Table of Contents
About this report

3

目次 Introduction

takeaways・バークレー国立研究所の報告書からの示唆
from the 2035 Japan Report
はじめに– Key― ローレンスby Lawrence Berkeley National Laboratory

4
1

サマリー

4

1.

4

Executive Summary

国家ビジョンとグランドデザイン

National vision
1-1. 1. 再エネ転換を基本にしたグランドデザイン

8

4

12

1-2.

目標強化と方針
・計画の見直し
5
1-1. A grand design
centered on a shift to renewables

12

1-3.

公正な移行戦略の策定

7

2.

政策措置

8

1-2. Ambitious targets and policy review
1-3. National strategies for a just transition

2-1. 適正なカーボンプライシングの導入

82-2. 2.
地域と共生する再エネの普及
Policy measures10

2-3. 再エネ大量導入のための柔軟な電力システム

122-4. 公平な競争に基づく電力市場や制度の再設計

132-1. Making carbon pricing more effective

16
20
22
22

2-2. Expanding renewable energy in ways that benefit communities
2-5. 洋上風力拡大のための環境整備
16

25

2-3.
Enhancing flexibility in Japan’s power system 18
2-6. 省エネ
・エネルギー効率向上の促進

282-7. エネルギー転換を後押しする財政措置
20
2-4. Redesigning power markets to encourage fair competition

31

おわりに

21

参考資料

22

2-5. Boosting offshore wind development
2-6. Improving energy efficiency

2-7. Using fiscal measures to support the energy shift

Conclusion

35
40
43
46

Columns
What is a Green Transformation (GX)?

15

Nuclear power in Japan19

JRE Sakata wind power station（Sakata city, Yamagata）

About this report
In this report, Climate Integrate proposes policy measures that would be needed to decarbonize
Japan’s power sector by 2035, based on a scenario developed by Lawrence Berkeley National
Laboratory. Through our partnership with Berkeley Lab, Climate Integrate gained valuable
insights. We express our deepest gratitude to the authors of the scenario, including Kenji
Shiraishi, Won Young Park, Nikit Abhyankar, Umed Paliwal, Nina Khanna, Jiang Lin, and Amol
Phadke, all at Berkeley Lab, and Toru Morotomi at Kyoto University. We are also grateful for
insightful comments by Kenji Shiraishi (Berkeley Lab), Yoh Yasuda (Kyoto University) and Hajime
Matsukubo (Citizen’s Nuclear Information Center) following their review of our report.

Authors: Kimiko Hirata, Chisaki Watanabe (Climate Integrate)

Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the ShiftIntroduction– Key takeaways from the 2035 Japan Report by Lawrence Berkeley National Laboratory

The 2035 Japan Report: Plummeting costs of solar, wind, and batteries can accelerate Japan’s
clean and independent electricity future,1 published by Lawrence Berkeley National Laboratory(Berkeley Lab), concludes that decarbonization of Japan’s power sector is achievable based on
the Clean Energy scenario.

The Clean Energy scenario

Capacities of offshore wind (24 GW for bottom-fixed and 19 GW for floating types) andstorage batteries (29 GW) will increase significantly toward 2035
Source: Berkeley Lab

Conclusions
The 2035 Japan Report by Berkeley Lab concludes that the Clean Energy
scenario is achievable by 2035 with a shift to a 90% clean energy system, andthat it would be dependable.
Key findings:• Strong policies are required to create a 90% clean grid by 2035
• Japan’s 90% Clean Grid is dependable without coal generation or new natural gas

14 he 2035 Japan Report: Plummeting Costs of Solar, Wind, and Batteries Can Accelerate Japan’ sTClean and Independent Electricity Futureplants• Electricity costs from the 90% Clean Grid are lower than today’s costs• 85% reduced fossil fuel imports and a 90% clean energy grid can significantly
bolster Japan’s energy security• Scaling-up renewables to achieve the 90% clean energy grid is feasible• Clean energy can cut electricity sector CO2 emissions by 92% (from 2020 levels)• Reaching cost-effective levels of clean energy generation will require overcoming
policy, market, and land-use barriers
Berkeley Lab’s report also proposes policies for the following:• Establishing medium-term policy targets (beyond 2030)• Accelerating renewable energy deployment and coal-fired power phaseout• Lowering institutional and societal barriers to rapid renewable energy
deployment• Pursuing a just energy transition through targeted assistance policies• Ensuring dependability, enhancing operational flexibility, and boosting energy
efficiency

A 90% decarbonization of Japan’s power sector by 2035 is possible
The Clean Energy scenario by Berkeley Lab shows that Japan can decarbonize 90% of its power
sector by 2035, and that the key will be the rapid and extensive deployment of renewableenergy, as their costs drop significantly. The scenario emphasizes that Japan can take fulladvantage of its abundant solar and wind resources to increase the share of renewables to
70% of power generation while maintaining a stable power supply and reducing electricity
costs. Berkeley Lab has conducted similar analyses of power sectors in the United States,
India, and China. The scenario for Japan is also aligned with the G7 Leaders’ Communiqueannounced in Elmau, Germany in June 2022,2 in which the leaders committed to achieving afully or predominantly decarbonized power sector by 2035.
With limited fossil fuel resources at home, Japan relies heavily on imported fuels, which accountfor about 85% of the primary energy supply,3 and this is why the country’s energy self-sufficiency
rate remains extremely low. Against this background, this Clean Energy scenario envisioning asignificantly reduced share of fossil fuels by 2035 - just 10% of Japan’s total power generation(gas-fired power only, no coal) - may sound ambitious. However, Berkeley Lab’s conclusion that
it is indeed feasible is momentous.

2

G7 Leaders’ Communique, June 28, 20223

 inistry of Economy, Trade and Industry Energy demand and supply for fiscal year 2021
M
(preliminary), November 22, 2022 (in Japanese).

5

Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the ShiftBenefits of decarbonizing 90% of Japan’s power sector by 2035
Japan would enjoy many benefits and it would be very significant if Japan were to make thescenario a reality. First of all, Japan would be able to break free of its dependence on fossil
fuels, which are a massive source of CO2 emissions. Damage from climate disasters is being
witnessed all over the world. Under guidance from the United Nations, countries are aiming
to limit the global temperature increase to 1.5℃ below pre-industrial levels to avoid further
loss and damage from climate change.4 The Earth’s temperature is rising with cumulative
CO2 emissions in the atmosphere, which means the remaining carbon budget is limited andthere are concerns we could exceed that limit within a matter of years. In order to stabilize
the climate, global greenhouse gas (GHG) emissions must be cut by more than half by 2030,
the emissions need to reach net zero by 2050, and short- and mid-term measures need to bestrengthened.5
Achieving this scenario would also help reduce electricity costs and improve Japan’s energy selfsufficiency. Fuel costs around the world jumped recently, pushing electricity bills up, as a resultof efforts to wean off Russian sources after Russia’s invasion of Ukraine in Feb. 2022.6 Japan’s
excessive reliance on fossil fuels poses a major threat to the stability of its energy supply andeconomy. It will continue to be exposed to geopolitical risks and saddled with concerns about
supplies and risks of rising energy prices. In contrast, renewable energy has advantages; it canbe produced using domestic resources and incurs no fuel costs.
The scenario presented by Berkeley Lab underscores the significance of shifting to a
decarbonized power system centered on renewables, to ensure energy security, avoid cost
increases, and protect our industries and civic life.

A shift to renewables is key: Nuclear and co-firing of hydrogen andfuel ammonia are costly
The scenario shows that costs of solar and wind power decline, while adding new nuclear
capacity and co-firing with hydrogen and ammonia at thermal power plants are not viableoptions for 2035 due to their high costs.
As a result, for Japan to decarbonize its power sector, an economically and environmentallysound and entirely viable option is to implement a steady but rapid expansion of wind, solar
and other forms of renewable energy while pursuing a swift phase-out of coal-fired power
and a reduction of gas-fired electricity generation.

Policy change is crucial for a speedy shift to renewables

6

4

U nited Nations Framework Convention on Climate Change (UNFCCC), Sharm el-Sheikh
Implementation Plan, November 2, 2022 Para 8.

5

Intergovernmental Panel on Climate Change (IPCC), Summary for Policymakers (SPM), 2021
(P.13, 27-29).

6

Electricity and Gas Market Surveillance Commission (EGC), Document on fuel costs, submitted
to a METI taskforce, January 11, 2023 (in Japanese).

Under the 90% Clean Energy scenario by 2035, the capacity of renewable energy needs toincrease from 188 to 254 GW between 2030 and 2035 and the capacity of storage batteries
needs to expand from 1.5 to 29 GW. To achieve such expansion, the government needs to adopt
national policies to shift to renewables and move away from fossil fuels. Therefore, it is crucial
to make policy changes to achieve the three following objectives through consensus building
among stakeholders, through democratic processes:
1. On the supply side, move away from fossil fuels and accelerate the deployment of
renewables
2. On the demand side, achieve higher energy efficiency and energy conservation
3. Develop a more flexible power system and upgrade infrastructure
The following is a set of policy proposals and accompanying recommendations to decarbonize
Japan’s power sector, based on Climate Integrate’s analysis of the Berkeley Lab scenario.

