Mitsubishi Heavy Industries Technical Review Vol. 59 No. 4 (December 2022)
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MISSION NET ZERO: Carbon Neutrality Initiatives
at MHI Group toward a Sustainable,
Safe, Secure and Comfortable Society

SHINSUKE MURAKAMI*1 SHINICHIRO GOMI*2

While the common goal of reducing CO2 emissions to Net Zero by around 2050 is shared bycountries around the world, Mitsubishi Heavy Industries, Ltd. (MHI) Group has declared its"MISSION NET ZERO" to reduce the group's CO2 emissions and those of its customers who use
our products to virtually zero by the year 2040. We have divided the energy social system into the"supply side" and the "use side", and have defined the direction we should aim in these areas as"Energy Transition" and "Smart Infrastructure", respectively. In addition, we are working todevelop technologies and businesses that will contribute to a "carbon-neutral society of the future"through technological development based on open innovation, collaboration and co-creation
across industries rather than efforts made by our company alone, in addition to conventional
product development.

|1. Introduction
Since the Industrial Revolution in Europe in the 18th century, human civilization has
developed in leaps and bounds using fossil fuels. Modern society is supported by energy, much ofwhich is provided by fossil fuels such as coal, oil and natural gas. While the expanded use of fossil
fuels has brought great benefits to humankind, it has also caused numerous problems. One of theseis environmental problems, which include local problems such as smog and region-wide problems
such as acid rain. Today, in the 21st century, the problems have expanded to a global scale. Climatechange, as typified by global warming, is believed to be mainly caused by greenhouse gases
emitted by humans. In terms of human activities, the main source of greenhouse gas emissions is
the use of fossil fuels. The composition of this problem was internationally recognized at COP3 in1997 in the form of the Kyoto Protocol. After long discussions, the Paris Agreement was adopted at
COP21 in 2015, which set "efforts to keep the global average temperature increase well below 2°C
above pre-industrial revolution levels and to limit it to 1.5°C" as a common global goal. In
response to this, countries have been required to set their own greenhouse gas reduction targets. In
2018, the IPCC's Special Report on Global Warming of 1.5 °C was published, which recognized
the need to reduce global CO2 emissions to Net Zero around 2050 in order to limit the temperature
increase to less than 1.5°C, and "Net zero CO2" or "carbon neutrality" was once again shared as acommon goal worldwide. After that, around the time of COP26 in 2021, countries around the world
declared their commitment to carbon neutrality by around 2050 or similar, which is still fresh in
our memories.
As mentioned at the beginning, modern society operates by consuming energy, the main
source of which is fossil fuels. In other words, the consumption of fossil fuels and resulting CO2
emissions is a prerequisite for modern society. Aiming for carbon neutrality means fundamentallyreconsidering this prerequisite, and can be said to be a major paradigm shift. This paradigm shiftmeans a drastic change in the socio-economic system that has been built over a long period of timesince the Industrial Revolution, and in particular, the energy social infrastructure is under pressure
for major changes.
*1

Senior General Manager, Business Development Department, Growth Strategy Office, Mitsubishi Heavy Industries, Ltd.

*2

General Manager, Business Development Department, Growth Strategy Office, Mitsubishi Heavy Industries, Ltd.

Mitsubishi Heavy Industries Technical Review Vol. 59 No. 4 (December 2022)2

Since its foundation, MHI Group has been extensively involved in the development ofenergy infrastructure, and even today, most of our business areas contribute to our customers andsociety by creating, transporting, storing, and consuming energy. Therefore, in the paradigm shift
toward carbon neutrality, it is the social responsibility of our group to actively and proactively
work toward achieving that goal. As an expression of this commitment, MHI Group declared"MISSION NET ZERO" in October 2021, which set a target to achieve Net Zero CO2 emissions by
2040 for both our group's CO2 emissions (Scopes 1 and 2) and our customers' CO2 emissions fromthe use of our group's products (Scope 3 reductions plus the contribution to reductions by Carbon
dioxide Capture, Utilization and Storage (CCUS)).
Table 1 shows the CO2 emission reduction targets in "MISSION NET ZERO" and Figure 1
shows the roadmap toward "MISSION NET ZERO". The reason for setting the deadline at 2040
rather than 2050, which is generally adopted, is that in order for our customers and society as awhole to achieve carbon neutrality, the renewal of the social infrastructure that supports them must
be done well before, and we set 10 years as a rough estimate of the period in which we should
complete our role. This is an extremely challenging target, but we believe that this is one of our
responsibilities as a company that supports social infrastructure, and that it is essential for the
future development of our business to lead the creation of a market in a new paradigm.
This report outlines our group's approach to achieving carbon neutrality and provides abird's-eye view of our initiatives in Energy Transition (supply side of energy) and Smart
Infrastructure (use side of energy).
Table 1CO2 emissions reduction targets in MISSION NET ZERO

