SUSTAINABILITY

Scale & Timeframe of Investment Related to Decarbonization

17 trillion yen (approx.) in 2030

Amount of investment

CLEAN ENERGYSTRATEGY
TO ACHIEVE CARBON NEUTRALITY BY 2050

Japan will draw out extensive investment
in areas of anticipated growth, such ashydrogen. The photos show FH2R
(Fukushima Hydrogen Energy ResearchField) in Fukushima–one of the world’s
largest hydrogen production plants (left),and a hydrogen refueling station and fuelcell buses operated by the Tokyo
Metropolitan Government (right).

The Japanese government issued an interim report on its “Clean Energy Strategy” in May. While aiming to achieve
the goals of carbon neutrality by 2050 and a 46% reduction in greenhouse gas emissions in fiscal 2030, further
growth will be achieved by ensuring a stable and affordable energy supply for the future.
Japan has accelerated the steps
taken to achieve decarbonization inorder to meet two ambitious goals– namely, carbon neutrality by 2050
and a 46% reduction in greenhousegases (GHG) in fiscal 2030.
However, while progress is underway,
the circumstances related to energy
security have been dramaticallyupended by the Russian invasionof Ukraine. It is crucial for Japan tostrive to reduce its reliance on Russia,
and to accelerate decarbonization,
while ensuring a stable supply ofenergy.
Ensuring energy security
Against such a backdrop, thegovernment issued an interim
report in May on its “Clean EnergyStrategy” so that taking measures tocombat global warming could leadto growth.
Firstly, it outlined a path to firmly
ensure Japan’s energy security andto accelerate decarbonization. A
short-term transition away froma reliance on Russia is necessary
for Japan to reduce its current
dependence. In addition to energy
diversification, the broadeningof procurement sources otherthan Russia is promoted throughthe government’s involvement in
LNG purchasing and so on. Also,
Japan, in cooperation with othermajor energy-consuming nations,will encourage energy producing
nations to increase output. A stablesupply of energy must be absolutelysecured, and on the premise of that,efforts toward decarbonization areaccelerated through “maximum
utilization of power sources withhigh security and decarbonizationsuch as renewable energy and nuclear
power.”
Reforms in economy, society andindustrial structure toward a carbonneutral society
Furthermore, the government
has stipulated such efforts
towards realizing an industrywide green transformation (GX)
for decarbonization to lead toeconomic development and growth,and upgrading social systems andinfrastructure to achieve GX on theinterim report. In order to shift toa society, economy and industrial
structure centered on clean energy, it
is anticipated that some 150 trillion
yen in investment will be required via
public and private partnerships overthe next decade.
As a framework for policy responses
to draw such investment, five pillars
have been outlined: (1) budgetarymeasures, (2) regulations and systems,(3) financial packages, (4) step-bystep development of the GX League,and (5) global strategies. Prime
Minister Kishida also stated thatabout 20 trillion yen of government
funds would first be raised in theform of GX Economic Transition
Bonds (tentative), backed up by
securing future financial resources,
with consideration given to quickly
directing such funds to support
investment. Further discussions will
be held to materialize these policyresponses.
Fiscal 2023 will see the fullscale launch of the GX League inJapan, enabling discussions acrossindustry, government, and academia

Expandinginvestment related
to decarbonization
15 trillion yen(approx.)
averageinvestmenta year

150 trillion yen (approx.)

Breakdown of
the 17 trillion yen (approx.)
Decarbonizationof power sources／ fuel transition

5 trillion
yen

Decarbonizationof manufacturing
processes

2 trillion
yen

End use4 trillion
yen

Infrastructure

4 trillion
yenR&D

2 trillion
yenover 10 years

The government’s financial aid
for investment in decarbonization
Early 2020sto implement all aspects of GX,
including emissions trading. During
the preparatory stage in fiscal 2022,
this was endorsed by 440 companies
that account for more than 40% ofJapan’s entire emissions. With the GX
League, participating companies set
their own emission reduction goalsconsistent with those of the country,
and annually disclose their reduction
efforts toward those goals. Then, if
their individual reduction goals set
by the companies are not achieved,
emissions will be traded between
participating companies or carbon
credits will be procured. The intent
is for the GX League to develop into2030s

a mechanism that stimulates reducedemissions and promotes investment.
The “Asia Zero Emissions
Community Initiative” as focusedon by the Kishida Administrationis one of the global strategies toenhance cooperation with other
Asian countries. Japan will strive
for cooperative decarbonization
acrossAsiabypromoting
joint demonstrations, international
investment, and establishing standards
for zero-emission technologies forbiomass, hydrogen, ammonia, carbon
capture, utilization and storage(CCUS), and so forth, while utilizing
the region’s credit markets. CREATING A GLOBALHYDROGEN SUPPLY CHAIN FORSUSTAINABLE ENERGY

PM Kishida, attending a ceremony to mark the completion of marine transport demonstration
tests of the world’s first liquified hydrogen carrier, stressed, “We must complete our structuralshift concerning energy, and establish a foundation for our future.”

The use of hydrogen as an energy source is considered
key to achieving carbon neutrality by 2050. Japan has
been quick to focus on hydrogen, as demonstrated
by its drawing up of a hydrogen utilization road map
in 2014 and being the first country in the world toformulate a national hydrogen strategy in 2017.
In February 2022, the world’s first liquified hydrogen
carrier successfully conducted its marine transport
demonstration tests. The vessel was loaded withhydrogen produced in Australia, which was thentransported back to Japan by sea. Upon returning
to the Port of Kobe, its cargo was off-loaded, thus
completing its first trial journey.
Japan aims to commercialize an international hydrogen
supply chain by producing hydrogen in bulk at low costin countries blessed with bountiful renewable energy
resources coupled with marine transport infrastructure.