IEEJ e-NEWSLETTER
No. 206(Based on Japanese No. 211)

Published: April 19, 2021
The Institute of Energy Economics, Japan(As of April 16, 2021)

Sources:(1) DOE-EIA(2) Investing.com

Sources:(1) Ministry of Finance "Japan Trade Statistics"(2) Ministry of Economy, Trade and Industry (arrival month basis)(3) Estimated by World Bank (Netherland Title Transfer Facility)(4) DOE-EIA, NYMEX (Front-month Futures)

Source: x-rates.com

Sources:(1) Finance. Yahoo.com(2) Investing.com

ContentsSummary【Energy Market and Policy Trends】
1. Energy Policies
2. Developments in Nuclear Energy
3. Recent Developments in the Oil and LNG Markets
4. Update on Policies Related to Climate Change and Energy Conservation
5. Update on Renewable Energies

1Summary【Energy Market and Policy Trends】
1. Energy Policies
Discussions on formulating the Sixth Strategic Energy Plan are under way. The Strategic
Policy Committee meetings held in March discussed the energy supply-demand structure for2030 in light of the 2050 carbon neutrality target.
2. Developments in Nuclear Energy
A serious lapse concerning the protection of nuclear materials was identified at theKashiwazaki-Kariwa Nuclear Power Plant. TEPCO must reflect on what happened and ensure
thorough remediation. In France, rules for extended operation of existing plants wereestablished.
3. Recent Developments in the Oil and LNG Markets
Due to larger gas demand caused by cold weather, the big four markets in Northeast Asia
imported 15% more LNG during the first two months of 2021 than one year earlier. There havebeen notable announcements in the LNG industry regarding decarbonization.
4. Update on Policies Related to Climate Change
The suspension of new oil and gas leases on public lands under the Biden administration may
become prolonged. In Japan, discussions began on a carbon pricing mechanism that would
contribute to the growth strategy.
5. Update on Renewable Energies
The establishment of the Battery Association for Supply Chain (BASC) comprising 28
Japanese companies was announced. Attention must be paid to how the initiative to strengtheninternational competitiveness in the battery sector will help accelerate the development of
renewables into a major power source.

2

1. Energy Policies

Seiya ENDO, Economist
Econometric and Statistical Analysis Group (ESA)
Energy Data and Modelling Center (EDMC)