Reduce CO2 emissions across
Reduce CO2 emissions
MHI Group
across MHI’s value chain
Scope 1 and 2
Scope 3 + reductions from CCUS
2030
-50% (compared to 2014)-50% (compared to 2019)
2040
Net Zero
Net Zero
Scope 1 and 2: The calculation standard is based on the GHG Protocol.
Scope 3:The calculation standard is based on the GHG Protocol. However, we also account for
reductions achieved by CCUS as an MHI original index.
GHG:
Greenhouse Gas
CCUS:
Carbon dioxide Capture, Utilization, and Storage
Target Year

* CO2 emissions account for 99% of our GHG emissions, so our goal is simply set as reduction of CO2
emissions.

Figure 1

Roadmap toward MISSION NET ZERO

Mitsubishi Heavy Industries Technical Review Vol. 59 No. 4 (December 2022)
3|2. Approach to carbon neutrality
Carbon neutrality means a state of practically zero CO2 emissions mainly from humaneconomic and social activities, achieved by reducing the emissions, and in some way absorbing(recovering) the remaining un-reduced emissions. The scope on which the emission and recovery
calculations are based varies, and carbon neutrality has been declared at different levels:
national/regional (e.g., Japan and EU), municipality, and corporate. The important point here is that
it is impossible for any individual player to achieve carbon neutrality on its own, regardless ofwhich level it belongs to. Energy is distributed to every corner of society from production to
consumption through supply chains in which many players participate. The energy supply chainsare interrelated, traded in oil and electricity markets, and the supply side and the use side (and the
distribution between them) are linked by an extremely complex global network. To dare tosimplify, in order to achieve carbon neutrality, there must be an "energy supply contributing tocarbon neutrality" that is sufficient to make the achievement possible, and at the same time, there
must be an "energy use contributing to carbon neutrality". Furthermore, a trading system that canlink these two and prove that the energy is carbon-neutral must be established.
This principle offers several implications for a carbon-neutral worldview. The first is that"the paths to carbon neutrality are diverse". For example, on a country-by-country basis, themeasures toward carbon neutrality should differ between countries that produce abundant fossil
fuels and countries that have abundant renewable energy sources. Also, the technical challenges
and the degree of economic difficulty in achieving carbon neutrality for companies will also differ
depending on the country where they are located. The second is that "the establishment of
economic rationality is a requisite for achieving carbon neutrality". Although it may seem obvious,
most measures toward carbon neutrality require additional costs to be paid in some form or another.
Since the energy system is based on a trade between the supply side and the use side, the additionalcosts are borne by someone participating in such trade, but they must be kept within a range that is
acceptable to society as a whole, and at the same time, they must be fairly distributed (shared). The
other is that "carbon-neutral energy systems require stability". As of October 2022, the surge inenergy prices originating in Europe, partly due to Russia's invasion of Ukraine, has led to inflation
around the world. This is by no means an accidental event, but rather partly due to European
political blunders to prematurely phase out coal-fired and nuclear power generation andconsequently increase dependence on Russian gas. To achieve carbon neutrality, it is inevitable toreduce dependence on fossil fuels and to transform the existing energy system, but it is important tosecure a balance so as not to undermine the stability of the overall system or create economic
disadvantages.
Based on the premise described above, MHI Group aims to "contribute to building a stableenergy social system while meeting the wide-ranging needs of its customers and controlling theincrease in social costs". To achieve this, we divided the energy social system roughly into the"supply side" and the "use side", and defined the direction and approach we should aim for in eacharea as "Energy Transition" and "Smart Infrastructure". The following chapters provide an
overview of each area.

|3. Our group's initiatives
3.1

Energy Transition (energy supply side)