7
Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the ShiftDecarbonizing Japan’s Electricity System Policy Change to Trigger a Shift

Executive Summary
To achieve net-zero emissions by 2050, it is essential to strengthen

co-firing should not be promoted, and existing nuclear power

measures to tackle climate change, ensure a stable supply ofshould not be replaced. Instead, the government should aim toenergy, and realize a just transition. Decarbonization of the power

achieve 100% renewables.

sector is especially crucial. It is a sector that can accommodate
a rapid shift thanks to falling costs of solar and wind power, and3. National strategies for a just transition

decarbonization of the power sector can have ripple effects on

A dramatic shift to renewables in the electricity system would

other sectors.

mean the downsizing of the fossil fuel and nuclear powerindustries and a massive expansion of renewables-related

The Clean Energy scenario developed by Lawrence Berkeley

industries. In formulating national strategies, the government

National Lab shows that it is possible for Japan to decarbonize

needs to place an emphasis on policies for a just transition

90% of its power sector and reduce electricity costs by 2035,

for workers and a transformation of industrial structure. The

through a massive shift to solar and wind. To realize this shift,

government should support consensus-building with stakeholders

the government would need to overhaul its energy policies andto assess impacts on the local economy and employment,

significantly strengthen and/or change policy measures. In thisformulate support measures, and create new industries inreport, we present three key elements for a national vision andaffected regions, and should also provide fiscal measures for aseven policy measures that are essential if Japan is to achieve

just transition.

the Clean Energy scenario.

National vision
1. A grand design centered on a shift to renewables

Policy measures
1. Making carbon pricing more effective
Japan’s Tax for Climate Change Mitigation has been set at low

To align Japan’s climate change policy with the 1.5℃ goal of thelevels. The government plans to introduce full-scale emissions

Paris Agreement and the 2050 net-zero emissions target andtrading in fiscal year (FY) 2026, auctioning of emissions frommake the policy cost-effective, Japan needs to develop a grandpower plants in FY2033, and carbon emissions surcharges indesign and a roadmap to supply the electricity sector with 100%

FY2028, and plans to use revenues from these measures for the

renewable energy, then devise industrial policies and selectredemption of “GX Economy Transition Bonds.” We recommend

technologies accordingly. Formulation of such a grand designthat the government set the target price of at least 6,000

should be coordinated by the Cabinet Office with the aim ofyen/ton (CO2 equivalent), and accelerate plans for staged

policy integration among the many government ministries andincreases to reach that level, which is necessary to achieveagencies, while ensuring citizen participation in decision-making

the Clean Energy scenario. When introducing carbon pricing

processes.

policies, Japan should implement a carbon tax, rather thansurcharges (which lack public oversight through deliberation in

2. Ambitious targets and policy review

parliament). Revenues from carbon pricing need to be decided in

Given that the United Nations is calling for more ambitious

a fair, transparent way, and the majority should be redistributed

targets for 2030 and that Japan has great wind and solar

through measures such as direct dividend and reductions in

potential, Japan needs to strengthen its 2030 targets forsocial security taxes.

GHG emission reductions and share of renewable energy. It
the power generation mix to 50% or higher by 2030, and 85%

2. Expanding renewable energy in ways that benefit
communities

or higher by 2040, with a lofty goal of 100% renewables byRenewables are a distributed energy source that can be developed

2040. Policy targets should include a phase out of coal-fired

and utilized by regional communities. However, many local

power. Such a phase out is essential to realize the Clean Energy

governments in Japan have introduced ordinances to rein in solar

scenario. There also needs to be a staged reduction of gas-fired

and wind developments, in response to opposition to inappropriate

power generation, and a ban on new construction of gas-fired

projects. It is important to notify and engage in dialogue withpower plants. As they are not aligned with the Paris Agreement

local residents at an early stage of proposed renewables projects,

and are not economically justifiable, hydrogen and ammonia

in order to build consensus and facilitate the massive expansion

should aim to increase the share of renewable electricity inof renewable energy. The government should ensure that fullenergy-intensive industries to offshore wind power producing

information is available to the public and that local residents are

regions. Policy work across multiple ministries should be better

part of the development process. It should also build frameworks

consolidated in order to expedite procedures and boost efficiency.

for central-government-led zoning to promote renewables,and schemes for circulating benefits and revenues within the

6. Improving energy efficiency

community, and support community-led power generation

Energy saving and efficiency are as important as production, andprojects.

they both contribute to decarbonization. The Energy Efficiency
Act and the Building Energy Efficiency Act were enacted to

3. Enhancing flexibility in Japan’s power system

reduce users’ energy intensity, with a focus on mandatory

Due to the variability of solar and wind output, a flexible

reporting, but more effective measures are needed. Carbon

electricity system is a prerequisite for a massive expansion

pricing is an effective way to boost energy efficiency in society

in renewable energy. To better manage electricity supply andand the economy as a whole. Additional measures and better

demand, the government needs to update its current curtailment

implementation are needed to improve energy efficiency in therules to a new framework that prioritizes electricity sourcesindustrial, building, and transportation sectors.

that make economic sense. Japan’s power grid needs physicalupgrades, and there is a need to improve the management of

7. Using fiscal measures to support the energy shiftexisting transmission lines with rule changes and technologies.

Multiple government ministries and agencies have budgets relating

Japan should also improve the ability to further control demand

to decarbonization, and subsidies are available for technology

and supply by integrating measures and technologies such as

development through the Green Innovation Fund. Based on

output adjustment, cross-region transmission, demand response,

estimates that Japan’s decarbonization efforts will require 150

power storage and sector coupling.

trillion yen in public and private investment over the next decade,the government plans to issue 20 trillion yen in “GX Economy

4. Redesigning power markets to encourage faircompetition

Transition Bonds.” All these measures should be cost effective andJapan has several electricity markets, and their increasing

both of those criteria into account to assess each budget request

complexity calls for a better environment for new entrants

and fiscal expenditure. Fiscal support for a just transition andto trade electricity under fair conditions. The types of “long-climate tech should also be provided.

aligned with the Paris Agreement. The government should taketerm decarbonized electricity” to be auctioned on the capacity
market include co-firing with fossil-fuel-derived hydrogen andammonia, as well as liquefied natural gas (LNG) power (newly

To realize the Clean Energy scenario presented by Berkeley Lab,

built). The government should reconsider its plan to introduce

Japan would need to swiftly implement the policy measuresa long-term decarbonized electricity auction, and insteadsummarized above. It is our hope that this report will contributeredesign the mechanism to secure capacity. It should redesign

to the implementation of policy changes by policymakers and civil

the power market to be fairer by starting discussions aboutsociety.

unbundling the sales and generation units of Japan’s ten major
utilities, increasing trading volumes on the spot market, andintroducing negative pricing.

5. Boosting offshore wind development
Offshore wind power generation must expand if Japan is to shift
to renewables. To do so, Japan needs to set ambitious targets
for floating offshore wind, accelerate grid development toconnect regions that have abundant wind resources with areasthat have high electricity demand, and adopt a centralized
approach as soon as possible for government engagementwith local communities. The country also needs to develop
domestic supply chains and offshore wind ports, and attract

Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the ShiftDecarbonizing Japan’s Electricity System Policy Change to Trigger a Shift

10 Recommendations
Vision 1

Grand Design

Vision 2

Grand Design

MeasuresAmbitious Targets

Ambitious Targets●1.5℃ aligned design●Intra-agency coordination●GHG reductions &renewables targets●Industrial policies●Citizen-participation●5-year target cycle●Cost-effective
technologies●Clear roles for national,
subnational governments●Sectoral targets

Policy Review

Just Transition Strategies
Dialogue

National Strategies●Impact analysis●Consensus building
among stakeholders●Support for affectedareas and workers●Nuclear: ban on new
construction

Proposal 1

Effective Carbon Pricing

Incentives forEnergy Efficiency,
Renewables

Implementing Carbon
Pricing Schemes●Higher prices●Creation of green
industries

Proposal 2●Gas-fired power:
ban on new construction●Hydrogen & ammonia:
reconsideration of policies●Budget and fiscal measures

Vision 3●Coal-fired power:
phaseout●Fair and transparent use of revenues

Financial Support

Renewables for Communities

Utility-scale
Solar, Wind Power●Carbon dividends, support for just transition

Proposal 3

Flexibility in Power System

Rooftop Solar,
Micro Hydro●Information disclosure, community participation●Zoning

MarketMechanism

Grid
Management

Grid Flexibility

Sector Coupling●Community-led power projects

Proposal 4

Redesigning Power Market

Capacity
Market Reform
Separation ofGeneration andRetail Units

Proposal 6

Trading on
the Spot Market
Fair Burden
Sharing
Negative
Pricing

Energy Efficiency

Industries●Review of energy
efficiency
standards●Emissions trading
scheme andcarbon tax●Energy saving
consultants

Buildings●Tougher
standards●Mandatory PV for
new buildings●PV, insulation forexisting buildings

Proposal 5

Boosting Offshore Wind

Floating
OffshoreWind Target

Transmission
Lines

Port
Development

Proposal 7

Centralized
SystemLocal
Electricity
Consumption

Domestic
Procurement

Centralized
Tasks and
DutiesFiscal Measures

Transportation●2035: newgasoline-powered
car sales end●Bikeable, walkablecommunities●Efficient freighttransport

Paris-aligned,
Cost-benefit
Analysis

Just Transition
SupportInvestment in
Climate Tech

Hakuba village, Nagano

11
Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the Shift1. National vision
1-1. A grand design centered on a shift torenewables
Vision 1

Grand Design

Grand Design

Measures●1.5℃ aligned design●Intra-agency coordination●Industrial policies●Citizen-participation●Cost-effective
technologies●Clear roles for national,
subnational governments●Budget and fiscal
measures

To achieve net-zero emissions by 2050, Japan would need to further strengthen its climatechange measures, ensure a stable supply of energy, and realize a just transition, and the key toall of that would be to prioritize the decarbonization of the power sector over other sectors.
This is a sector that can accommodate a rapid shift thanks to falling costs of solar and wind
power. Decarbonization of the power sector can have ripple effects on other sectors. The
Japanese government needs to declare that it will undertake a bold shift to create a powersystem centered on renewables in order to achieve carbon neutrality, and then present a granddesign and industrial policy to achieve the energy shift.

