Provisional Translation

The Basic Policy for the Realization of GX- A roadmap for the next 10 years -February 2023

1. Foreword
Humanity is now facing a shared challenge of global climate change such as extreme weather
and a rising number of massive natural disasters all over the world. As more countries and regions
announce their net-zero greenhouse gas (GHG) emissions targets and the global momentum for
decarbonization grows, Japan has made a global pledge for reducing GHG emissions by 46% in
FY2030 and achieving net-zero GHG emissions by 2050, showing its strong national
determination to combat climate change.
Meanwhile, Russia’s military invasion of Ukraine in February 2022 has dramatically changed
the world’s energy situation. Every country has seen significant energy-related inflation. The
situation in Japan is very tense as well. As electricity supply becomes stretched and energy prices
soar, there is now a risk of the first full-scale energy crisis since the Oil Crisis of 1973. It goes
without saying that ensuring stable energy supply is the foundation of citizens’ lives and businessactivities. The current crisis has revealed the vulnerabilities of Japan’s energy supply systems andtheir issues with regard to national energy security.
For Japan, a country that has experienced many critical moments in history with stable energy
supply being disrupted, the idea of Green Transformation, or GX, means a thorough overhaul of
its post-war industrial/energy policies, as GX will transform our entire industrial and social
structures centering around fossil energy sources, long established since the Industrial Revolution,
into ones based on clean energy.
As a result of Russia’s invasion of Ukraine, European countries and the United States havefurther accelerated their existing decarbonization initiatives. They have launched national efforts
to support investment leading to decarbonization in power generation, industry, and transportation
sectors as well as residential sector for accelerated transition to a carbon-free society. The
European Union has set a 140 trillion-yen target over 10 years for its joint public-private
investment plan consisting of various support measures. Some European Union (EU) member
countries have added extra measures worth several trillion yen. The U.S., in addition to the
Bipartisan Infrastructure Law, introduced the Inflation Reduction Act in August 2022, with theaim of spending ¥50 trillion on energy and climate change over 10 years. These policies areexamples of accelerated government-led efforts by European countries and the U.S. to support decarbonization investment and to establish new markets and rules. Successful GX decarbonization
investment is now the decisive factor for each business and state that wishes to remain competitive.
As a country surrounded by sea and deprived of natural resources that can be extracted easily,
Japan has traditionally focused on research and development in the field of decarbonization
technologies, with Japanese corporations having technological strengths in many areas. Making
the most of these technological advantages to accelerate GX will lead to the stable supply of energy
as well as providing opportunities for putting Japan on track for a dramatic bounce-back to1economic growth. Japan’s economy needs to grow by leveraging the expertise and insightaccumulated in the country’s private sector to support other countries’ effort for achieving netzero GHG emissions, as well as creating new demand and markets in decarbonization business
which will ultimately lead to reinforcing Japan’s industrial competitiveness.
GX introduction can lead the way to clearing Japan’s global commitment of 46% reductionof GHG emissions in FY2030 and achieving net-zero GHG emissions by 2050.This initiative canalso bring stable supply of inexpensive energy by reorganizing energy supply-demand structures,and furthermore, reforming Japan’s industrial and social structures, and building a society in which
all citizens, including future generations, can live an affluent life. With these goals in mind, the
GX Implementation Council, based on the results of its past discussions, has created the following
policies for the initiatives to be undertaken for 10 years.1
Additionally, bills relevant to GX implementation will be submitted to the 211th session of
the Diet.

