IEEJ：October 2020©IEEJ 2020
Special Bulletin
A Japanese Perspective on the International Energy Landscape (504)

October 29, 2020

Carbon Neutral and Decarbonization of Fossil Fuels (1)Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, Japan
Carbon neutral initiatives to pursue net-zero greenhouse gas emissions over the long term
are being promoted globally. The European Union known for its aggressive climate change
countermeasures has advocated net-zero GHG emissions in 2050. In late September, China, theworld’s largest GHG emitter, vowed to pursue net-zero emissions in 2060. On October 26, JapanesePrime Minister Yoshihide Suga in his first keynote policy address at the National Diet declared thatJapan would seek to achieve net-zero GHG emissions in 2050. On October 28, South Korean
President Moon Jae-in as well announced a policy of pursuing net-zero emissions in 2050. In thisway, major countries in the world have announced net-zero GHG emission or carbon neutral
initiatives one after another. If Democratic candidate Joe Biden wins in the attention-attracting U.S.
presidential election, Washington may specify a policy of enhancing climate change
countermeasures and go in the direction of decarbonization.
Various factors are conceivable behind the series of carbon neutral initiatives announced
by major countries. They include international and domestic political strategies to lead the world inaddressing climate change and maintain or enhance leadership in protecting global interests,
strategies to address severe geopolitical environments by building strategic relations with majorcountries and regions in the world regarding climate change policy, policies to leverage clean energy
investment as part of climate change countermeasures for recovering from huge economic damage
caused by the COVID-19 pandemic, economic and industrial strategies to win supremacy inadvanced or innovative technologies for achieving net-zero GHG emissions, and industrial policies
to secure long-term economic development growth by nurturing technologies and industries tosupport the transition to carbon neutral status. Essential or fundamental purposes for preventing
climate change and protecting the global environment might have been combined with theabovementioned strategies, policies, or motivations to lead governments to pursue carbon neutral
initiatives.
Given that all countries, including those pursuing net-zero GHG emissions, in the world
still depend heavily on fossil fuels at present, however, it will not be easy for any country to realize
net-zero GHG emissions even in the next 30 or 40 years. Net-zero emissions in 2050 or 2060 would
be an extremely challenging or ambitious target. In fact, none of those vowing to achieve carbon
neutral status has specified paths or energy mixes to accomplish the target. Investment or costs torealize the status have not been specified. They seem to be embarking on uncharted voyages toachieving carbon neutral status.
The first step for realizing carbon neutral status would be to eliminate emissions in thepower sector after electrifying energy systems as much as possible. This is because the eliminationof emissions is relatively easier for the power sector than for others. After a zero-emission power
sector is realized, emissions will have to be eliminated in all other sectors such as those in the1IEEJ：October 2020©IEEJ 2020
industry, buildings, and transport sectors. Under this carbon neutral concept, interest has grown in
CO2-free hydrogen. This means a growing recognition that net-zero emissions or the decarbonizationof all energy systems would be difficult to realize without CO2-free hydrogen and other innovativetechnologies. Therefore, the Hydrogen Ministerial Conference launched by Japan in 2018 attracted
global attention. Then, the European Union, Germany, the Netherlands, and others announcedhydrogen strategies one after another. Hydrogen promotion policies have been implemented while
the business sector has been enhancing hydrogen initiatives.
As is well known, CO2-free hydrogen includes green hydrogen produced with renewableenergy electricity and blue hydrogen made from fossil fuels with CO2 captured and stored. CO2-freehydrogen produced with nuclear power generation is also considered. Although what type ofCO2-free hydrogen would be a future leader is still uncertain, it may be important to accept any typethat could contribute to achieving net-zero GHG emissions. This is because options vary depending
on resource endowment, technological capabilities, infrastructure development, and industrial
arrangements for specific countries or hydrogen developers.
Among the types of hydrogen, however, blue hydrogen produced from fossil fuels with
CO2 emissions captured and stored is attracting growing interest. The thorough enhancement ofenergy efficiency and the spread of non-fossil energy such as renewables and nuclear would beindispensable for realizing carbon neutral status. Given that fossil fuels account for most of global
energy supply and are abundant sources of energy and available through existing infrastructure,
however, the decarbonization and utilization of fossil fuels is basically important. This is the reason
Saudi Arabia, a leading oil producer that hosts an annual summit of the Group of 20 major countries
this year, has advocated the concept of a circular carbon economy for promoting comprehensive
decarbonization initiatives and pointed out that it would be important to eliminate CO2 emissions
from fossil fuel consumption with the so-called 4R technologies to reduce, reuse, recycle, andremove CO2. The decarbonization of fossil fuels is expected to make great contributions to global
carbon neutral initiatives.
As a matter of course, many of those categorized as the 4R technologies are still underdevelopment and have yet to be commercialized. Their innovative development must be secured
along with their improved economic efficiency, relevant infrastructure development, and their socialacceptability. Their development path would be difficult and long. Subject to growing interest inblue hydrogen produced through fossil fuel decarbonization is the whole supply chain covering
upstream development and production, midstream transportation, and downstream consumption. The
key is the improvement of economic efficiency to cut blue hydrogen supply costs. The utilization ofCO2-free ammonia (blue ammonia) is attracting attention as the phase before blue hydrogendevelopment. This is because there is potential to use some of the existing supply chain to cut costs.
A joint press release by the Institute of Energy Economics, Japan, Saudi Aramco, and SABIC on theworld’s first blue ammonia shipment has attracted global interest.
The path to carbon neutral status is not easy. Initiatives to decarbonize fossil fuels andutilize blue hydrogen and blue ammonia are entering crucial stages. I would like to pay attention totheir promotion through future policies and market players’ specific initiatives.
Contact: report@tky.ieej.or.jp
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