to achieve these goals. This plan will be further elaborated and incorporated into the government’s growth strategy to be compiled in June. On April 22, Prime Minister Suga announced increased ambition for reducing GHG by 2030, targeting a cut of 46%, significantly up from the former ambition of 26%

Japan has a very low energy self-sufficiency ratio, which was 11.8% in 2018. The main reason for this is the lack of energy resources in Japan, not least after the shut-down on nuclear power plants after the great earthquake and tsunami in 2011. Fossil fuels such as oil, coal and liquefied natural gas (LNG) are scarce, and Japan relies heavily on imports from overseas. Of the primary energy supply in Japan in FY 2018, fossil fuels accounted for 85.5%. The remain 15% come from nuclear power, hydroelectric and other renewable resources.

The chart and information are from “Japan’s Energy 2020” published by Agency for Natural Resources and Energy of METI.

At a meeting of the government’s Growth Strategy Council held at the Prime Minister’s Office, METI’s Minister Hiroshi Kajiyama explained the aim of the GGS by saying “We want to see the promotion of global warming countermeasures as a good opportunity for economic growth and create a virtuous cycle between the economy and the environment. Although efforts toward achieving carbon neutrality are not simple, we want to support companies that take on the challenge positively.”

The GGS identifies 14 promising industrial sectors and formulates action plans designed to achieve carbon neutrality by 2050, including issues to address and timetables to adopt to do so. The 14 fields are comprise of the following sectors: Offshore wind power; Fuel ammonia; Hydrogen as power source; Nuclear power; Mobility and battery; Semiconductors and ICT; Maritime (ships); Logistics, people flow and infrastructure; Food, agriculture, forestry and fisheries; Aviation; Carbon recycling; Housing and buildings, Next-generation PV; Resource circulation; and Lifestyle-related industries.

As a precondition for the GGS, electricity demand in 2050 is estimated to be approximately 1.3 trillion to 1.5 trillion kWh, an increase of 30 ~ 50% from the current level. In addition, reference values are shown with the power source composition being 50 ~ 60% renewable energy, 30 ~ 40% thermal power assuming nuclear power with CO2 Capture, Utilization and Storage (CCUS), and 10% hydrogen and ammonia power generation.

In the 14 industrial sectors, the government announced plans to introduce 30 to 45 gigawatts of offshore wind power generation by 2040 and to start discussions on DC power transmission. As for fuel ammonia, the government plans to conduct a demonstration test of “20% co-firing (thermal co-firing, in which ammonia is mixed with a boiler of a coal-fired power plant)” for three years toward 2030, aiming to achieve 100 million tons by 2050 by building a supply chain.

As for hydrogen, the target is to increase the amount of hydrogen to 3 million tons in 2030 and 20 million tons in 2050, while at the same time reducing the cost to less than 20 JPY per normal cubic meter. In the field of nuclear power, Japan has declared its participation as a major player in international cooperation projects for small modular reactors.

An ambition is that all new passenger cars sold will be electric vehicles by the mid-2030s at the latest, and the price of battery packs for vehicles will be reduced to 10,000 JPY or less so that the economic efficiency of electric vehicles and gasoline vehicles will be equivalent as early as possible by 2030.

In the semiconductor and ICT industries, the government will discuss mandating data centers to use part of their electricity from renewable energy sources, with the aim of achieving carbon neutrality in the semiconductor and ICT industries by 2040. The government aims to achieve an 86% reduction in CO2 emissions from ships sailing on liquefied natural gas, and to achieve virtually zero emissions through the use of recycled methane.

The strategy calls for the promotion of maritime port development that can contribute to the acquisition of next-generation energy resources from overseas in logistics and civil engineering infrastructure, discussions on regulations for the construction of local production for local consumption in the food, agriculture, forestry and fisheries industries, and examination of infrastructure and supply chains for hydrogen supply in anticipation of the full-scale introduction of hydrogen aircraft from 2035.

The government aims to achieve a 30% share of the global carbon capture and storage (CCS) market by 2050. In addition, the strategy incorporates promotion of next-generation solar power generation that is expected to capture new markets such as building walls, improvement of the efficiency of waste power generation, and digitalization on application procedures through the J-Credit System (a system in which the government certifies the amount of GHG emissions reduced or absorbed as credits).

In order to realize these measures, the government will establish a cooperative system among financial institutions, including cooperation with guidance policy finance, and will promote efforts to allocate corporate deposits and savings, which are said to be 240 trillion JPY (19 000 billion SEK), to investment. In addition, the strategy calls for the establishment of a Green Innovation Fund worth 2 trillion JPY (160 billion SEK) to stimulate corporate R & D and capital investment by 15 trillion JPY (1200 billion SEK).

Prime Minister Suga positioned carbon neutrality by 2050 as a central pillar of Japan’s growth strategy, noting in his policy speech to the ordinary Diet session in 2021 that, “Environmental measures are not economic constraints, but key to major socio-economic changes and strong growth. Our Green Growth Strategy will generate economic effects and new jobs, and we will lead the world in realizing a decarbonized society.”.

There are strong similarities and joint interests between the Japanese Green Growth Strategy, and the Swedish priorities, and huge potential for working closer together for addressing the global climate challenge, and for building future competitiveness with sustainable solutions.

Michael Jacob & Shiori Schules at OSI Tokyo