These polices are based on the Sixth Strategic Energy Plan, Plan for Global Warming Countermeasures, andJapan's Long-term Strategy under the Paris Agreement, all decided by the Cabinet in October 2021, and summarize
Japan’s global pledge for climate change actions (46% GHG reduction in FY2030 vs. FY2013 levels) as well as
continuously trying to clear a higher goal of a 50% reduction in order to achieve net-zero GHG emissions by 2050)
together with the country’s initiatives for strengthening its industrial competitiveness and developing its economy,
among other undertakings.
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2. Decarbonization initiatives towards GX based on the premise of ensuring a stableenergy supply(1) Basic concept
In response to the dire energy situation after Russia’s invasion of Ukraine, European andNorth American countries, including the G7, have taken actions to maintain stable supply ofenergy in line with each country’s practical requirements. In addition to various measures thathave been taken to address the issue of soaring energy retail prices, affected nations have beenreaching out for an even wider introduction of renewable energy, as well as announcing policies
for building more nuclear power plants, showing their enhanced moves towards ensuring stableenergy supply.
On the other hand, the development of a business environment under the electricity
deregulation scheme has not gone smoothly inside Japan, together with developing a grid network
for introducing renewable energy and also restarting nuclear power stations. The power shortage
within Tokyo Electric Power Company and other companies' service areas in March and June
2022, coupled with soaring energy prices, have led to an energy crisis situation not experienced
since the 1973 Oil Crisis.
Stable supply of inexpensive energy is the very foundation of citizens’ daily lives as well associal and economic activities. As such, it is Japan’s top priority. Ensuring stable supply of energy
is the fundamental prerequisite for both addressing climate change issues and facilitating GX overthe coming years. At the same time, driving GX itself will lead to ensuring stable energy supply.
In order to ensure stable supply of energy into the future, simply focusing on the retail pricesof gasoline, kerosene, electricity, and gas as temporary actions to mitigate the impact of pricevolatility is not enough. Transition to a resilient energy supply-demand that can withstand an
energy crisis is needed.
To that end, promoting thorough energy efficiency improvement on the demand side and fuelswitching within the manufacture will be facilitated to escape from excessive dependence on fossil
energy sources. On the supply side, renewables, nuclear, and other power sources that contributeto national energy security and are highly effective for decarbonization will be used to theirmaximum potential, also in order to overcome the current crisis.
Based on the understanding that the reconstruction of Fukushima is the starting point for
promoting any energy policies, no efforts will be spared until Fukushima is rebuilt and reborn.
Initiatives to that end include the decommissioning of Fukushima Dai-ichi Nuclear Power Station,
lifting of evacuation orders in Difficult-to-Return Zones, creating new businesses through the
Fukushima Innovation Coast Framework, and revitalizing local businesses and livelihoods.
Furthermore, the fundamental premise for utilizing nuclear power is that we will never forget the3lessons learned from the accident and give top priority to safety in nuclear power while being freeof safety myths.
GX implementation has many requirements. The initiative will leverage Japanese companies’
globally acclaimed technologies for decarbonization to help worldwide efforts aimed at achieving
net-zero GHG emissions. Furthermore, by creating new markets and demands as well as
strengthening Japan’s industrial competitiveness, the country’s economy can be put back on track
for further growth, leading to future economic development and growth in jobs and income.
These basic concepts and discussions in the GX Implementation Council meetings form thefoundation of the following initiatives.
(2) Next steps2
1)
Promotion of thorough energy efficiency improvement and restructuring the
manufacturing industry (through fuel and feedstocks transition)
Energy efficiency improvement not only contributes to a decarbonized society throughreducing energy consumption but also building an energy supply-demand structure that is resilient
to crises. As such, we will promote bold energy efficiency improvement through a combination ofregulatory measures and support measures based on "the Act on the Rationalizing Energy Use andShifting to Non-fossil Energy”
For companies, we will strengthen the support measures for SMEs by subsidies which are
eligible for multiple-year investment plans. We will also strengthen the support measures for small
business owners by increasing subsidies for energy efficiency diagnosis, which examines the useof energy and suggests how to improve energy efficiency.

The Sixth Strategic Energy Plan decided by the Cabinet in October 2021 states that, based on theassumption that ensuring stable supply of inexpensive energy is vital not only for maintaining andstrengthening Japan’s vitality but also for a 46% GHG reduction in FY2030 and achieving net-zero
GHG emissions by 2050, “Japan will address maximum introduction of renewable energy as major
power sources as the top priority; societal implementation of hydrogen and Carbon dioxide Capture,
Utilization and Storage (CCUS) will be promoted; and a necessary amount of nuclear power will be
continuously utilized on the major premise of ensuring safety and public trust. Including these efforts,
Japan will pursue all options to realize net-zero GHG emissions by 2050 by striving to maintain global
competitiveness and to restrain the citizens’ burden by securing a stable and cost-efficient energy
supply.”2