Current status
The government has compiled several long-term strategies and roadmaps in line with its
target to achieve carbon neutrality by 2050. It has set emission reduction targets and apower generation mix for 2030 and policies for each sector. Japan has declared a target of
reducing GHG emissions by 46% by 2030 from 2013 levels, and that it would make an effort
to achieve 50%. By 2030, renewables are to account for 36% to 38% of Japan’s power
generation mix, according to the government outlook. The government says that to theextent possible it will prioritize and expand the use of renewable energy as a main powersource.7 But it has yet to indicate a pathway for the power generation mix beyond 2030.8
The Green Growth Strategy, announced in 2021, identified 14 priority areas. Althoughrenewable energy is included, the others are heavy in technologies that still have little

12

7

METI, Sixth Strategic Energy Plan, Oct. 22, 2021

8

In December 2020, a government taskforce (in Japanese) presented “reference” values for the
power generation mix in 2050, with renewable electricity accounting for about 50 to 60%,
hydrogen and ammonia about 10%, and the remaining 30% to 40% from nuclear and fossil fuels(combined with CCUS and carbon recycling). The Sixth Strategic Energy Plan, published later,
mentioned these “reference” values, saying that any electricity source obviously has issues, so
multiple scenarios are needed for 2050.

Chart.1 National policy and a grand design

MiningNature Positive

World

World
CO 2

nuclear

CentralizedWork

PeopleSystemic
ChangeDisparity

Energy Intensive

Work

Distributed

PeopleFairness

Local Circulation
both-way
ﬂexibility
storageone-way
baseload

Unequal Society

Governance

wind

solar

Just Transition

thermalFossil Fuels

Equal Society
Renewables

Governance
Citizen Participation

Top-down

prospect of commercial viability in the foreseeable future, such as carbon capture,utilization and storage (CCUS), nuclear fusion, and next-generation nuclear reactors.9
As for the Green Transformation (GX), the cabinet approved the GX Basic Policy” 10 in February
2023, along with a companion roadmap11 for the next decade, with the goal of achieving a “green
transformation” in Japan. The government said that it will expand renewable energy andinstall more storage batteries. However, it also said that the service life of nuclear reactors
could be extended by not counting the periods they are offline, and to develop and constructnext-generation nuclear reactors. The roadmap makes no mention of the power generation mix
beyond 2030 and no detailed emissions targets for each sector. Essentially, Japan has not yet
presented a pathway to achieve carbon neutrality by 2050 in any of its strategies and plans.

Proposals
Japan’s economy and society will be hard hit and our national security shaken if climate change
continues to worsen. The government needs to prioritize decarbonization, end its reliance on
fossil fuels - the biggest contributor to global warming - to help achieve global goals to keep
the temperature rise under 1.5℃ and focus on making Japan’s economy and society sustainable
and prosperous while utilizing domestic natural capital.
A priority should be placed on decarbonization of the power sector, as that is crucial todecarbonize other sectors as well. A government roadmap is needed to improve energy

9

METI, Green Growth Strategy, June 18, 2021

10

Government of Japan, GX Basic Policy, February 10, 2023 (in Japanese).

11

Government of Japan, Roadmap for GX Basic Policy, February 10, 2023 (in Japanese).

13

Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the Shiftefficiency and reduce energy consumption, making full use of domestic renewable resources
to supply 100% of the electricity needed in Japan by 2040, and ensuring that energy-related
policies are integrated across the board.
A national grand design for a shift to renewables would include:• An energy shift aligned with the 1.5℃ goal, incorporating greater energy efficiency,
massive deployment of renewables, and a move away from fossil fuels• Industrial policies for an energy transition (to foster new industries, develop domestic
supply chains and markets)• Selection of technologies that are effective in reducing emissions and cost-effective
A structure to implement the grand design would include:• Improved coordination under the Cabinet Office, and policy integration among all
government agencies• Participatory and democratic decision-making processes for policy formulation• Clarification of roles for national and subnational governments• Budget allocations and fiscal measures aligned with the 1.5℃ goal

14

What is a Green Transformation (GX)?
Japan defines Green Transformation (GX) as an overarching system reform of Japan’s
economy and society to achieve emission reductions and enhance its industrial
competitiveness.12 GX is one of the key investment areas in the government’s “Grand
Design and Action Plan for a New Form of Capitalism” (Cabinet Decision, June 2022) andthrough it the government aims to mobilize about 150 trillion yen in GX investmentsfrom public and private sources. In February 2023, the cabinet approved the GX Basic
Policy13 for green transformation aiming to break away from an excessive reliance on
fossil energy, promote energy efficiency measures and the energy shift in industries
on the demand side, and to maximize the use of renewables and nuclear energy, bothof which the government claims can contribute to energy security and are effective indecarbonization on the supply side.
Examples of specific measures include the use of hydrogen and ammonia derived
from fossil fuels for thermal power, as well as CCUS. To implement these measures,the government plans to issue about 20 trillion yen worth of “GX Economy Transition
Bonds” to support investment (the ordinary session of Diet is expected to deliberate
the related legislation during 2023).

Minamiyokohama LNG thermal power station（Yokohama city, Kanagawa）

12

METI GX League Basic Concepts, February 1, 2022 (in Japanese).

13

Government of Japan, GX Basic Policy, February 10, 2023 (in Japanese).

15

Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the Shift1-2. Ambitious targets and policy review
Vision 2

Ambitious Targets

Ambitious Targets

Policy Review●GHG reductions &renewables targets●Coal-fired power:
phaseout●5-year target cycle●Gas-fired power:
ban on new construction●Sectoral targets●Hydrogen & ammonia:
reconsideration of policies●Nuclear: ban on new
construction

Numerical targets would be a key element for any grand design. Japan has abundant renewable
resources, such as wind and solar. According to estimates by the Ministry of the Environment(MOE), Japan’s potential for commercially viable wind and solar power is more than double
the country’s current annual power generation. That abundance should allow Japan to set
ambitious targets for renewables.14

Current status
Japan’s national target for GHG emission reduction is a 46% to 50% cut by 2030 from 2013
levels. Under the Sixth Strategic Energy Plan to achieve the reduction target, Japan’s outlook
for the renewable energy share in the power generation mix is 36% to 38% by 2030. The
outlook for the share of renewables are low compared with global outlooks presented byinternational organizations. 15 Japan has yet to set any target or outlook beyond 2030 andthis results in a lack of incentive to scale up renewables.
Coal- and gas-fired power are to account for 19% and 20%, respectively, in Japan’s power
generation mix in 2030, according to the Sixth Strategic Energy Plan. Under current policy,
coal-fired power generators are required to achieve a generation efficiency of 43% or higher
as a measure for Japan to “fade out” inefficient plants by 2030.16 But separate policies allow
coal-fired power plants to mix coal with fuels that have lower emissions, such as biomass,hydrogen and ammonia, to achieve the 43% efficiency target. Furthermore, hydrogen andammonia are categorized as non-fossil energy, even though in practice they are derived from

16

14

MOE, Japan's potential for renewables, April 2022 (in Japanese).

15 or example, a report by the International Energy Agency(IEA) Net Zero by 2050 A Roadmap
F
for the Global Energy Sector presented a global scenario of 60% renewables in 2030, October
2021 (P.115).

16

 ETI Working Group on coal-fired power, Advisory committee for natural resources and energy
M
Interim report, April 23, 2021 (in Japanese).

fossil fuels.17 Several studies have found that any reductions of CO2 emissions achieved
through co-firing of hydrogen and ammonia would be extremely limited and costly.18, 19, 20
These conflicting policies add uncertainty prospects for the overall reduction of coal power inJapan. The government also plans to promote the construction of new gas-fired power plants
based on the assumption that they will later co-fire with hydrogen or fire hydrogen alone tosupply power.21 The push for co-firing with hydrogen and ammonia at thermal power plants
and CCUS technologies was also evident in the GX Basic Policy, making Japan one of few
developed nations without a coal phase out plan.22
As for nuclear power generation, in the GX Basic Policy the Kishida administration unveiled its
intentions to extend the service life of currently operating units, restart reactors that havebeen halted, and develop and construct next-generation reactors. This revelation indicatesa move away from policies to reduce the country’s nuclear reliance that were introduced
following the 2011 Fukushima nuclear disaster.

Proposals
Setting ambitious targets for emission reductions and renewables
The U.N. has been calling on governments to strengthen emission reduction targets for 2030
to close the gap between anticipated emission levels in 2030 and levels consistent with a 1.5℃ goal.23 Taking into account the feasibility of a decarbonized power sector as presented in
the Clean Energy scenario, Japan should strengthen its targets for GHG emission reductions
and increase the share of renewable electricity for 2030, and set targets for every five
years through 2050. Reduction targets also need to be set for the electricity/heat, industry,transportation, commercial and residential sectors.

Reconsidering policies for hydrogen and ammonia co-firing, CCUS and nuclear
powerCoal-fired power: Phase out. Make the decision to phase out coal by 2030 and develop
a plan to do so.

17 ith a revision in May 2022, the government set a policy of promoting the use of hydrogenWand ammonia as “non-fossil energy source” under the Act on Sophisticated Methods of Energy
Supply Structures.