Discussions on formulating the Sixth Strategic Energy Plan are underway. The target energy
supply-demand structure for 2030 has been reviewed since February, in light of the discussions
on the 2050 carbon neutrality target conducted to date.
The discussions at the 38th Strategic Policy Committee meeting on March 11 focused on
supply security and resilience. At the opening, the moderator made a notable remark, withreference to the Great East Japan Earthquake ten years ago, that safety is the overriding priority
in energy policy and that energy security is particularly important among the three Es of the 3E
policy. The Committee members engaged in lively debate, particularly about the position offossil fuels among various energy sources, in view of the trends in recent years. Memberscommented that the resource strategy will newly include securing supply destinations foralternative fuels such as hydrogen and ammonia as well as favorable sites for CCS. There wasalso a comment that securing interests involves a risk of holding stranded assets in the long run
if Europe and the U.S. shift further away from fossil fuels.
At the 39th Committee meeting, opinions were heard from six industry associations
representing energy suppliers, including the Federation of Electric Power Companies and theJapan Gas Association, and from the Ministry of Foreign Affairs and the Ministry of theEnvironment. Presentations by fossil fuel businesses such as the Japan Gas Association and thePetroleum Association of Japan indicated that they have been earnestly exploring new forms ofbusiness after the carbon neutrality declaration last year. The Japan Gas Association stated thatit took 30 years to expand the use of LNG in the city gas business, and shared the view that theintroduction of carbon-neutral gases should require a similar lead-time. Since this applies not
only to gas but also to other energy sources, this comment confirmed the need to take measures
toward carbon neutrality into consideration when formulating the 2030 target.
The moderator shared plans to deepen discussions on the 2030 energy vision in theCommittee in view of the 2050 carbon neutrality target. With the EU having raised its 2030
NDC from 40% to 55% last December and the US set to announce its NDC at the Climate
Summit in April, reconsideration of Japan’s CO2 emission target will certainly be a major issue.
Meanwhile, with less than 10 years left until the target year, the discussions will also need to
be practical, focusing on measures that are feasible in that time frame and the scale of theirimplementation.
IEEJ Chairman and CEO Masakazu Toyoda commented as follows:• 38th meeting: We should remind ourselves that there is no perfect energy source and build
a well-balanced portfolio. It is possible to continue to use fossil fuels in the medium to longterm through combination with decarbonization technologies. I ask that efforts be made toform an international consensus that “CO2 emissions are to blame, but not fossil fuels.” I
also ask that electricity system reforms, including leveraging the capacity market andintroducing Contracts for Difference (CFD), be considered in order to prevent excessive
liberalization of the electricity system.
• 39th meeting: Costs should be thoroughly considered for both 2030 and 2050, to determine
whether the public and industry will bear the high costs. A system for curbing rises in thecost of industrial electricity should also be discussed.
32. Developments in Nuclear Energy
Kenji KIMURA, PhD
Senior Researcher, Nuclear Energy Group
Strategy Research Unit
To mark the tenth anniversary of the Great East Japan Earthquake and the Fukushima Daiichi
accident that occurred on March 11, 2011, the Nuclear Energy Agency of the Organisation for
Economic Cooperation and Development (OECD/NEA) released a report on March 3, 2021,
presenting the details of the accident and the actions taken by Japan and by other member
countries following the accident. Regarding Japan, the report commends the Nuclear
Regulation Authority (NRA), which was established after the accident, for quickly drawing up
new safety regulation standards and for its recent effort to adopt a new risk-informed
surveillance process. Meanwhile, the organization advises the NRA to maintain independence
and have more occasions for open discussions with regulated parties.
On March 16, the NRA announced that intruder detection equipment for protecting nuclear
materials had been failing to function for an extended period at TEPCO’s Kashiwazaki-Kariwa
Nuclear Power Plant. This lapse in plant security was rated by the NRA as “red (a levelrepresenting major impact on safety functions or performance).” TEPCO has not objected tothis rating and has said they will consider countermeasures and investigate the causes
immediately. While the actual gravity of the security lapse cannot be deduced due to a lack ofdetails pertaining to plant security, it can be assumed that the problem was extremely serious
given the “red” rating. Other incidents have been discovered at the same plant, including falsely
claiming completion of construction of safety measures that were actually unfinished and anemployee using a colleague’s ID pass to enter the main control room. TEPCO must take thisincident very seriously, reflect on what happened, and ensure thorough remediation.
On February 23, French regulator ASN (English name: Nuclear Safety Authority) set out
rules for extending the operational life of 900 MW reactors operating for at least 40 years.
France has had no limitations on the operational life of reactors, and reactors were required topass designated safety tests every ten years to be allowed to operate for the next ten. The
decision this time set clear conditions for long-term operation beyond 40 years. Even thoughFrance has a goal of reducing the share of nuclear power in the total power output to 50% by2035, it still considers nuclear energy as an essential power source. The decision indicatesFrance’s intention to fully utilize its existing power plants.
On March 10, Russian state nuclear firm Rosatom announced it has started the constructionof Akkuyu Unit 3 in Turkey. This news is a clear indication that Russian companies arecontinuing to rapidly expand their overseas business, as well as Turkey’s intention to activelyexpand the use of nuclear power, as also shown by Akkuyu Units 1 and 2 which are underconstruction. Nuclear plant manufacturers of nations including Japan, the US, and France needto once again consider how to plan feasible export projects.