The Sixth Strategic Energy Plan has made clear that Japan’s fundamental energy strategy forclearing the ambitious goal of achieving net-zero GHG emissions by 2050 must be built by considering
all possibilities and utilizing all available technologies. All the actions listed in this document for
ensuring stable supply of energy are within the guidelines set by this Sixth Strategic Energy Plan,aiming to define all options based on these guidelines.
4For the households, relevant ministries and agencies will work together to facilitate
spontaneous cooperation and initiatives by citizens by, for example, establishing a single point ofcontact and strengthening one-stop support for the existing programs to support energy efficiency
retrofitting in houses, such as replacing windows with thermal insulated models with higher
energy efficiency performance. At the same time, relevant authorities will promote theunderstanding between consumers for energy efficiency improvement and changes in consumer
behavior so that the effort take root as a comfortable lifestyles. Special Cash Payments for
Resident Tax-Exempted Households, Etc. will be utilized to back up initiatives by municipalities,
taking local needs into account, to support replacing appliances with energy efficient ones.
Based on "the Act on the Rationalizing Energy Use and Shifting to Non-fossil Energy”, largescale consumers are obliged to submit their medium- and long-term plans and periodic reports on
the shift to non-fossil energy. We will encourage the shift to non-fossil fuel energy with newly
proposed governmental guidelines for the five key industries (iron and steel, chemical, cement
manufacturing, paper manufacturing, and automotive manufacturing) that use 40% of energy
consumed by the entire industry sector3. In addition, by introducing a new system of voluntary
disclosure of the periodic report information under the Act, we will encourage companies todisclose information about energy efficiency improvement and shift to non-fossil energy.
Furthermore, targeted support will be given to, for example, development and introduction of
innovative technologies such as hydrogen reduction for steelmaking, conversion of production
systems from blast furnaces to electric furnaces, conversion to Carbon-Recycling production
systems using ammonia-fueled naphtha cracker and other technologies, and fuel switching forcoal-fired auto power generation.
We will promote the spread of energy-efficient appliance, such as heat pump water heaters,
home-use fuel cells, as well as encouraging the introduction of energy-efficient equipment suchas industrial heat pumps and co-generation, aiming for decarbonization of heat demand and theeffective use of heat .
Demand response will be further expanded through support for introduction of suitablebatteries and control systems, and establishment of a framework for evaluating demand response
performance under "the Act on the Rationalizing Energy Use and Shifting to Non-fossil Energy”.
2)

Making renewable energy a major power source

To spread the usage of renewable energy, which is important as decarbonized electricity,while mitigating citizens’ burdens and seeking coexistence with local communities, and being
based on the key prerequisites of S+3Es (Safety, Energy security, Economic efficiency, andSource: Act on Rationalizing Energy Use regular report (2021 report). Estimation provided by aggregating theenergy used by all enterprises who, among others, declared themselves to be involved in any of the five key
operations as their major business.
3

5

Environment), efforts will be made to maximize the deployment of renewable energy under the
principle of giving it top priority as a major power source. Relevant ministries, agencies, andinstitutions will work closely to ensure the target level of 36-38% for renewable energy in the
power generation mix by fiscal year 2030 is met.
To that end, as an immediate step, and in order to maximize the deployment of solar
photovoltaic (PV) power generation to suitable locations, relevant ministries, agencies, andinstitutions will join forces to install more solar PV panels in places such as public facilities,
residences, factories, warehouses, airports, and railways, as well as exploiting, for example, theprovisions of the Act on Promotion of Global Warming Countermeasures4, in order to facilitate
local-led initiatives for introducing renewable energy. Additionally, best inspection andmaintenance practices for sustaining output will be shared.
As for feed in tariff (FIT) and feed in premium (FIP) programs, power generation costs canbe reduced by further leveraging bidding systems and extending the introduction of the FIP
programs. At the same time, models for solar PV deployment based on long-term contracts with
consumers outside the FIT/FIP programs can be extended.
In order to stabilize the output from renewables power generation, power supplies based on
actual supply-demand situations will be facilitated by installing batteries together with generatorsand facilitating the FIP program.
For a wider introduction of offshore wind power generation, a new public bidding process
was started at the end of 2022, with revised rules for tendering offshore wind projects, such as
giving additional incentives by favoring accelerated starting of commercial operation plans. A
Japan-style centralized approach will also be established to accelerate formulation of projects
based on developing local understanding and support. Furthermore, systemic approaches forextending Japan’s exclusive economic zone will be studied. Additionally, further introduction of
onshore wind, with the proviso that the facilities can coexist with local communities, will befacilitated through initiatives for streamlining relevant regulations and frameworks.
As medium- to long-term actions, development of power grids that can respond to fluctuating
output, vital for wider introduction of renewable energy, will be accelerated. As for specificmeasures for power grid development, country-wide grid networks and submarine direct current(DC) transmission systems will be developed, based on the Master Plan for national power griddevelopment with cost-benefit analysis, while seeking local communities’ support and studying
how infrastructures, such as road and rail networks, can be utilized. The development of interregional transmission networks will be accelerated for 10 years to grow more than eight times(larger than 10 GW) compared to the last 10 years (around 1.2 GW), while submarine DC

4Act on Promotion of Global Warming Countermeasures (Act No. 117 of 1998)