18

TransitionZero, Coal-de-sac: Advanced Coal in Japan, February 14, 2022

19

Climate Integrate, Getting Lost on the Road to Decarbonization: Japan's Big Plans forAmmonia, June 30, 2022

20

B lo o m b e rg N EF, Ja p a n’s A m m o nia- Co al Co - Firin g Strate g y a Co stly A p p ro a ch to
Decarbonization, Renewables Present More Economic Alternative, September 28, 2022

21

Agency for Natural Resources and Energy (ANRE), Auctions of long-term decarbonized powersources, November 30, 2022 (P.7) (in Japanese).

22

E3G Coal Transition Progress Tracker, OECD & EU Countries

23

UNFCCC Sharm el-Sheikh Implementation Plan, November 2, 2022, Para 20, 23, 29.

17
Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the ShiftTable 1. Reduction target proposals
Year

2030

2035

2040

2045

2050

GHG emission
reductions

At least
- 60%

-70%

-80%

-90%

Net zero

Share of renewableelectricity ingeneration mix

At least
50%

At least
85%

Nearly100%
Prepared by Climate IntegrateGas-fired (LNG) power: Gradually reduce existing capacity, ban new construction.
Power generated from gas-fired plants should be reduced significantly and the use ofgas-fired power needs to be limited to dispatchable power sources to address supply
fluctuations. Construction of new plants should be banned, as there is no need for new
capacity. Existing plants should be gradually phased out.
Hydrogen and ammonia co-firing: Reconsider. Fundamentally reconsider policies
for co-firing with hydrogen and ammonia at thermal power plants. They are high-cost
options, whereas the costs of solar and wind power are falling and economically viableoptions.
Nuclear power: Ban new construction, phase out existing plants. There is no
economic rationale for massive spending on new nuclear capacity instead of solar andwind, which are low-cost and have vast potential. There are safety issues with restarting
old nuclear reactors, and building new capacity presents challenges such as high costs andlong planning horizons, so new construction is a highly unlikely option. Instead of replacing
old nuclear plants with new ones or add new capacity, Japan should phase out nuclear
and increase the share of decarbonized electricity by promoting energy efficiency andrenewables.

18

Nuclear power in Japan
Berkeley Lab’s Clean Energy scenario does not count any new nuclear construction
or replacement, as they are not considered to be economically viable options due tochallenges such as obtaining permits and local acceptance, long construction periods, andhigh generation costs compared with solar and wind power. The scenario assumes, however,that nuclear power will still account for approx. 20% of Japan’s power generation mix in
2035, based on the assumption that under current policy the government will maintaina portion of nuclear capacity by restarting idled reactors and extending their operating
lives.
The Low Nuclear scenario assumes that reactors will be decommissioned at 40 yearsof service, leading to a decrease of 8 GW of nuclear capacity and an increase in thecapacities of offshore wind and battery storage, without impacting the reliability ofsupply. Costs may be marginally higher than the Clean Energy scenario, but still lower thancosts in 2020.
Restarts of nuclear reactors are not likely to go according to plan as they will facedifficulties, considering negative public sentiments toward nuclear power, opposition
from host communities, and safety risks associated with aging reactors. Nuclear power’s
contribution to decarbonization will also be limited, given that the share of nuclear in the
power generation mix will inevitably drop after 2035 with decommissioning of old units.
Therefore, the quick but reliable path to decarbonization would be to move ahead with thedecommissioning of nuclear reactors, while quickly raising the share of renewables in the
power sector to 100%.
Nuclear power incurs massive costs for maintenance when reactors are offline, safetymeasures, the decommissioning of reactors (as at the Fukushima nuclear plant), and thedisposal of spent nuclear fuel. It is difficult to justify investing in nuclear power whenmore promising options for investment are available.

Sendai nuclear power station（Satsumasendai city, Kagoshima）

19
Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the Shift1-3. National strategies for a just transition
Vision 3

Just Transition Strategies
National Strategies●Impact analysis●Support for affected areas
and workers

Dialogue●Consensus building among
stakeholders●Creation of green industries

Financial Support

A dramatic shift to renewable power would lead inevitably to the downsizing of the thermal andnuclear power industries and an expansion of renewables-related industries. A just transition24
for structural changes in industries and supply chains as well as employment is a key focus forachieving decarbonization globally,25 and Japan also needs to address these issues. Strategies
for a just transition would serve as an important employment policy.

Current status
Japan’s Long-Term Strategy under the Paris Agreement, released in October 2021, refers
to a just transition in this way: “The Government, local authorities and companies as wellas financial institutions will work together to provide vocational training to the workforce,
support for diversification and shifts in business operations, support for inviting new businessand replacement of the labor force, in order to achieve the transition of the workforce to a
decarbonized society smoothly and without delay. Such efforts also include support to local
societies and economies for their smooth transitions,” 26
Meanwhile, the government’s Green Growth Strategy and GX Basic Policy detail support forhydrogen and ammonia co-firing in thermal power generation as well as CCUS pilot projects.

20

24

 just transition is possible through participation by all stakeholders in dialogue, by givingApeople in communities a say in choices and ensuring that workers have meaningful jobs andstable incomes, in order to leave no one behind in the transition to a decarbonized society. It
is also crucial to promote the diversification of a sustainable economy at local, regional andnational levels, and to strengthen the resilience of communities. The preamble to the Paris
Agreement acknowledges “the imperatives of a just transition of the workforce and thecreation of decent work and quality jobs.”

25

For example, Canada and Spain have strategies for a just transition while the European Union
has set up a fund for a just transition to provide support measures for regions that rely
heavily on fossil fuels. References: Kiko Network “Just transition” (2021, in Japanese), andWorld Resources Institute “Just Transition and Equitable Climate Action Resource Center.”

26

Government of Japan The Long-Term Strategy under the Paris Agreement, October 2021.

However, they fail to provide specific measures needed for a just transition that would bemade necessary by the energy shift, which would include closures of thermal power plants.
Local governments in communities that currently host thermal and nuclear power plants have
yet to get a grasp on how the transition will impact their local industries and employment.

Proposals
A just transition would involve recognizing the importance of establishing measures and building
sustainable communities by implementing the following policy measures.
A national strategy for a just transition: A national just transition strategy for industries
and workers should be established to avoid adverse effects of the shift to renewable power
and to revitalize local economies. Such strategy would include the following actions.
• Conducting a nationwide survey on impacts on host communities, economies, and employment
from the decommissioning of power plants and related facilities• Establishing support measures such as job training, career change assistance, andunemployment compensation, in the most affected areas and for workers at risk oflosing jobs
• Fostering decarbonization industries in impacted areas, such as infrastructure development
and manufacturing in solar, offshore wind, batteries, and EVs, as well as human resources
training
Opportunities for dialogue: Consultations for consensus-building need to take place between
national and local governments, businesses, factories, labor unions, citizens and NGOs.
Financial support: The national and local governments should provide financial support toimplement policies associated with just transition strategies.

21
Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the Shift2. Policy measures
2-1. Making carbon pricing more effective
Proposal 1

Effective Carbon Pricing

Incentives forEnergy Efficiency,
Renewables

Implementing Carbon
Pricing Schemes●Higher prices●Fair and transparent use of revenues●Carbon dividends, support for just transition

Current status
In October 2012, Japan introduced the Tax for Climate Change Mitigation, equivalent to acarbon tax, on top of the existing Petroleum and Coal Tax. The rate of this tax is still currently
289 yen/t-CO2, which is low compared with other countries (Chart 2). As for emissions trading,Japan has no nationwide program, but the Tokyo Metropolitan Government and Saitama
Prefecture have launched their own emissions trading schemes.
Following instructions from then-Prime Minister Yoshihide Suga in December 2020,27 theMinistry of Economy, Trade and Industry (METI) and Ministry of the Environment (MOE)separately started discussions on carbon pricing schemes, such as carbon tax and emissions
trading.28, 29 Through that process, METI launched the Green Transformation (GX) League,
a forum of hundreds of companies, and started a pilot for voluntary emissions trading in
September 2022.30 According to the GX Basic Policy approved by the cabinet in February
2023, the government plans to start full-scale emissions trading in FY2026, to introduce
the auctioning of emissions from power generation companies in FY2033, and carbon
emissions surcharges in lieu of carbon taxes in FY2028.
The government plans to issue “GX Economy Transition Bonds” of about 20 trillion yen
over the next ten years and use revenues from carbon pricing schemes such as emissions
trading and surcharges for the redemption of the bonds. It intends to issue the bonds toraise funds for investments in large-scale projects for the development of technologies
promoted by the GX Basic Policy. There are concerns that this scheme would benefit only
the companies involved in those projects, and that it would not pass on revenues from

22

27

METI Summary of a press conference by minister Kajiyama, December 21, 2020 (in Japanese).

28

METI Study group on financial means to achieve carbon neutrality (in Japanese).

29

MOE Subcommittee on the utilization of carbon pricing (in Japanese).

30

 apan Exchange Group (JPX) News Release JPX commences carbon credit market demonstration,
J
September 22, 2022.

carbon pricing to Japanese society as a whole.