The Energy Transition mainly refers to the overall initiatives to decarbonize the energy
supply system centered on fossil fuels. Our group defines the Energy Transition as"decarbonization of existing infrastructure", "realization of hydrogen ecosystems", and "realizationof CO2 ecosystems", and are promoting new business and technological developments in each ofthese areas.
The "decarbonization of existing infrastructure" reduces CO2 emissions while utilizing
existing energy social infrastructure such as thermal and nuclear power plants, thereby suppressing
the additional social cost of introducing new infrastructure and contributing to a stable energy
supply. While the introduction of renewable energies is increasing in society as a whole, naturalenergies such as wind and solar have low CO2 emissions over their lifecycle, but their output

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fluctuations are a major issue. It is possible to suppress the fluctuations and provide backup for
short periods of time and small capacities by using storage batteries, but from the perspective of
overall grid stability, storage batteries have their limitations and need to be supplemented by othermethods. Therefore, MHI Group promotes the development and social implementation oftechnologies for gas turbines and engines capable of hydrogen co-firing or single-fuel hydrogenfiring, and ammonia co-firing for coal-fired power generation, for example, thereby aiming to
reduce CO2 emissions and at the same time maximizing the use of existing infrastructure to absorb
fluctuations in renewable energy. We are also working to reduce CO2 emissions to practically zeroby installing CO2 capture equipment in thermal power plants and industrial plants. In particular, in
the "hard-to-abate" industries, i.e., steel and cement, it is difficult to reduce CO2 emissions bygreening electricity (i.e., converting to renewable energy) due to their product manufacturing
processes. Therefore, we aim to expand the application of our CO2 capture technology to contributeto the achievement of carbon neutrality in a wide range of industries. In the steel industry, where
MHI Group also produces products, we are developing future technologies to reduce CO2
emissions themselves, such as a direct reduction process using hydrogen.
Nuclear power is a carbon-free, large-scale stable power source that does not emit CO2
during operation and can generate electricity stably regardless of weather conditions. In addition,
recently there has been a rapid increase in interest in energy security, and expectations for nuclear
power, which ensures a high degree of energy security, are rising worldwide. To achieve carbon
neutrality, we will support existing nuclear power plants, including not only pressurized water
reactors (PWRs) but also boiling water reactors (BWRs), to restart operations and to install
accident management system, and will ensure safe and stable operation thereafter in order toimprove the safety of nuclear power plants. In addition, we will make steady progress in our
initiatives toward the early establishment of a fuel cycle. We will also promote the development
and design of innovative light water reactors (next-generation light water reactors) that achieve theworld's highest level of safety for social implementation in the mid-2030s. Furthermore, in
response to the diversifying needs of society in the future, we will also develop compact light water
reactors as distributed power sources, high-temperature gas reactors for stable mass hydrogenproduction, fast reactors for effective use of resources and for reducing the volume and toxicity ofhigh-level radioactive waste, and micro reactors as portable power sources for remote islands anddisaster areas. In the medium to long term, we intend to take up the challenge of putting fusion
reactors, our dream permanent energy source into practical use.
The other two of the three pillars, "realization of hydrogen ecosystems" and "realization of
CO2 ecosystems" are to build the value chain necessary to realize the "decarbonization of existing
infrastructure". The "realization of hydrogen ecosystems" builds upstream supply chains forhydrogen and ammonia needed in thermal power plants and steel plants, etc., while the "realizationof CO2 ecosystems" builds downstream supply chains for transporting, storing, and reusing CO2
captured from various emission sources. We use the term "ecosystem" because we recognize that itis necessary not only to demonstrate a single supply chain, but also to create markets and build
networks through collaboration with a wide variety of players, including customers and partnercompanies, in consideration of the fact that the energy social infrastructure consists of complex
supply- and use-side networks as mentioned above.
The "realization of hydrogen ecosystems" is primarily aimed at building a large-scalehydrogen supply network for hydrogen consumption at power plants, etc. For this purpose, we aredeveloping technologies for the production of blue hydrogen and ammonia, which are produced
from natural gas, and green hydrogen and ammonia, which are produced by water electrolysis
using renewable energy, as well as transportation technologies, etc.
To demonstrate the decarbonization of existing infrastructure through building hydrogenecosystems, we are constructing the "Takasago Hydrogen Park" at Takasago Machinery Works of
Mitsubishi Heavy Industries, Ltd. (located in Takasago City, Hyogo Prefecture), which isscheduled to begin operations in fiscal 2023. The Takasago Machinery Works has operated a
combined cycle power plant as a demonstration facility since 1997, and is responsible forsupplying electricity to the local community, and thus the "Takasago Hydrogen Park" will
demonstrate the decarbonization of existing infrastructure through fuel conversion.