6

transmission from Hokkaido will be developed targeting FY2030. Furthermore, a mechanism forsmoothly raising funds needed for these grid projects will be developed.
Expanding introduction of renewable energy with output fluctuations needs decarbonizedbalancing power to be in place. Regarding stationary batteries , we will formulate the prospects ofintroducing stationary batteries in 2030, and attract investment from private companies. To reducethe costs of stationary batteries and make these commercial quickly, we will promote support for
their introduction, at the same time, establish a market which distributed energy resource can enter,
including batteries for homes, and develop rules that can easily connect batteries to systems.
Maintenance and strengthening of pumped hydro power stations will be promoted leveraging
Long-Term Decarbonization Power Resource Auction, while an environment that can effectively
and efficiently control power fluctuations will be developed by, for example, scaling the demand
response mechanism with support for introducing systems to control distributed energy resources,and by promoting research, development, and introduction of methods for storing excessive powerin the form of hydrogen.
Targeting the early social implementation of next-generation (perovskite) solar cells that canhelp wider introduction of solar PVs and raise the self-sufficiency rate of technologies, research,development, and support for introduction together with demonstration projects in collaboration
with users will be accelerated, while creation of demand and mass production schemes will befacilitated.
Goals for introducing floating offshore wind will be set. To achieve these goals, technologicaldevelopment and large-scale demonstration projects will be implemented, while a huge and robust
supply chain covering wind turbines and their components, floating foundations, and otherelements of offshore wind and relevant industries will be built.
As the disposal of solar PV panels, the provisioning program for disposal expenses launched
in July 2022 will be steadily managed, and there will be planned actions to adequately cope withthe mass disposal expected to peak in the second half of the 2030s.
In order to enable the wider introduction of renewables that can coexist with local
communities, provided that appropriate business discipline is established, the acquisition oflicenses and permits required for land development projects with potential to directly affect risksof disaster, such as impact of deforestation, shall be made a condition for approval under the Act
on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources byElectricity Utilities5. Systemic measures will be defined, including a new procedure for temporary
suspension of support provided to enterprises by the FIT/FIP programs with financial
5Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electricity

Utilities (Act No. 108 of 2011).
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contributions of citizens when relevant legal obligations and other rules are violated. Other
systemic measures will be taken for sustaining the amount of power supplied by renewable energy
through maintenance, management, renovation, and addition of renewable energy facilities inorder to facilitate additional investment for adding capacity to existing renewable energy andensuring their long-term operation.
For further introduction of renewable energy, with regard to geothermal, hydro, and biomass
that can be expected to generate electricity stably, the business environment for them will be
developed further by initiatives including the continuous review of requisite regulations andprograms. Support that addresses specific requirements of different sources will be offered, suchas business feasibility studies, resource surveys, technology development, and support for
introducing artificial intelligence (AI) and Internet of things (IoT).
3)

Utilization of nuclear power

The fundamental premise for utilizing nuclear power is that the national government andoperators never forget the lessons learned from the accident at Tokyo Electric Power Company’s
Fukushima Dai-ichi Nuclear Power Station, continuously asking whether they are free of safety
myths. The national government will lead efforts to make self-motivated safety improvements
beyond satisfying regulation, reform management and organization of utilities, coexist with hostcommunities through supporting for municipalities and continuous improvement of disastermitigation and control methods, including construction and maintenance of evacuation routes
based on unique local situations as well as deepening and extending communication with different
groups of Japan’s population.
On that premise, nuclear power, which is characterized as a carbon free energy source andhaving stable output and high autonomy, will be utilized to achieve both the stable energy supply
and net-zero GHG emissions. In order to make sure to achieve the target of approximately 20-22%
nuclear power of the total power generation mix in 2030 defined by the Strategic Energy Plan,
giving top priority to safety, we will facilitate the restart of the nuclear reactors that have passed
safety reviews by the Nuclear Regulation Authority and have gained local understanding.
Nuclear power will be utilized in line with the Strategic Energy Plan by aiming to improve
nuclear safety through the development and construction of next-generation advanced reactors
with built-in new safety mechanisms. On the basic premise of gaining local understanding, plansfor building next-generation advanced reactors within the sites of existing nuclear power plantsthat have determined to be decommissioned will be materialized, taking developments in backend such as the completion of Rokkasho Reprocessing Plant into account. Other development andconstruction projects will be considered based on the future situation, including the status ofreactors operating in each region and how local understanding has progressed. Additionally, thebusiness environment required for safety improvement and other initiatives will be developed,8

while offering stronger support for research and development, training, and supply chain
maintenance and enhancement. Steps will also be taken to promote research and development
through international collaborations with partner countries, to build a resilient supply chain, andto ensure nuclear safety and security.
In order to utilize existing nuclear power plants maximally, the operation period, limited to
40 years with a possibility of extensions for 20 years in the same way as current regulations, will
be approved to be additionally extended for a certain length of outage periods on the premise of
the Nuclear Regulation Authority conducting rigorous safety reviews.
We will promote the development of a framework that promotes the nuclear fuel cycle,
including achieving the completion of construction goals of the Rokkasho Reprocessing Plant,
sharing knowledge to ensure the steady and efficient decommissioning of reactors, and securing
funds; to encourage country-led understanding by citizens to realize final disposal and drasticallystrengthen proactive work for local municipalities, we will also promote measures to create a
support system as a nation for municipalities to accept literature survey, to strengthen the systemof the implementing entity, the Nuclear Waste Management Organization of Japan (NUMO), toestablish a conference for discussion between the national government and the relevant
municipalities, and to suggest from various levels of the government to local stakeholders.
4)