Proposals
Carbon pricing is a financial scheme to reduce CO2 emissions by putting a price on emissions
and using the economic effects of price incentives. The concept has gained support as ameans of achieving decarbonization targets, and a quick implementation of carbon pricing
policies with appropriate design is needed. In order to reduce CO2 emissions by promoting
energy efficiency measures and expanding renewables, the government needs to provide
price incentives at appropriate levels to rein in overall emissions. Revenues generated fromcarbon pricing policies such as taxes and cap-and-trade can be given back to society andused to pay for decarbonization efforts.
• Prompt carbon pricing schemes: The government should start emissions trading earlier
than the planned year of 2026. Instead of the surcharges the government is considering
to introduce in FY2028, legislation should be prepared and passed by Diet to introduce
a carbon tax sooner in order to put an appropriate price on emissions and decide on fairusage of revenues.
• Setting higher prices on emissions: Following the Clean Energy scenario, through a
combination of raising the rates of existing tax schemes, introducing emissions trading(”cap and trade”), and implementing a full-fledged carbon tax, the price on carbon shouldbe raised to the equivalent of 6,000 yen/t-CO2 by 2035 or higher.
• Fair and transparent use of revenues: The use of revenues from carbon pricing
instruments should align with the grand design, be deliberated by Diet, and decided infair and transparent processes.
• Revenue redistribution and support for a just transition: Higher carbon prices would
have a regressive effect in terms of a greater burden on lower income earners. Revenues
from carbon pricing schemes should be redistributed to the Japanese people throughmeasures such as carbon dividend and reduction in social security taxes. A priority should
be given to providing support for a just transition for regions and workers impacted bydecarbonization. If revenues are to be used for the redemption of “GX Economy Transition
Bonds,” their use should be limited to measures that are cost-effective and expected to havea real effect in reducing emissions by 2035.

23
Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the Shiftssa Poch lan
Sh uset den tszh
Ka Ukr en
za ain
kh e
st
Fu an
jia
n
Sin
ga
po
Me re
x
Tia icon
To jinky
Co Chi o
Ar lombleg
Ch ent ia
on inagq
Be ing
iji
Hu ng
b
Ch ei
S
So ha ina
ut ng
Guh Af hai
an ricgd ao
Ta R ng
ma GG
uli I
p
Sp as
La ain
tv
Br
Ko ia
iti
sh Slo rea
Pri Unit Co ven
nce ed lum ia
Ed Kin bia
wa gd
rd om
Po Islan
rt d
D
No
e uga
Ca nma lrth
lif rkweorst
Te Qué nia
rri bect
Ge orierm s
Ice any
Ca landNew N
fou ew A nad
ndl Br lbe aand un rt
Sa and swi a
sk Lab ck
at ra
ch dorBrew
itis
New N h Ca anCfou ew ol nad
ndl Br um aand un bi
an sw aLu d Lab ick
xe radmb oro
Ne Ire urg
th la
er nd
l
Ne F andsw ra
Sw Zea nce
itz lan
er d
Eu
la
ro
pe Finl nd
an an
Un d
Un
ite No iondr
S Kin way
Liewitz gdo
ch erl mte an
ns d
Sw teinUr eden
ug
ua
y

Ma

Carbon price (USD/tCO2e)

24
100

80

60

40

0
2030 carbon price corridor

Chart 2. Carbon prices as of April 1, 2022

140
Carbon tax
ETS
Others

20

<1 1
1
1

31
1
2
2
4
4

130

120

59-85

28-43
19-34
40 40 40 40 40 40 40 40 40

0.4-3.7

4
5
5
5
6
7
7
9
9 10
13 14
15
17 17
19 19 20
24 24

World Bank State and Trends of Carbon Pricing, May 24, 2022.
46
49
9-88
99

87

37-45
64

53

22-27
33
31 31 32

26

Japan
Prepared by Climate Integrate from World Bank materials31

Kaya wetland（Toyooka city, Hyogo）

2-2. E xpanding renewable energy
in ways that benefit communities
Proposal 2

Renewables for Communities

Utility-scale
Solar, Wind Power

Rooftop Solar,
Micro Hydro●Information disclosure, community participation●Zoning●Community-led power projects

Current status
Renewables are a distributed energy source that can be developed and utilized through local
initiatives. However, 224 local governments (about 13% of Japan’s local governments) haveintroduced ordinances to rein in renewable energy developments in the face of some solar
and wind projects that were not implemented appropriately.32 In some regions with plans andpotential for offshore wind farms, local residents have expressed concern and opposition.
Information on individual renewables projects that have received government approval to sellelectricity under the feed-in tariff (FIT) program is publicly available on METI’s website.33
However, information on applications for renewables projects is only made available to the
local governments concerned. Government policies require developers to “make an effort” tonotify local residents about their projects at an early stage of planning.34 Such requirements
are not legally binding, and residents sometimes learn about a new project only whenconstruction is about to begin. In October 2022, a METI taskforce on the proper installationand management of renewable energy projects compiled a set of proposals and urged thegovernment to consider making it mandatory for proponents to notify residents of renewableenergy projects of a certain size by certain measures, including holding information sessions
for residents.
In June 2021, the government compiled a “roadmap for regional decarbonization,” presenting
steps and measures to be taken for regional development by local communitiesup to 2030.

32

 esearch Institute for Local Government Local ordinances regarding solar power generationRequipment, accessed January 13, 2023 (in Japanese).

33

ANRE Application site for feed-in tariff programs (in Japanese).

34

M
 ETI Taskforce proposals on appropriate installations and management of renewable energy
equipment October 2022 (in Japanese).

25

Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the ShiftIt also plans to designate at least 100 “Decarbonization Leading Areas” 35 across Japan, with46 of them announced in 2022.
At the municipal level, a revision to the Act on Promotion of Global Warming Countermeasuresin 2021 allows cities, towns and villages to designate “promotion zones” for decarbonization
projects. In these zones, developers of local renewable energy projects are eligible forpreferential measures to streamline the development process.36 Japan currently has two
promotion zones and more are under consideration by about 20 municipalities.37 These measuresare expected to contribute some progress being made. However, their impacts will likely belimited, as they are not based on any long-term plan beyond 2030.

Proposals
The shift to renewables requires not only building large-scale wind and solar farms in areas
with vast potential, but also scaling up rooftop solar which can be installed nearly anywhereacross Japan, as well as small hydropower and biomass electricity generation to take advantage
of local resources. Regardless of the size of project, there should be systems to notify local
residents about renewables projects and facilitate dialogue from an early stage of planning, inorder to build consensus and facilitate a rapid energy shift to renewables.
• Full information disclosure and community participation: The government should
develop mechanisms that allow local residents to obtain information and provide theircomments on renewables projects from early stages of planning, hold consultations, andresolve disputes.
• Central government-led zoning for renewable energy, and sharing benefits
with communities: The central government should develop a mechanism to take thelead in designating areas to promote renewable energy across the country throughcoordination with local governments.38 Once the mechanism is in place, the selectionof “Decarbonization Leading Areas” by MOE and designation of “Promotion Zones” forrenewables by municipal governments can be done more efficiently to deploy renewables.
When selecting such leading areas for renewable energy, upgrade plans for local grids
should be taken into account in order to ensure the renewable electricity generated isused efficiently. Systems should also be established to redistribute some of the revenues
from renewables projects back to these designated zones.
• Support for community-led projects: Obstacles need to be removed for power

26

35

D
 ecarbonization Leading Areas, according to MOE, are intended to achieve net-zero CO2emissions from electricity consumption in residential and business sectors by FY2030.
They are also to make efforts to achieve reductions in other GHG emissions such as fromtransportation and heat use at levels that are aligned with Japan’s FY2030 reductions target
and local characteristics.

36

M
 OE Measures for renewable projects that can benefit communities, April 2022(P.6) (inJapanese). Preferential measures include a streamlined process to receive approval and ashortened environmental impact assessment process at early stages of planning.

37

MOE Toward 2050 carbon neutrality, November 9, 2022 (P.30) (in Japanese).

38

MOE has published a manual on zoning for wind power (in Japanese), but not yet for solar.

projects developed by communities and municipal governments, to ensure faircompetition for their entry, continuation, and expansion in electricity markets.
• Speedy introduction of a centralized system for offshore wind development (See 2-5)

Solar Sharing（Toyooka city, Hyogo）

27
Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the Shift2-3. Enhancing flexibility
in Japan’s power system
Flexibility in Power System

Proposal 3

Market Mechanism

Grid Management

Grid Flexibility

Sector Coupling

Current status
Since the start of the feed-in tariff program in July 2012, Japan’s renewable energy
development has been led largely by solar power. To expand variable power sources such as
solar and wind, there is a need for measures to maintain balance between electricity demandand supply. Japan has introduced curtailment, which requires power producers to reduce orhalt electricity production, in accordance with priority dispatching rules. Under curtailment
rules, power production is reduced in this sequence: (1) thermal power, pumped hydro → (2)biomass → (3) solar, wind → (4) nuclear, hydro, geothermal.
In 2018, the main island of Kyushu had the first case of curtailment of variable renewable
power (item (3) solar, wind). Since then, curtailment has also been carried out in Hokkaido,
Tohoku, Chugoku, and Shikoku regions, though less frequently.39 Although such measures arenecessary for the stability of the power supply, excessive curtailment could directly impact
the bottom line of power producers. The government is considering ways to tackle thesituation, such as implementing measures on the demand side and strengthening the grid. As
for storage batteries, which contribute to stabilizing the grid by charging and discharging
surplus electricity, the government plans to set a target for 2030 for stationary batteries,
and to expand the national battery manufacturing capacity to 150 GWh by then.40 It also
will develop a market mechanism to allow for distributed power sources—such as residential
storage batteries—to trade electricity, and adjust grid access rules for storage batteries.

Proposals
Below are several recommendations for Japan to improve its electricity supply and demand
management in anticipation of a massive deployment of renewables.

28

39

ANRE Report on curtailment (in Japanese).

40

Government of Japan GX Basic Policy, February 10, 2023 (in Japanese).