43. Recent Developments in the Oil and LNG Markets
Hiroshi Hashimoto
Senior Analyst, Head of Gas Group
Fossil Energies & International Cooperation Unit
Due to larger gas demand caused by cold weather, the big four markets in Northeast Asia Japan, Korea, China and Chinese Taipei - imported 42.55 million tonnes of LNG during thefirst two months of 2021, 15% more than one year earlier, serving as one of the causes ofextremely high spot LNG prices in early January. China imported 27% more LNG in the twomonths than a year ago.
In February, Qatar's QP announced the largest investment decision in the history on an LNG
production project with capacity of 33 million tonnes per year. As indicated in its announcementof New Sustainability Strategy in January, QP expressed its intention to reduce GHG footprintof the project through a large-scale carbon capture and sequestration (CCS) facility, solar power
supply, and a jetty boil-off-gas recovery system.
There have been notable announcements in the LNG industry regarding decarbonization andNet-Zero initiatives. In early February, JERA and Malaysia's Petronas announced aMemorandum of Understanding (MOU) on cooperation in the decarbonization sector. In lateFebruary, Cheniere Energy, a major LNG exporter in the United States, announced its plan toprovide its customers with GHG emissions data of LNG from the company's facilities beginningin 2022. Singapore's Pavilion Energy announced an LNG purchase agreement with Chevronaccompanied by a statement of GHG emissions by cargo. Mitsui & Co. and Hokkaido Gas
announced a sales and purchase agreement of carbon-neutral LNG. In March, Tokyo Gas
announced its Carbon Neutral LNG Buyers Alliance with 14 end-user companies, aiming atfurther penetration of carbon neutral LNG. Shell announced that it had received in the United
Kingdom the first carbon neutral LNG cargo in Europe bought from Russia's Gazprom.
The OPEC+ meeting on 4 March agreed to maintain the current production level in April.
Saudi Arabia is assumed to maintain its voluntary production cut of 1 million barrels per day.
The decision served as a surprise for many observers who had anticipated smaller production
cuts. On 7 March, the Brent price shot up over USD 70 / barrel for the first time since January
2020, after a drone attack on Saudi oil facilities. However, as evidenced by a 7% one-day drop
to USD 63 on 18 March due to concern over supply surplus, fundamentals do not seem tosupport prices.
Discussions are underway over renewal of the nation's Strategic Energy Plan. On 2 March,
the Natural Resources and Fuel Committee - under the Advisory Committee for Natural
Resources and Energy - discussed issues and directions of resource and fuel policy. As acommittee member, Mr. Toyoda, CEO of IEEJ, expressed views that fossil energy should
maintain its importance even after decarbonization or transition, companies should be given
incentives to advance decarbonization, and integrated initiatives should be established topromote blue hydrogen and blue ammonia in the Indo-Pacific region.

5

4. Update on Policies Related to Climate Change
Takahiko TAGAMI, Senior Coordinator, Manager
Climate Change Group
Climate Change and Energy Efficiency Unit

On January 27, US President Biden issued an executive order to pause new oil and gas leases
on public lands or in offshore waters pending completion of a comprehensive review andreconsideration of Federal oil and gas permitting and leasing practices. On March 9, theDepartment of the Interior announced that an interim report on the comprehensive review andreconsideration will be made in the coming summer, and on March 26, launched a forum on
the leasing program with the participation of representatives of industry, labor unions,environmental groups, indigenous people, and others, giving rise to the possibility that thesuspension may become prolonged. Meanwhile, some analysts have pointed out that suchapproaches to limit fossil fuel supply and production merely cause production to be relocatedfrom federal lands to private lands and overseas, and have almost no effect on the climate.
On March 11, the Fourteenth 5-year Plan was approved by the National People’s Congressin China. While goals such as a 19–20% reduction of CO2 emissions per unit GDP between
2020 and 2025 and limiting total energy-related CO2 emissions to 10.5 billion tonnes wereexpected to be adopted, the reduction target for CO2 emissions per unit GDP was set to 18%.
Furthermore, not only the goal for total energy-related CO2 emissions, but also the goal for totalenergy consumption, which was adopted in the Thirteenth Plan, was omitted from theFourteenth (for details on the 5-year Plan, also see China Watching on page 11 of thisNewsletter).
On February 1, the subcommittee on carbon pricing (“the subcommittee”) of the Central
Environmental Council was convened after a one and a half year hiatus and on February 17, theMETI study group on economic instruments was convened (“the study group”), commencing
discussions on carbon pricing that will contribute to the growth strategy. Discussions at thesubcommittee have begun, starting with a carbon tax and credit trading, with the aim of devisinga specific carbon pricing scheme that will contribute to achieving carbon neutrality by 2050 andthe growth strategy, while taking note of international trends. Meanwhile, the study groupdiscussed system designs that would contribute to growth within the context of the policy mix,
specifically, themes such as carbon border adjustment measures, fossil fuel taxes, and credit
trading. Both the subcommittee and the study group are set to issue an interim report by aroundthe summer.
On March 23, the Energy Efficiency and Conservation Subcommittee of the Advisory
Committee for Natural Resources and Energy convened a meeting following the one inFebruary. For achieving the 2050 carbon neutrality target, the first hearing was conducted forenergy-intensive industries and the energy conversion sector on the subject of further energy
conservation and expansion of the use of non-fossil energy. The Subcommittee also discussed
how to revise the approach for energy conservation for the 2030 energy mix. At the next
meeting scheduled for April, the Subcommittee will conduct a hearing for the transport andresidential/commercial sectors and new energy conservation measures for 2030 and roughestimates of energy savings to be made by those measures will be presented.