Facilitating introduction of hydrogen and ammonia

Hydrogen and ammonia are expected to play important roles in various fields including
power generation, transportation, and industry. These energy sources can also improve the selfsufficiency rates of energy and help managing renewable energy’s fluctuating output, making themone of key energy sources for achieving net-zero GHG emissions while helping with stable energy
supply as well. Hydrogen and ammonia can be co-fired with fossil fuel, so they can support thetransition towards a net-zero GHG emissions by reducing CO2 emissions from thermal power
generation while ensuring stable supply of electricity. At the same time, policy measures andinfrastructures will be developed strategically so that large-scale introduction of hydrogen andammonia can positively impact Japan’s economy by strengthening industries and creating jobs,
among other effects.
A large-scale and resilient supply chain will be built inside and outside Japan under a national
strategy in order to induce the transition to clean hydrogen and ammonia, and also by accelerating
the introduction of a comprehensive program packaging regulations and support schemes, such assupport for improving investment predictability while paying attention to price differences against
existing fuels, and support for developing clusters that will induce larger demand and industry
concentration. Also, development of technologies for co-firing and single-firing as well as
measures aiming at extended introduction of hydrogen and ammonia for commercial purposes in
the mobility field will be accelerated.
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From the perspective of national energy security, support will also be offered for building a
supply chain for producing and distributing hydrogen and ammonia inside Japan. Research anddevelopment as well as the introduction support of both production and usage of hydrogen derived
from excess renewable energy sources will be accelerated so that large-scale production anddistribution of green hydrogen supply chain inside Japan in particular can be realized as soon as
possible with medium- to long-term perspectives in mind. When importing hydrogen andammonia from abroad, sufficient attention must be paid to the global consensus on GHG emissions
during their production. At the same time, stronger relationships with hydrogen producing andexporting countries should be built with an eye to acquiring upstream interests.
With a view to fostering sufficient social acceptance in introducing hydrogen and ammonia
to the society, demonstrations and other activities at the Expo 2025 Osaka, Kansai, Japan should
be promoted. Also a hydrogen safety strategy covering regulatory rationalization and optimization
should be developed and a global standardization sought, by learning from examples outside Japanand ensuring safety as a primary concern.
5)

Establish electricity and gas markets to achieve net-zero GHG emissions

With regard to electricity system reforms, while there have been achievements such as
consumers given more choices and formulation of cross-regional power supply systems, there aresome challenges left in terms of program designs. One example is supply-shortages caused bysuspensions and shutdowns of thermal power stations, delays in restarting nuclear power stations,and various other reasons. Another example is stronger discipline within electricity retail businessfor protecting consumers.
Therefore, to secure a stable supply capacity, we will steadily run a capacity market, to belaunched in FY2024, as well as support the realization of a stable supply through Reserve Power
Plants with a view to utilizing the inactive power plants in emergencies, and through Long-term
Decarbonized Power Resource Auction; we will also support systematic investment indecarbonized electric power.
Decarbonized balancing power will be developed by fade-out of inefficient coal-fired power
plants and switching to cleaner natural gas. There will also be other approaches such as improving
power generation system efficiency, co-firing and single-fuel firing of hydrogen and ammonia,
maintaining and enhancing pumped hydro, facilitating introduction of batteries, and developing
carbon dioxide capture and storage (CCS) and Carbon Recycling technologies. Also, countrywide
grid networks and submarine DC transmission systems will be developed, based on the Master
Plan and with cost-benefit analysis, while seeking local communities’ support and studying how
infrastructures, such as road and rail networks, can be utilized. The development of inter-regionaltransmission networks will be accelerated for 10 years to grow them more than eight times
compared to the last 10 years, while submarine DC transmission from Hokkaido will be developed
10