• Prioritization of power sources based on market principles: Under Japan’s curtailment
rules, renewable energy producers are required to reduce or halt power production beforehydropower, nuclear, and geothermal power producers. In order to deploy the more variableenergy sources, however, the country needs to break away from the long-held concept of“baseload power sources,” and review the curtailment rules that favor nuclear. A smart
approach would be to choose electricity sources that make the best economic sense, bycurtailing electricity in order from high to low marginal cost.41• Grid upgrades and better grid management: Japan’s grid system needs to be upgradedto accommodate the more variable renewable power sources such as solar and wind inaccordance with a “master plan” for cross-region transmission lines being compiled by theOrganization for Cross-regional Coordination of Transmission Operations, Japan (OCCTO).
Currently “non-firm” access to the grid is provided to power producers at main grid levels.42
The government plans to expand this to local grid levels and start accepting applicationsin April 2023. It is crucial for this to actually be done. At the same time, adopting newtechnologies such as dynamic line rating (a technology to enhance connectivity to the gridwith sensors giving real-time information on weather conditions) could also help reduce thefrequency of curtailment and enhance grid management.43• A more flexible power system: In promoting renewables as a main source of electricity,
it is crucial to maintain supply and demand balance and improve the flexibility of thegrid. Balancing capability is one aspect of flexibility which can be provided by controlling
output from plants - including thermal, hydro and biomass power generators - as well asinterregional transmission, demand response, and energy storage. An optimal combination ofthese technologies would provide flexibility in managing the variability of the power system.
In particular, the expansion of wind capacity, combined with accelerated development ofcross-region power transmission, would be key to supplement solar power at night and on
cloudy days.
Japan can create new business opportunities using the latest technologies and digitization.
One example would be demand response based on electric vehicle batteries - an option thathas considerable potential. Setting a target for battery deployment could increase Japan’sbalancing capability and accelerate decarbonization. According to the International Energy
Agency (IEA), the share of renewable energy in Japan’s total power generation is still low,
and the impact from variable energy sources on the power system is still limited,44 so thecurrent system allows some leeway to adopt these measures in stages, to improve flexibilityof the grid.
• Sector coupling: The volume of excess renewable power is expected to increase as
renewable installations expand. Such excess electricity should be utilized by promoting41

 abinet Office’s taskforce on renewable energy regulations made similar proposals, June 3,
C
2021(in Japanese).

42

ANRE How to connect to the grid to increase renewables March 25, 2021 (in Japanese).

43

ANRE Next generation grid, March 12, 2021 (P.46) (in Japanese).

44

IEA Status of Power System Transformation 2019, May 201929
Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the Shiftelectrification and sector coupling (integration of sectors such as manufacturing, heat,
residential and commercial, transportation and agriculture, as shown in Chart 3). Sector
coupling means transferring energy between sectors. In the power sector, in particular,
rapid deployment of renewable energy from wind and solar power can accelerate
electrification of sectors, especially heat and transport,45 which can help reduce CO2
emissions through the indirect use of renewable energy. Sector coupling also allows for theuse of new sources of flexibility such as thermal energy storage and electricity storage
using EV batteries, contributing to improving the flexibility of the overall power system.

•

Chart 3. Concept of sector coupling
Renewable PowerElectricity→Heat

Electrolysis→Hydrogen, Methane Gas

Electricity→Mobility

EV

Heating, Cooling(i.e. heat pumps)

Storage Battery

Residential

Commercial

Industry

Transportation

Back to Electricity
Prepared by Climate Integrate based on International Energy Association (IEA) materials46 and cleanenergywire.com.

30

45

IEA Wind TCP Task25 Electrification, August 2020.

46

IEA Status of Power System Transformation 2019, May 2019

2-4. Redesigning power markets
to encourage fair competition
Proposal 4

Redesigning Power Market

Capacity
Market Reform

Separation ofGeneration andRetail Units

Fair Burden
Sharing

Trading on
the Spot
MarketNegative
Pricing

Current status
For decades, ten regional utilities in Japan were in charge of electricity generation, transmission/
distribution, and retail. The liberalization of retail electricity began in March 2000, firsttargeting extra-high-voltage customers (large factories, department stores, office buildings)
and allowing them to source electricity from other power producers. The scope of liberalization
was later expanded to high voltage consumers (small- and mid-size buildings and factories), andthe process was completed in April 2016 with low-voltage customers (homes and small retailstores). In the course of market reforms, the electricity generation and retail sectors were bothliberalized, which prompted the emergence of the wholesale market. Meanwhile, the transmission/
distribution sector was legally separated from other sectors.
Japan subsequently created more markets besides the wholesale market and the situation
became increasingly complex (Chart 4).47 One of them, the “capacity market,” is drawing
criticism for functioning as a de-facto mechanism that provides incentives to prolong the useof existing facilities such as nuclear and aging coal power plants.48 The government plans to
add a new mechanism to the capacity market to auction “long-term decarbonized electricity.”
The auction would incentivize multi-year investments in decarbonized power sources (unlike
the capacity market, which covers only one year). The government’s choice of power sources
eligible to take part in the auction lacks some logic, as it includes not only hydrogen andammonia co-firing in thermal power plants (despite their poor prospects for return on capital
investment), but also thermal power with CCUS, and under certain conditions, new gas-fired47

 enues for electricity trading in Japan include the Tokyo Commodity Exchange (electricity
V
futures), the Japan Electric Power Exchange (spot, hour-ahead, forward, financial transmission
rights, baseload, non-fossil fuel certificates), OCCTO (capacity, long-term decarbonizedelectricity auctions) and the Electric Power Reserve Exchange (balancing). Individual spot
contract and one-on-one futures contracts are also done outside these markets.

48

 abinet Office’s taskforce on renewable energy regulations Views on the capacity market,
C
December 1, 2020 (in Japanese).

31

Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the Shiftpower generation.49
Meanwhile, despite market liberalization attempts, the original ten regional utilities continue togenerate much of the electricity produced in Japan.50, 51 The newer, smaller electricity retailers
source their electricity as follows:(1) One-on-one contracts with power producers(2) Transactions on the wholesale market(3) Ownership of power plants(4) Transactions on the baseload market
However, the current situation has its flaws. For one-on-one contracts, most of the power
supplied by the ten regional utilities still goes to their own retail units or to retailers ofgroup companies.52 As for the wholesale market, where the spot (day-ahead) market accounts
for the majority of transactions, there are fewer “sell” offers from the ten regional utilities
than from newer, smaller electricity retailers,53 possibly indicating a lack of fair competition.
Some measures to ensure fair practices in electricity wholesale were implemented in FY2021
to prevent the ten regional utilities from selling electricity under preferential conditions totheir own retail units.54 More needs to be done.
Furthermore, the spot (day-ahead) market has not been serving as a practical venue for power
retailers to source electricity and avoid imbalance settlement fees. That is because trading
volume on the spot market is low (about 0.7% of all electricity sold in Japan) as bidding isclosed an hour before the delivery.55

32

49

ANRE Auctions of long-term decarbonization electricity sources, October 3, 2022 (P.4) (inJapanese).

50

ANRE Active trading on wholesale market, May, 25, 2016 (P.2) (in Japanese).

51

ANRE Baseload electricity, April 7, 2020 (in Japanese).

52

E GC FY2022 update on trading submitted to the 73rd working group, May 31, 2022 (P.4) (inJapanese).

53

Climate Integrate data compiled from ANRE statistics (in Japanese).

54

E GC Press release on commitment to fair wholesale of electricity by 10 major utilities,
September 9, 2020 (in Japanese).

55

EGC Monitoring report for July-September 2022, December 22, 2022 (P.2) (in Japanese).

Table 2. Types of electricity markets in Japan
Types

Transactions

Markets

BuyersElectricity (kWh)Generated power

Wholesale market
・Spot (Day-ahead)・Hour-ahead
・Forward
・Baseload

Capacity(kW value)

Ability togenerate power

Capacity market

Power retailers

Balancing( Δ kW value)

Ability to adjust
demand and supply in ashort term

In transition from ancillary
service public offering tobalancing market

Transmission
and distribution
operators

Power retailers

Prepared by Climate Integrate from materials from ANRE taskforce on sustainable electricity system56

Chart 4. Timeline for power market functions
4yrs

5pm on the day
beforeYrs to days

Futures（2019）
Capacity（2020）
Long-term decarbonizedelectricity auction(2023 ~ )ForwardBaseload（2019）

Day-ahead(Spot)

1hr beforeGC

Hour-ahead
30 min
GC: 60 minprior

the day

Public call forbalancing capacity(〜2023)
Balancing market
30 min (2021〜)（2021年〜）
Transmission/
Distribution operators

Prepared by Climate Integrate from materials by Kimio Yamaka57

Proposals
The following measures, if introduced, would structure power markets in Japan to offertransparency and fair competition.
• Review the capacity market: The auction for “long-term decarbonized electricity” thatthe government is planning to introduce needs a thorough review, as the scheme provides
long-term incentives for investing in and keeping fossil fuel power plants running,
including plants co-firing with hydrogen and ammonia, as well as nuclear power plants.
Capacity mechanisms (such as strategic reserves) need to be redesigned in order to56

 NRE taskforce on sustainable electricity system Ensuring investment in power sources,
A
October 16, 2020 (in Japanese).

57

 imio Yamaka, Graduate School of Economics, Kyoto University, Research Project on Renewable
K
Energy Economics, Column No. 334 Reasons behind tight supply and demand of electricity,
September 9, 2022 (in Japanese).