65. Update on Renewable Energies
Akiko SASAKAWA, PhD
New and Renewable Energy GroupElectric Power Industry & New and Renewable Energy Unit
On March 8, the establishment of the Battery Association for Supply Chain (BASC)
comprising 28 Japanese companies was announced. This is an alliance of automobile, battery,parts, raw materials manufacturers and trading houses transcending sector boundaries tostrengthen the international competitiveness of Japan’s battery supply chain. As the utilizationof renewable energy and electric vehicles (EV) grows to achieve a decarbonized society, it isconsidered essential to expand the use of batteries. The Association will commence efforts as ateam to boost the international competitiveness of Japan’s supply chain sector comprisingindustries related to battery materials, parts and their raw materials.
The strengthening of battery supply chains is accelerating in Europe and the United States
which had a head start. In Europe, the European Battery Alliance was formed in October 2017
to boost the competitiveness of the EU industry in areas including EV batteries. In December
2020, a bill for revising the EU Battery Directive, which regulates the entire lifecycle ofbatteries from design to production, reuse and recycling, was put forward to shift toward a
recycling-oriented economy. In the United States, President Biden issued an executive order inthis February requesting a review of supply chains in four key product areas including EV
batteries, with the purpose of reducing dependency on certain countries and establishing a stablesupply network.
Behind these moves lies China’s enormous growth in the battery industry. China has
designated innovation in battery technology as one of its key national projects and is actively
expanding investment in the project, including in securing battery resources. For China, where
the installed capacity of wind and solar power is expected to reach 1,200 GW by 2030, there isan urgent need to utilize variable renewable energies by leveraging energy storage technologies.
China has also announced a policy to ensure that all new cars sold are EVs and other ecofriendly cars by 2035. Contemporary Amperex Technology (CATL), a vehicle-mount battery
company established in 2011, has burgeoned into one of the world’s top battery makers. China’s
presence is growing in the formulation of international standards as well. It was China thatencouraged the International Organization for Standardization (ISO) to consider setting up anew technical committee (TC) to establish an ISO standard for lithium, the key material forlithium-ion batteries. As the committee’s secretariat, China currently leads the establishment ofthis standard.
In view of these moves in Europe, the United States, and China, the Battery Association for
Supply Chain of Japan will focus on the following key activities: deliberating international
standards concerning the battery supply chain, formulating new standards, and establishing thebattery ecosystem. The objective is two-pronged: to counterbalance China, which is leading thecreation of the ISO standard for lithium, and to formulate a standard taking battery recycling
into account.
Japan commercialized lithium-ion batteries ahead of other countries and has been leading in
the number of patents on battery technology. Attention must be paid to how Japanese companies’
efforts to strengthen Japan’s international competitiveness in the battery supply chain sector
will help accelerate the development of renewables into a major power source and realize adecarbonized society.

7

Past IEEJ Events
Energy and Economy Indicators of JapanIEEJ Homepage Top
Back Numbers of IEEJ e-Newsletter
Back Numbers of IEEJ Newsletter (Original Japanese Version - Members Only)

The Institute of Energy Economics, JapanIEEJ e-Newsletter Editor: Yukari Yamashita, Managing Director
IEEJ j-Newsletter Editor: Ken Koyama, Senior Managing Director

The Institute of Energy Economics, Japan (IEEJ)Inui Bldg. Kachidoki, 13-1 Kachidoki 1-chome, Chuo-ku, Tokyo 104-0054, Japan
Tel: +81-3-5547-0211 Fax: +81-3-5547-0223

IEEJ：April 2021

8ｃ IEEJ 2021○