targeting FY2030. Furthermore, a mechanism for smoothly raising funds needed for these gridprojects will be developed. Remote islands and other locations that have constraints on powersources and grid scales will be subject to necessary initiatives taking specific local requirements
into account.
In order to ensure procurement of fuel, enhanced government involvement in fuelprocurement and other approaches will be sought, such as building a framework to enable reviewsof procurement business structures and fuel reallocations, as well as a 'strategic buffer liquefied
natural gas (LNG)' mechanism to secure surplus LNG for emergency use in normal times.
Risks of city gas supply shortages will be mitigated through city gas supply-demand
management, such as capping city gas usage using financial incentives and other measures,
exploiting alternative energy and other potential sources, and supply-demand controls as lastresorts as mandated by the revised Gas Business Act.6
For consumer protection, steps will be taken to improve electricity retailers’ self-discipline
through operation monitoring and other measures. At the same time, in order to energize
competition between electricity retailers, measures will be taken aimed at strengthening access tosustainable and consistent power sources. Actions required to ensure the neutrality andtransparency of power transmission business will also be taken.
6)Enhancing government involvement, including resource diplomacy toensure access to natural resources
Russia’s invasion of Ukraine has further decreased the global LNG supply capacity. The
world’s resource and energy situation seems even more complex and uncertain. Under thesecircumstances, the government of Japan must be at the forefront of diplomatic efforts to ensure
access to natural resources so that fossil fuels, mineral resources, and other material can becontinuously supplied, since the country depends on imports for the majority of the resources it
needs.
For the purpose of ensuring stable supplies of oil, natural gas, and metal resources, in orderto support the acquisition and procurement of upstream and middle-stream interests outside Japan
where private businesses are involved in development and production activities, initiatives will befacilitated to engage in active resource diplomacy and provide stronger government support for
acquiring LNG through government arms such as the Japan Organization for Metals and Energy
Security (JOGMEC) and the Japan Bank for International Cooperation (JBIC).
In addition, in light of the increasingly uncertain LNG market trends, and given the nature of
LNG, which is difficult to reserve for the long term, all possible policy measures will be mobilized

6Gas Business Act (Act No. 51 of 1954).

11

to ensure stable supplies, including the establishment of strategic buffer LNG by leveraging theprivate sector’s procurement capabilities.
Interests in Sakhalin 1 and 2, Arctic LNG 2, and other international projects will be preserved
for the time being, as they are important for energy security. The public and private sectors willcontinue to do their utmost to ensure stable supplies while working together with internationalsociety including the G7 countries.
In order to realize an energy security framework encompassing all of Asia, Japan will invest
in upstream development in partnership with Asian countries and build a mutual cooperation
system for acquiring LNG in times of emergency and supply shortages. Also, Japan will facilitate
the practical transition towards stabilized energy supply and net-zero GHG emission in all of Asia
through close communication with resource producing countries to increase their LNG production
and other approaches.
In terms of securing indigenous resource that can be supplied without disruption and are notprone to geopolitical risks, support for technological and other development projects in the fieldof resource exploration in Japan, especially for methane hydrate, as well as submarinehydrothermal deposit, will continue to be facilitated so that positive outcomes can be gained assoon as possible.
7)

Battery industry

For establishing a domestic annual manufacturing base of 150 GWh of batteries and materials
by 2030, support will be offered for investments in plants manufacturing batteries together with
their material and components, and to programs that will establish and enhance advanced
manufacturing technologies using digital transformation (DX) and GX. These approaches andintroduction of a mechanism to visualize production CO2 emissions will drive the decarbonizationof battery production and strengthen Japan’s competitiveness in this field. Also, support will begiven to efforts aimed at winning a certain share in next-generation battery markets, for example,
by accelerating all-solid-state battery research and development with the goal of making the
product available around 2030.
8)

Resource circulation

To establish Growth-Oriented, Resource-Autonomous Circular Economy, a mechanism toaccelerate resource circulation by collaboration between manufactures and recyclers, among otheractors and supporting medium- to long-term creation of a resilient resource circulation market will
be introduced. Resource circulation throughout the entire life cycles can be accelerated bypromoting circularity-friendly designs, supporting introduction of facilities that contributes toresource circularity such as plastics, metals, and sustainable aviation fuel (SAF) etc., measuring

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circularity and CO2 emissions by leveraging information distribution platforms based on digitaltechnologies and advocating disclosure, among other initiatives.
GX in transport sector

9)a.

Next-generation vehicle

The ambitious FY2030 target for fuel and power efficiency, based on the Top Runner program
introduced by the Act on Rationalizing Energy Use and Shifting to Non-fossil Energy, and stronger
enforcement of those new rules will be the tool for facilitating the development of electrified
vehicles and improving their performance as well as for supporting their introduction and also
assisting the roll-out of recharging stations and creating methods of charging from vehicles. As
medium- to long-term plans in line with the non-fossil energy switching target will be mademandatory for transportation businesses and shippers under the revised Act on Rationalizing
Energy Use, businesses that have set ambitious goals for introducing fuel cell vehicles (FCVs),
battery electric vehicles (BEVs), or any other relevant equipment will be eligible for focusedfinancial support when purchasing them or on some other occasions involving such equipment.
b.