33

Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the Shiftensure adequacy.
• Unbundle generation and retail units: The government and the ten regional utilities
should start looking into legally unbundling the utilities’ generation and retail operations
into two entities, in order to prevent power sales within each utility under preferentialconditions, and to thoroughly liberalize the power market.
• Increase trading volume on the spot market: In April 2022, Japan began a gradual shift
from the feed-in tariff scheme (FIT) to the feed-in premium scheme (FIP). The switch
requires renewable energy producers to sell electricity on the wholesale market, rather
than receiving a pre-set tariff, and they will be subject to imbalance settlement fees
for any difference between the planned versus delivered power generation amounts. The
government should start discussions on shortening the gate closure from the current
close of one-hour before delivery to shorter times such as 5 and 15 minutes to allow for
more flexible supply and demand adjustments.58• Start discussions on negative pricing: The minimum bidding price is currently 0.01 yen/
kWh on the spot market of the Japan Electric Power Exchange (JEPX). However, such an
artificially set price could distort market mechanisms. One way to help balance the grid
would be to introduce negative pricing, which would require power generators to pay forexcess electricity. That, in turn, could prompt them to reduce or shut down renewable
power generation when supply exceeds demand.
• Ensure fair cost sharing: Costs to strengthen and connect to the grid should not beborne unfairly by renewable power producers or hinder the accelerated development of
renewables.

58

34

 ome countries in Europe set the gate closure at 5 minutes or 15 minutes. Mitsubishi UFJ
S
Research and Consulting Report on overseas electricity markets, March 26, 2021 (in Japanese).

2-5. Boosting Offshore Wind Development
Boosting Offshore Wind

Proposal 5

Floating
OffshoreWind Target

Transmission
Lines

Port
Development

Centralized
SystemLocal
Electricity
Consumption

Domestic
Procurement

Centralized
Tasks and
DutiesCurrent status
In 2020, a private-public council set up to strengthen Japan’s competitiveness in the offshore
wind industry set a target of adding 30 to 45 GW in offshore wind projects by 2040.59 While
the target is ambitious, it is also far below the country’s offshore wind potential of 552 GW(128 GW of bottom-fixed and 424 GW of floating), according to figures by the Japan Wind
Power Association (JWPA).60 Floating offshore wind is an important technology to utilize windpotential, and the government plans to start discussions to set a target.61
In recent years, the government has enacted legislation and revised existing laws to deploy
more offshore wind.62 For example, the Port and Harbor Act has been revised to promoteoffshore wind projects near ports. The Act on Promoting the Utilization of Sea Areas forthe Development of Marine Renewable Energy Power Generation Facilities was enacted
for the development of wind farms further into the ocean. The government is compiling amaster plan for cross-region transmission lines, a blueprint for the expansion of main grids
to connect regions that have abundant offshore wind resources (such as Hokkaido andTohoku) with areas that have high electricity demand, including Tokyo.
The government plans to introduce a Japanese version of a more centralized system modeled
after European schemes for offshore wind development, putting the government in charge ofactivities such as research required for offshore wind development. According to the roadmapof the GX Basic Policy, research will start in FY2023, with bidding beginning in FY2025.63

59

 he public-private council on offshore wind industry Summary of the visions for the offshore windTindustry (1st edition), December 15, 2020 (P.6) (in Japanese).

60T he Japan Wind Power Association document submitted to the public-private council on offshore windindustry, July 17, 2020 (P.14) (in Japanese).

61

Green Transformation Implementation Council GX Basic Policy (draft), December 22, 2022 (in Japanese).

62

ANRE Offshore wind policies, October 6, 2022 (P.5) (in Japanese).

63

Government of Japan Roadmap for GX Basic Policy, February 10, 2023 (in Japanese).

35

Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the Shift

The challenge for Japan’s offshore wind industry is to build a domestic supply chain without
the presence of a major wind turbine maker. The pace of onshore wind development did not
pick up even after the FIT program started in 2012, as wind projects with a capacity of 10
MW or larger became subject to environmental impact assessments soon after the FIT was
introduced.64 The slow uptake in wind development has led major domestic makers (Hitachi,
Mitsubishi Heavy Industry, Japan Steel Works) to cease wind turbine production.
Another issue is the inefficient engagement process at prospective offshore wind farmsites, as individual developers themselves are dealing with local communities and fisheries
stakeholders.65 According to a draft plan for a centralized system presented by the government
in January 2023,66 local governments will be in charge of coordinating with local communities
to develop projects, and the central government will be in charge of providing support for local
governments.

Proposals
Offshore wind will play a crucial role in the shift to renewables in Japan. The following measures
are recommended in order to accelerate developments beyond JWPA targets.
• Set ambitious targets for floating offshore wind: For the full deployment of thepotential for floating offshore wind, Japan should aim to install 2 to 3 GW by 2030, 20 GW
by 2035 and set an ambitious target for 2050. Japan also needs to set industry policies
for floating offshore wind soon in order to be able to compete with countries aiming tobuild gigawatts of capacity each by 2030.67 A delay in setting goals and policies could slow
the development of related industries and infrastructure, and prevent Japan from gaining
market share in Asia.
• Accelerate grid development: To expand offshore wind, there is a need for further
development of transmission lines and other infrastructure for the efficient use of wind
power. A pilot project is underway for undersea high-voltage cables between Hokkaido
and Tokyo. Such installations need to advance quickly, and feasible grid projects underthe master plan should also proceed.
• Introduce a centralized system for local engagement: In the centralized system thegovernment is planning, it is laudable that the scope is expected to include local

64

 he Japan Wind Power Association Japan's wind installation data as of the end of 2018, January 16,
T2019 (in Japanese).

65 enewable Energy Institute Proposals for the Coexistence of Offshore Wind with Local Communities
R
and the Fishing Industry, July 29, 2022 (P5) (The original Japanese report was published in June 2022)

66

METI, MLIT 18th joint taskforce meeting Draft of a centralized system mechanism, January 30, 2023 (inJapanese).

67

36

 apan’s Floating Offshore Wind Group Outlook on floating offshore wind power in Japan, September
J
2021 (P.2) (in Japanese).

Chart 5. Grid development for offshore wind expansion

Centralized System

Local Consumption

Transmission
Infrastructure

Centralized Tasks
and Duties
New routefor Hokkaido,
Tohoku, Tokyo

New route for
Hokkaido, Tohoku

Tohoku,Tokyo buildup

Kyushu-Chugoku
buildup

New route for
Tohoku, Tokyo

Central regionbuildup

Promotion areas
Promising areas
Potentially suitable areas

Frequencychanger buildup

Oﬀshore wind ports

Prepared by Climate Integrate from METI materials68, 69, 70

coordination for dialogue to achieve consensus building among local stakeholders. The
current plan is for local governments to be in charge of local coordination at candidate
sites, but the central government should also be involved in the process for the time being,
to set useful precedents and accelerate the full-scale deployment of offshore wind.71• Develop industry to increase domestic procurement: The private-public council on
offshore wind has set a target rate of 60% for domestic procurement by 2040. Wind
turbine manufacturing accounts for 23.8% of the offshore wind supply chain, while thecosts of research, installation, operation, maintenance, and dismantling account for more

68

METI Transmission and distribution business, November 24, 2022 (P.11) (in Japanese).

69

METI Systems related to offshore wind power (in Japanese).

70

MLIT Summary of offshore wind port system (in Japanese).

71

 enewable Energy Institute Proposals for the Coexistence of Offshore Wind with Local Communities
R
and the Fishing Industry, July 29, 2022 (P.15).

37

Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the Shiftthan 60%.72 Japan has no domestic manufacturing capacity for the actual wind turbines at
the moment, but the domestic share of other parts could be increased. Related businesses
should be encouraged to develop in order to ensure a stable supply of key parts andcomponents.
• Develop offshore wind ports: The government is developing offshore wind ports acrossthe country, to be used as hubs for the construction and maintenance of wind farms at
sea. It is also aiming to develop so-called “carbon neutral ports” (CNP) featuring facilities
designed to help decarbonize port activities. Some ports could potentially serve dual
functions as both an offshore wind port and a carbon neutral port. Possible functions being
considered for CNPs include providing storage space for imported hydrogen and ammonia,
but expectations for the scale of such storage tend to be overestimated. Port development
requires a long-term perspective. Investments need to be well considered, taking into
account the potential for expansion of offshore wind ports as related industries grow, while
any investments in infrastructure for hydrogen and ammonia must be planned carefully as
their demand is hard to forecast.
• Promote local consumption of electricity: Along with grid development for longdistance power transmission, Japan should create local demand for offshore wind powerin industries with high electricity demand, such as data centers. According to policies
on digital technology use,73 approved in 2022, the government plans to build more thanten data centers over the next five years across Japan to use locally produced renewableelectricity. The government should jumpstart efforts for local consumption of renewableenergy by building data centers at sites with offshore wind resources, and use excess
electricity, for example, to produce green hydrogen.
• Centralize tasks and duties: Policies related to offshore wind span several ministries,
including METI, the Ministry of Land, Infrastructure, Transport and Tourism (MLIT), MOE
and the Fisheries Agency. This calls for a centralization of contact points to expedite theprocess of building offshore wind farms. Government responsibilities—at national, regionaland municipal levels—also need to be clarified to ensure more efficient operations.74

3872

 he public-private council on offshore wind industry Summary of the visions for the offshore windTindustry (1st edition), December 15, 2020 (P.12) (in Japanese).

73

Government of Japan Basic policy for digital garden city, June 2022 (in Japanese).

