IEEJ：February 2020○
ｃIEEJ 2020
Special Bulletin
A Japanese Perspective on the International Energy Landscape (467)

February 13, 2020

Energy Transition and Future of Fossil Fuels (3)Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanThe 464th and 465th issues of “A Japanese Perspective on the International Energy
Landscape” discussed energy transition and the future of fossil fuels from the overall or macro
viewpoint and from the investment and finance viewpoint. This time, I would like to discuss thematter from the viewpoint of innovative technologies and innovations.
Mainly in Europe, arguments are growing for very ambitious greenhouse gas emission
reduction goals including “net zero” GHG emissions. If these goals are to be attained, energy supply
and demand would have to be restructured. The world now depends on fossil fuels such as oil,natural gas and coal for 85% of its primary energy supply. If “net zero” GHG emissions are to berealized in the future, the world would have to dramatically expand non-fossil energy such as
renewable energy and nuclear, thoroughly decarbonize fossil fuels or combine these measures.
Another way to attain the “net zero” GHG emissions would be the direct removal of CO2 and other
GHGs in the atmosphere to offset GHG emissions. If energy supply and demand were changed
structurally to attain the goal of “net zero” GHG emissions, however, the world would have todepend on the abovementioned two measures.
As hopes on renewable energy are growing globally and rapidly, with the International
Energy Agency pointing to nuclear energy as a key option to address climate change, non-fossil
energy sources will likely play greater roles than in the past. Given the fact that fossil fuels accountfor most of current energy supply, however, how to use fossil fuels as mainstay energy sources in aclean manner to meet climate change goals would also be very important.
As a matter of course, technologies to use fossil fuels cleanly have existed and beendeveloped. Technologies have been developed and diffused to maximize combustion efficiency andreduce CO2, SOx, NOx and other pollutant emissions. They include clean coal technologies. It is
important to further sophisticate and diffuse these technologies. To attain high-level goals such as“net zero” GHG emissions, however, innovative technologies and innovations will be required to use
fossil fuels.
In this respect, hopes have rapidly grown on innovative hydrogen technologies. Attracting
attention particularly in regard to the utilization of fossil fuels and decarbonization is the bluehydrogen technology to produce hydrogen from fossil fuels and use the carbon capture and storage(CCS) technology for containing or cutting subsequent CO2 emissions. In a manner to meet the trendof calling for raising climate change goals to ambitious levels, various plans are emerging to produce
blue hydrogen from coal and natural gas in resource-rich countries and to transport blue hydrogen toconsumer countries. They include initiatives in Australia, Brunei and Saudi Arabia. Russia has also
grown interested in hydrogen recently. In order to effectively utilize their resources over a long term
instead of leaving them to become stranded assets, resource-rich countries have no choice but to1

IEEJ：February 2020○ｃIEEJ 2020
tackle innovative technologies and innovations.
Hopes are growing on innovative technologies and innovations not only among
resource-rich countries but also among multinational corporations engaging in fossil fuel business.
Believing that the blue hydrogen technology should play a key role in decarbonizing natural gas asplanned in Europe, multilateral energy corporations are moving in expectation of utilizing natural
gas effectively for producing blue hydrogen.
A key component of the blue hydrogen technology is CCS. CCS technology, which has
been expected to become a key climate change countermeasure, will have to be innovated further. Inaddition to CCS, a wider technology concept of carbon capture, utilization and storage (CCUS) is
attracting interest. Although CCS technology captures and stores CO2 generated through fossil fuelconsumption, plans are considered to utilize CO2 for enhanced oil recovery (EOR) to expand oil andgas production, for dry ice and for carbon recycling initiatives to produce chemical, fuel andconcrete products.
These CO2 utilization plans view CO2 as a usable resource and seek to utilize CO2 for the
purpose of limiting or reducing CO2 emissions into the atmosphere. CCUS and carbon recycling
have rapidly attracted interest in recent years in line with efforts to explore the effective utilization offossil fuels and with growing hopes on innovative technologies for the purpose. They were key
topics at an annual Group of 20 summit in Japan last year and will be so at this year’s G20 summit in
Saudi Arabia.
As a matter of course, the abovementioned technologies are innovative and have yet todiffuse commercially in the market. Technologically, economically and socially, they remain in thedevelopment stage. Constraints on and hurdles to their commercialization are abundant and difficult
to overcome. A key challenge is to advance the technology development to substantially cut relevantcosts. This is because laboratory-stage technologies would be meaningless unless they diffuse widelyin society.
If very high climate change goals such as “net zero” GHG emissions are pursued, however,the utilization or extension of traditional technologies will not suffice but innovative technologies
will have to play a key role. As this point is being shared globally, various countries and companies
are seriously enhancing their innovative technology and innovation initiatives while developing
technology roadmaps and setting cost reduction goals.
It is important that innovative technologies and innovations have the potential to resolve
climate change and other challenges for the whole of mankind. However, attention must be paid totheir potential to influence the survival of individual countries and companies. As global races fortechnology development and supremacy are growing fiercer, countries or companies withtechnological advantages are likely to have dominant influence and achieve supremacy in the world.
In this sense, the world is expected to see fierce geotechnology competition in the future.
Amid the energy transition, the future of fossil fuels will depend on how blue hydrogen,
CCUS and other innovative technologies make progress. We will have to closely watch global
technology development efforts and competition.

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