Next-generation aircraft

Efforts will be made with a target date of the 2030s to develop demonstration aircraft, develop
and demonstrate SAF production methods, introduce fuel-efficient aircraft, and improve flight
operation, among other activities. Japan will continue to lead efforts to establish international rules
and discussions on specific measures including a framework for mandatory CO2 reduction in linewith the 2050 net-zero emissions target agreed by United Nations organizations, and will promote
SAF utilization as well as create demand inside and outside Japan for aircraft embedded with newtechnologies by developing basic policy for promotion of decarbonization in aviation sector inline with the revised Civil Aeronautics Act.7and so on.
c.

Zero-emission ship

In order to achieve net-zero GHG emissions for international shipping by 2050, clear thegoals of the Plan for Global Warming Countermeasures, and other relevant purposes, requisite
support programs will be introduced to spread the use of zero-emissions ships, and so on, indomestic and international shipping. Japan will lead international rule-making and other initiatives
for achieving net-zero GHG emissions using both economic and technical measures and facilitate
wider use of zero-emission ships and so on that can make maritime industries more competitive.
d.

Railway

Introduction of renewable energy by, for example, utilizing railway assets will be facilitated
together with initiatives to promote railway transportation. At the same time, introduction of
7Civil Aeronautics Act (Act No. 231 of 1952).

13

energy efficient and CO2-saving railway vehicles, and fuel cell railway vehicles will be facilitated,
as well as demonstrations of the integrated hydrogen stations that will become hydrogen supply
points.

e.

Logistics and human transportation

In order to shift demand structures towards using less energy and more non-fossil fuel infreight and passenger transportation, actions such as promoting wider use of trucks, buses, or taxis,
and other types of next-generation vehicles in business and facilitation of green logistics by, forexample, supporting introduction of comprehensive renewable energy-related facilities, modal
shift towards railway and vessels, and implementation of drone delivery, and encouraging the useof public transport through mobility-as-a-service (MaaS) implementation will be planned.
10)

Digital investment aimed at decarbonization

Support aimed at facilitating the development of and investment in energy efficient
semiconductors, photonics electronics convergence technologies, or any other approaches that are
indispensable for digitalization, electrification, and certain other purposes will be considered.
Data centers are the platforms for processing information. Going forward, extension of thecoverage of benchmarking frameworks under the Act on Rationalizing Energy Use and othermeasures will used to further develop an energy efficient information processing environment.
As for semiconductors, investment for growth targeting GX will be realized by making
businesses commit to continuous production activities and social implementation of their researchoutcomes.
11)

Houses and buildings

Compliance with energy efficiency standards will be made mandatory by FY2025. To ensure
the energy efficiency performance of houses and buildings newly constructed after FY2030 tomeet the level of the ZEH (Net Zero Energy House) and ZEB(Net Zero Energy Building) standard
as well as improve the performance levels of stock of all of the existing houses and buildings, thegovernment will strengthen support for building new houses and buildings with high energy
efficiency performance and retrofitting existing houses and buildings to improve energy efficiency.
At the same time, we aim to update the building material Top Runner program based on "the Act
on the Rationalizing Energy Use and Shifting to Non-fossil Energy” earlier than FY2030 and
extend its coverage. In addition, we promote the usage of wooden materials by rationalizing
building standards and support.
12)

Infrastructure

Introduction of renewable energy by leveraging airports, roads, dams, sewers, and othercomponents of infrastructure, a thorough reduction of energy consumption, and development of14

cities and communities that will help decarbonization, among other projects, will be facilitated.
To decarbonize industries and ports while enhancing their competitiveness, development of
Carbon Neutral Ports (CNPs) and decarbonization of their construction processes will be promoted.
13)
a.

Carbon Recycling and CCS
Carbon Recycling fuelCarbon Recycling fuel can be used for existing infrastructure, facilities, and internal
combustion engines. This type of fuel can keep decarbonization investment costs low, while
having a positive effect for stable supply of energy by ensuring diversity in energy sources otherthan electricity.
As for methanation, discussions on how to establish domestic and international rules forregulating CO2 emissions when combusted will be coordinated. Together with fossil fuel-freeliquefied petroleum gas, the Green Innovation Fund will be exploited to support and promoteresearch and development projects, while exploring different ways to support introduction of thesetechnologies while reducing their costs.
In the field of SAF and e-fuel, Public-Private Council meetings will focus on how to solve
technological, economic, and systemic challenges. Projects for developing technologies to makevarious production methods available will be facilitated, while support will be offered to invest in
production facilities aimed at demonstrating and implementing these fuels.
b.