74 enewable Energy Institute Proposals for the Coexistence of Offshore Wind with Local Communities
R
and the Fishing Industry, July 29, 2022

Wind turbines farm in Baltic Sea, Denmark

39
Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the Shift2-6. Improving energy efficiency
Proposal 6

Energy Efficiency

Industries

Buildings

Transportation●Review of energy
efficiency standards●Tougher standards●2035: newgasoline-powered car
sales end

●Emissions trading
scheme andcarbon tax●Energy saving
consultants●Mandatory PV for
new buildings●PV, insulation forexisting buildings●Bikeable, walkablecommunities●Efficient freighttransport

Current status
Each sector on the demand side (industries, transportation, commercial and residential)
has the potential to reduce emissions by improving energy efficiency. Japan has two laws
related to energy efficiency: the Act on Rationalizing Energy Use (Energy Efficiency Act)and the Act on Improvement of Energy Consumption Performance of Buildings (Building
Energy Efficiency Act).
Under the Energy Efficiency Act, businesses are required to make plans to achieve their energy
efficiency goals and report on their energy use. Standards are set by the government for the
improvement of energy efficiency of factories (1% a year), and for energy efficiency for eachtype of industry and equipment. However, they are not regulatory standards, no advisoryor order has ever been issued, and no public announcement has ever been made concerningbusinesses failing to meet standards. In addition, these standards are for energy intensity(per unit of activity), so they are not effective in reining in a rise in total CO2 emissions when
production volumes increase. Much of the corporate effort on energy efficiency is voluntary, inline with Voluntary Action Plan the Japan Business Federation (Keidanren) introduced in 1997.
With a 2022 amendment to the Building Energy Efficiency Act, it will become mandatory for
all new residential and other buildings to meet energy efficiency standards starting in 2025.75
However, the current standards (e.g., residential buildings require Class 4 insulation) are below
the levels required for net-zero energy houses (ZEH) and net-zero energy buildings (ZEB).
Furthermore, many existing residential and other buildings have no insulation, despite subsidies
and incentive programs being available, so there is room for improvement.

75

40

MLIT Building Energy Efficiency Act, (in Japanese).

Proposals
Saving energy by improving energy efficiency on the demand side is as important as producing
energy on the supply side, and contributes to decarbonization. Policy measures should be
strengthened in order to improve energy efficiency in each of the following three categories,
combined with energy management, the use of renewables, and electrification.
①

Buildings②

Systems, facilities③

Transportation

Introduction of carbon pricing: Japan should set a carbon price of 6,000 yen/t-CO2 or higher
to promote energy efficiency across society and the economy.
Strengthening policy measures:• Industries• A review needs to be conducted to assess the effectiveness of the standard requiring
factories to improve energy efficiency 1% every year, which is a non-binding standard
under the Energy Efficiency Act. Based on the results of the review, the government
should set an emission reduction target for the industry sector and introduce a scheme
combining emissions trading and carbon tax.
• The government should institutionalize the practice of using energy-saving consultants who
provide reviews of energy efficiency plans and advice to emitters. It should be mandatory
for large emitters to receive such outside reviews and counseling, and smaller emittersshould be encouraged to do so as well.
• Buildings• Tougher energy efficiency standards for new buildings should be introduced. The government
should make it mandatory for buildings to meet requirements that are more ambitious
than the existing ones for ZEB and ZEH and implement measures to put in place even more
ambitious standards earlier than 2030.
• It should be made mandatory for builders to install equipment to use renewable energy
such as solar panels when they construct new buildings.
• More support measures should be introduced to install solar panels and add insulation forexisting buildings. Priorities should be given to insulate public facilities ahead of privatebuildings.
• Transportation• Sales of new internal combustion engine (ICE) vehicles (including hybrid and plug-in hybrid)should end by 2035.
• Urban planning should focus on building bikeable and walkable communities and implementing
measures to improve public transportation systems.
• Cargo transport needs to be made more efficient.

41
Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the Shift• Information sharing• Appeals for energy saving actions will only start to be effective after putting the abovementioned policy measures in place. To raise awareness among businesses and citizens,
easy access to detailed information about energy efficiency measures and policies should
be provided.

Chart 6. Improve energy efficiency

Buildings

Systems, Facilities

Transportation

Resource saving,
low carbon materials,
wood, long-life, insulation

Better eﬃciency

Downsized,
better eﬃciency[Non-residential][Production line, equipment]

FactoryOﬃce

BoilerHeat
exchanger

Plane

Ship

Piping[Residential]
Truck
Condominium

Apartment

Energy management

42

Stand-alone
house

AC

Refrigerator

Renewables

Car

ServerElectriﬁcationTrain2-7. Using fiscal measures
to support the energy shift
Proposal 7

Fiscal Measures

Paris-aligned,
Cost-benefit
Analysis

Just Transition
SupportInvestment in
Climate Tech

Current status
In METI and MOE energy special account budget requests for FY2023, funds related to fossil
fuels, CCUS, hydrogen, and ammonia continue to account for more than 30% of the totalenergy-related budget, and the share rises to 50% if allocations for nuclear are added (Chart 7).
In other words, allocations have been made for all types of power sources, from renewables
to fossil fuels and nuclear. Most of MOE’s budget request is allocated for the energy efficiency
and renewables sectors, while the largest share of METI’s request is for fossil fuels.
The government’s two trillion yen Green Innovation Fund provides subsidies through the New
Energy and Industrial Technology Development Organization (NEDO) for the development ofinnovative technologies, but much of the funding is allocated for fossil fuel-related projects,
including CCUS and hydrogen and ammonia technologies.
Moreover, co-firing with hydrogen and ammonia is among the technologies in the power sector
eligible for public funds for transition finance, according to METI, and the government isurging the private sector to invest in them as well.76 Little financial support has been provided,
however, for a just transition away from the fossil fuel industry. The government estimatesthat Japan’s decarbonization efforts will require 150 trillion yen in public and private
investment in the next decade, and plans to issue 20 trillion yen in “GX Economy Transition
Bonds.”
Japan lags behind in the climate tech sector, technologies focused on reducing GHG emissions
and adapting to the impacts of climate change. The government has set aside 100 billion yen
from the Green Innovation Fund to provide support for novel technologies and startups,7776

 he government revised in May 2022 the Act on Advancement of Energy Supply to defineThydrogen and ammonia as non-fossil energy sources to promote the use of such fuels as
decarbonized sources.

77

METI Allocation policy for Green Innovation Fund, revised March 18, 2022 (in Japanese).

43

Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the Shiftonly a few Japanese companies have a global presence in climate tech, and they rarely getmentioned in industry reports published overseas.78, 79

Chart 7. Budget requests for FY2023(METI’s energy budget and MOE’s Special Account Budget for Energy)
Others 5％

Energyefficiency
23％

Nuclear 16％
CCUS 2％
Hydrogen, Ammonia 6％

Fossil fuels
25％

Renewables
23％

A budget item with multiple purposes is categorized into the most suitable purpose. “Others”
includes projects with no specific category, contributions to international organizations.
Prepared by Climate Integrate from materials by METI80 and MOE81 (energy-related special account budget documents)

Chart 8. Breakdown of MOE, METI budgets Prepared by Climate Integrate(in 100 million yen)

METI

MOE

3000
2500
2000
1500
1000
500

44

s
er
th

w
po
ro
H

yd

O

er

ar
le
uc
N

US

dr

og
en

CC

ia
mm
on
,A

si

lf

ue
ls

es
ab
l
w
ne

Re

Fo
s

Hy

En

er

gy

ef

fi
ci

en
cy

0

Prepared by Climate Integrate from METI, MOE materials

78

PwC State of Climate Tech 2021.

79

Holon IQ Global Climate Tech Unicorns.

80

M ETI Documents for special account for energy measures (FY2023), August 31, 2022 (inJapanese).

81

MOE Documents for special account for energy measures (FY2023), (in Japanese).

Proposals• Review of CO2 emission reductions and cost benefit analysis in budget requests
and expenditures: The government should closely examine its public spending in deciding
whether the use of each electricity source and new technology is cost-effective andaligned with the Paris Agreement. Hydrogen and ammonia co-firing are still high cost andshould be implemented only if a project featuring those technologies is found to be morecost-effective than other options in reducing CO2 emissions.
• Support for a just transition: Budgets should be allocated to support workers in areas
heavily impacted by the energy transition, and be aligned with strategies for a justtransition (Section 1-3).
• Promotion of investment in climate tech: Financial support should be provided forstartups and technologies in financial and other sectors that are not typically within thescope of technology development support from NEDO but still have the potential to become
key players.

•

Capitol Building（Chiyoda ward, Tokyo）

45
Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the ShiftConclusion
The Clean Energy scenario presented by Lawrence Berkeley National Laboratory shows that
decarbonizing Japan's power sector while reducing electricity costs is not impossible. It is
doable. But for this to happen, Japan must make policy shifts as presented in this report.
To decarbonize the power sector, it is essential for the government to send out a clear signalthat it is championing the energy transition, and committed to providing the required incentives
and support to make it a reality.
In policy discussions in Japan, there tends to be an emphasis on why an energy shift is notpossible. But it has to happen if we are to overcome the many challenges associated with climatechange. At the same time, this shift will bring many benefits, such as improved energy security
and reduced health risks. Now is the time for policymakers and civil society to bring forward
a swift policy shift and implement changes, to create a better future. It is our hope that thisreport will help Japan make the shift.

46

Sakatakyoudou Thermal Power Station（Sakata city, Yamagata）

Climate Integrate
March 1, 2023
Authors: Kimiko Hirata,
Chisaki Watanabe
Design: Minami Hirayama
Layout: Yasuyuki Sasaki

47
Decarbonizing Japan’s Electricity System: Policy Changes to Trigger the Shift