IEEJ：August 2021©IEEJ 2021
Special Bulletin
A Japanese Perspective on the International Energy Landscape (547)

August 26, 2021

Malaysia’s Interests in Japan Pursuing Carbon Neutrality
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, Japan
On August 26, I made a presentation titled “Japan’s Strategic Energy Transition: Voyage in
Uncharted Waters to Carbon Neutrality under the Impacts of COVID-19” in a webinar sponsored by
the Universiti Tenaga Nasional Institute of Energy Policy Research (UNITEN/IEPRe) in Malaysia. I
have served as Chair in the Energy Economics of Energy Commission at UNITEN since 2015. In thewebinar, I reported Japan’s 2050 carbon neutrality initiatives and discussions on the revision of its
Strategic Energy Plan, which are of great interest to Malaysian energy policy and industry
stakeholders, and had a moderated discussion with the moderator before exchanging views withparticipants, based on consultations with the sponsor.
It was very impressive to me that Malaysian energy stakeholders indicated their greatinterests in Japan’s carbon neutrality initiatives and the revision of the Strategic Energy Plan throughthe moderated discussion and the exchange of views after my presentation. Malaysia is strongly
conscious of the significance of the enhancement of climate change countermeasures and isinterested in how to overcome cost hikes and other challenges accompanying the enhancement andhow to realize a suitable energy transition over the long term. Malaysia, which has had close
relations with and strong interests in Japan as indicated by its Look East policy in the past,
apparently hopes to learn some lessons from Japan’s initiatives. This may be the same case with theother members of the Association of Southeast Asian Nations or a wide range of Asian emerging
market and developing economies. In the following, I would like to summarize the key points of mypresentation and Malaysia’s (and other ASEAN members’ potential) interests in the Japaneseinitiatives, as indicated by the moderated discussion and the exchange of views.
In my presentation, I first explained the current situation in which Japan is trying to revise
its long-term Strategic Energy Plan amid the global decarbonization trend accelerating since 2020
while the COVID-19 pandemic exerts various impacts on international energy markets. Then, I
described what the Strategic Energy Plan is and pointed out key points for considering the sixth
Strategic Energy Plan now under development. The key points included the 2050 carbon neutrality
target announced in October 2020 and the April 2021 decision to raise the 2030 greenhouse gas
emission reduction target to 46% (from 26% at present target). I explained the history in which thesixth Strategic Energy Plan has been drafted to achieve the so-called 3E’s + S – energy security,environmental conservation and economic efficiency plus safety – under the GHG emission
reduction target decided in a top-down fashion.
I then described prescriptions to raise the GHG emission reduction target including theenhancement of energy efficiency improvement for increasing target energy savings by more than
20% and the modification of the target power generation mix. In the modification, the power mix
share is increased from 22-24% to 36-38% for renewable energy and cut from 27% to 20% forliquefied natural gas and from 26% to 19% for coal. The nuclear share is left unchanged at 20-22%
and a new share of 1% is set for hydrogen/ammonia. I noted that the modified target power mix is1

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designed to not only achieve the GHG emission reduction target but also to raise Japan’s target
energy self-sufficiency rate from 25% to 30% and cut electricity cost increase as much as possible.
Achieving the ambitious target power mix would represent a kind of a “fight against time”, I noted,
citing such difficult challenges as the promoted restart of nuclear power plants, the substantial
increase in energy savings and the dramatic rise in solar photovoltaics and other renewable energy
power generation within the next nine years. I also pointed out that substantial solar PV capacity
growth under constraints on suitable sites/land for such capacity and the dramatic enhancement ofenergy savings would lead to cost hikes. I argued that these challenges would have to be overcome.
As for the 2050 carbon neutrality target, I emphasized that electrification would have to bepromoted along with efforts to further improve energy efficiency, develop renewable energy into amajor electricity source, maintain and utilize nuclear power capacity and achieve zero emissions in
the power generation sector and that innovations such as the substantial expansion of CO2-free fuels
like hydrogen and ammonia and the introduction and utilization of negative emission technologies
would be indispensable along with efforts to cut costs for innovative technologies, diffuse thesetechnologies and develop relevant infrastructure. I then introduced a power cost analysis using
multiple scenarios as discussed at an advisory council at METI and emphasized that how to holddown power cost increase would be significant for Japan while uncertainty, unknown andunpredictability become keywords for the future pathway to carbon neutrality.
In discussions after my presentation, questions came about the roles of the government,
energy industry, society and citizens in realizing carbon neutrality. Then, the government was urged
to work out an adequate long-term strategy, depict a roadmap for realizing carbon neutrality,
implement regulations, market designing, rulemaking and guidance for the realization and play acentral role in promoting research and development in view of the significance of innovations. Theenergy industry was requested to identify changes in financial markets and market environments
amid the enhancement of climate change countermeasures, implement business strategies forsurviving such changes and make investment required for cutting GHG emissions. Society andconsumers were asked to transform their behavior for enhancing energy conservation and diffusing
clean energy toward preventing climate change and become prepared to accept costs for enhancing
climate change countermeasures.
A question came about recommendations to Malaysia and other emerging market ordeveloping economies in Asia that are seriously considering enhancing climate changecountermeasures, see the need for further economic development and growth, have unique energy
supply and demand conditions and view affordable energy prices as significant. I then noted thatJapan, as well as the European Union and the United States, is determined to make utmost efforts toreach carbon neutrality by 2050, has made strategic decision to give priority to preventing climatechange and believes that it is extremely important for Malaysia and other Asian countries to enhance
climate change countermeasures because climate change prevention serves global interests. I also
pointed out that emerging market and developing economies should steadily tackle decarbonization
under their realistic approaches based on their respective conditions and characteristics and that theAsia Energy Transition Initiative, which Japan offered at a meeting of Japanese and ASEAN energy
ministers to provide ASEAN countries with support for formulating specific roadmaps todecarbonization, is extremely significant for considering future decarbonization initiatives inMalaysia.
Regarding the significance of innovations for decarbonization, questions came about why
Japan emphasizes blue hydrogen and ammonia free from CO2. As CO2-free hydrogen and ammonia2IEEJ：August 2021©IEEJ 2021
can be produced with various methods, countries consider their respective strategies according totheir characteristics. I noted that Japan places hopes on blue hydrogen and ammonia from fossil fuels
due to high costs for producing hydrogen and ammonia from renewable energy in Japan and that it
has a strategy to become the world’s top runner in developing blue hydrogen and ammonia
technologies and that it would have to cooperate with Malaysia as well as the Middle East, Russiaand Australia in developing such technologies. The exchange of opinions regarding my presentationwas extremely interesting.

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