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The "realization of CO2 ecosystems" denotes an attempt to build a value chain primarily
aimed at collecting, transporting, and appropriately storing or reusing the captured CO2. Various
concepts are currently being proposed and studied around the world to determine what kind ofchain will be built, but the chains are roughly classified into two types: “CCS (Carbon Capture andStorage) to finally store the captured CO2“ and “CCU (Carbon Capture and Utilization) to finallyutilize the captured CO2”. The storage (CCS) mainly uses depleted oil and gas fields as the final
storage site, but it is necessary to develop technologies to economically transport the captured CO2,
store it underground, and prove that it is stored reliably. Mainly in Europe and North America,
projects to demonstrate CCS in the country and the region are being planned, and we areconsidering participating in some of these projects. For the utilization (CCU), processes have been
proposed to convert the captured CO2 back into fuel or into valuable materials such as recycledplastics, but most of them are still in the research and development stage before commercialization.
Furthermore, there are many issues to be addressed in terms of designing the system, such as how
to certify CO2 reductions during the life cycle. Currently, we are focusing on several promisingtechnologies and determining their feasibility. For example, direct air capture (DAC), which
captures CO2 from the air, is a technology that enables a carbon recycling process without sticking
to artificially emitted CO2, but because its cost of capturing CO2 is currently very high, we areworking to develop and demonstrate this technology as a future technology. In addition to thesetechnologies, MHI Group is also developing and demonstrating a digital platform called
CO2NNEXTM, which visualizes and links CO2 emissions and demand (take-back as CCS or reuseas CCU) to establish trade and ensure traceability. We will contribute to the creation and expansionof markets, and ultimately to the achievement of carbon neutrality for society as a whole, by
providing the technology that will serve as the basis for trading CO2, for which no market currently
exists.

3.2

Smart Infrastructure (energy use side)

The world’s population is expected to reach nine billion between 2040 and 2060. This
population growth will occur mainly in emerging countries and will be accompanied by an increasein the scale of economic activities. In order to achieve carbon neutrality in this process, changes inthe "way energy is used", including changes in people's behavior, will be required. Not only inemerging countries but also in developed countries, a major shift in socioeconomic systems iscreating a polarization in which the population is concentrating in large cities and decreasing inrural areas, and an era of disparities in the universality of utilities such as electricity, gas, and water,
public transportation services, and food supply is beginning. The Internet and the services thatmake use of it continue to expand. A data society has been built in which the world is connected inevery possible way, and the foundation has begun to be organized to realize process visualizationfrom production to consumption and automated and autonomous mechanical systems through theaccelerated speed of information sharing and the processing of vast amounts of data. Furthermore,in the mobility, logistics, and industrial sectors, the trend toward decarbonization is accelerating"electrification", and the world is moving toward an era of pursuing optimization throughautomation and autonomy using data and digital technology. All these trends are linked to anincrease in electricity consumption, which is predicted to more than triple by 2050 compared to
today. In the future, an important issue of how to use precious energy resources (electricity)
efficiently and carefully on the use side will arise.
We believe that a challenge that our group should address is to make social systems smart
and pursue efficiency, optimization, and sustainability on the use side in the coming age when theuse for energy and food is expected to increase dramatically, while taking the global environment
into consideration. As a means to achieve this, we are promoting technological development andparticipating in new business sectors with the major themes in "decarbonization", "energy saving","manpower reduction", "autonomous operation", and "digital intelligence".
As an initiative in the mobility sector, MHI Group is building infrastructure for therealization of a Mobility as a Service (MaaS) society. One example is the provision ofcomprehensive environmental test equipment for realizing "autonomous driving". In collaboration
with partners in Japan and overseas, we are considering providing everything from test equipment
to actual testing services and homologation support. In addition, as the EV market accelerates andMitsubishi Heavy Industries Technical Review Vol. 59 No. 4 (December 2022)
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urbanization progresses at the same time, multi-story parking garages and other facilities will serve
as recharging bases. We are also developing and building next-generation MaaS service bases thatwill serve as energy storage systems. By supporting these changes in the mobility sector on thesocial infrastructure side, we will contribute to the development of various mobility services thatprovide safety and security.
In the logistics sector, we are promoting the provision of "intelligent logistics systems". By
combining high-performance AGF (Automated Guided Forklift) and other equipment, we areworking on smooth coordination between people and various logistics equipment to build more
efficient and safer automated logistics systems. In addition, we aim to achieve significant energy
saving and decarbonization by taking advantage of our product lineup that includes air conditioning
and refrigeration equipment such as natural refrigerant chillers to optimize the total operation oflogistics equipment, air conditioning and refrigeration equipment, and electric power equipment.
The industrial sector faces the urgent challenge of the "decarbonization of factories". Many
factories require not only electricity but also heat, and have conventionally used fossil fuels as theirenergy source. In line with the trend toward decarbonization, it will be necessary in the future tobuild utility systems that pursue economic efficiency and stability while promoting electrification
or utilizing decarbonized power generation with renewable energy, hydrogen, ammonia, etc. Afterdeclaring "MISSION NET ZERO", our group has been promoting the decarbonization of our plants
in order to achieve carbon neutrality in Scopes 1 and 2. As a first step, we have been promoting therealization of a "carbon neutral factory" in Mihara Machinery Works of Mitsubishi Heavy
Industries, Ltd. (Mihara City, Hiroshima Prefecture) by completely eliminating 10,000 tons of CO2
emissions per year from each plant there by the end of fiscal 2023. We plan to work with theelectric utility to replace the existing power supply with solar power generation using the PPA
method, and to use the Mihara Machinery Works as a development field for MHI Group’s
proprietary technologies to achieve carbon neutrality, such as heat source electrification and fuelconversion. Thus, we will achieve carbon neutral factories by implementing carbon neutral
solutions in a challenging and rational manner.
Finally, we are also promoting the construction of "data center" infrastructure, which will be
an important social infrastructure for the next generation. In the case of hyperscale data centers, it
is expected that the data capacity per building will be enormous. In order to support theconstruction of an optimal and highly reliable data center that combines the reduction of power
consumption, the enhancement of server cooling efficiency, and the establishment of an integrated
operation system, we have been providing high-performance air conditioning and refrigeration
systems, power generation systems, and energy management systems. In addition to hyperscaledata centers, micro-edge data centers are expected to accelerate in the future. The micro-edge data
center infrastructure, in conjunction with the hyperscale data center infrastructure, will enable large
volumes of data processing and low latency, and will realize automatic and autonomous operationof mechanical systems, as well as remote control and operation. Our group aims to optimize theoperation of data centers through next-generation cooling systems, decarbonized power generation
systems, and integrated control.
As described above, MHI Group has a product base related to various industrial and lifestylefields, and by combining intelligent technologies for mechanical systems with technologies for
improving and optimizing energy efficiency, we will realize Smart Infrastructure and contribute tobuilding sustainable social systems.

|4. Conclusion
The achievement of carbon neutrality is an issue that needs to be addressed by society as awhole, and as described in this report, changes on the energy supply side (Energy Transition) andon the use side (Smart Infrastructure) must be pursued in parallel. However, the road ahead is not
yet clear, and it is difficult to predict which technologies and products will become mainstream.
Startup companies aiming to establish innovative technologies are emerging in various fields.
Technology and business development based on unconventional approaches, such as open
innovation with such startup companies, will also be required. In addition, in order to transform thestructure of the energy social infrastructure that is related to both supply and use, collaboration andMitsubishi Heavy Industries Technical Review Vol. 59 No. 4 (December 2022)
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co-creation across industries are required rather than one company working alone. Our group,
which has a diverse product lineup and has provided products and services to a wide range ofindustries, has the potential to contribute to many of society's needs in this changing environment.
For this purpose, it is necessary to envision a "future carbon-neutral society", steadily develop thenecessary technologies, and at the same time, carry out a rapid and flexible business development
cycle. This will pave the way for the MHI Group to make a new contribution to society.
CO2NNEXTM is a registered trademark of Mitsubishi Heavy Industries, Ltd. in Japan.