Bio-manufacturing

To create initial demand, measures such as increasing the percentage of bio-based products
in public procurement or involving agriculture and other businesses will be taken to build up themarket.
Usage of bio-based products can be incentivized by creating certification and credit programsfor CO2 and other raw materials to justify their costs added to the prices as well as establishing
schemes for reuse and collection, among other approaches.
c.

CO2 reduction concrete

In order to develop the market, support for projects such as building production facilities forCO2 reduction concrete and products using calcium carbonate will be offered, while formulating
measures for stimulating demand.
Methods to evaluate CO2 levels inside concrete during production will be established.
Technologies ready for application in construction sites throughout Japan will be tested in national
government-run projects and elsewhere to have their results incorporated into technologicalstandards and other rules so they can be fully implemented in construction work.

15

d.

CCS

To develop a business environment for starting CCS by 2030, development and operation ofadvanced projects that can be models for other projects will be supported. Business risks and safetyissues for geologic CO2 storage will be fully addressed, and current discussions on developing
relevant legal frameworks will be accelerated to have systemic measures in place.
14)

Food, agriculture, forestry, and fisheries

The Strategy for Sustainable Food Systems, MIDORI8, MIDORI Act9 and other frameworks
promote investments on decarbonization of agriculture, forestry, and fisheries, enhancement ofcarbon sinks, and developing innovations utilizing forest-sourced material, which will contributeto realizing both decarbonization and economic growth.

3. Realizing and implementing Pro-Growth Carbon Pricing Concept(1) Basic concept
Investment in different fields is needed to fulfill Japan’s global commitments while
enhancing its industrial competitiveness and growing its economy at the same time. According to
one estimate, this will require more than 150 trillion yen for 10 years. To bring in this enormous
GX investment through public-private partnerships, a Pro-Growth Carbon Pricing Concept will
be swiftly realized and implemented. The following three methods will be applied:Bold initial investment leveraging instruments such as GX Economy
Transition Bonds (including Government support integrated with regulation for GX
investment),Incentives for upfront GX investment through carbon pricing, and

Leverage new financial instruments.

In order to realize GX investment and other enormous decarbonization investment, better
predictability for private businesses is needed. To that end, the government must show its longterm commitment spanning multiple years, and also publish outlooks for regulatory and structural
measures. Accordingly, the government will introduce a comprehensive strategy aimed atstrengthening industrial competitiveness and economic growth at the same time. In key areas
where GX investment can be expected, the government will announce its targets for bringing in
new products in each area and defining new regulations and frameworks, to be presented as a
combined roadmap. These undertakings will have their progress assessed, analyzed, and reviewed

8

Launched by Ministry of Agriculture, Forestry and Fisheries, May 12th, 2021.

Law Concerning Promotion of Low Environment Impact Business Activities to Establish a Food
System in Harmony with the Environment(Law No.37 of 2022).
916

as required, inviting industrial and expert insights as well. Additionally, in order to drive therealization and implementation of Pro-Growth Carbon Pricing Concept and other GX initiatives,
actions needed to foster understanding between citizens and industries will be taken.
Furthermore, to accelerate the establishment of Pro-Growth Carbon Pricing Concept andits implementation, bills addressing legal requirements will be submitted to the 211th session of
the Diet. For some of the relevant schemes that will be introduced in the future, detailed rules
required for their implementation will be established within two years, after requisite discussions
and considerations.
(2) Support for bold initial investment leveraging GX Economy Transition Bonds (Government support
integrated with regulation for GX investment)
1) Basic concept
In order to invest more than ¥150 trillion in GX for10 years through public-private
partnerships, the government must offer long-term multi-year support programs to provide
predictability for private businesses. To this end, new GX Economy Transition Bonds program
will be launched. These bonds can be leveraged to offer bold support for advance investment
amounting to ¥20 trillion. This program for promoting investment will be implemented together
with regulatory and structural initiatives to have a positive impact on the creation of new markets
and demands.
First, based on the current investment and business projections, support at a level of ¥20
trillion will be offered by the government for investment in switching to renewables, nuclear, andother non-fossil energy, structural transformation and fundamental promotion of energy efficiency
improvement from both demand and supply sides in industries including iron and steel, chemical,
and other manufacturing sectors, and research and development on resource-recycling, carbon
storage, or other technologies, and other relevant projects, regardless of enterprises’ scale.
This support will be offered in combination with appropriate subsidies, investment, or loan
guarantees, based on individual project’s level of realization, business risks, and even their market
and product characteristics, in line with different instruments available for financing enterprises.
It should be noted that while the government must first show its willingness to strategicallydesign this support portfolio, this portfolio must also be reviewed flexibly based on impact surveys
and assessment of support programs.
Therefore, when setting priorities for different support areas, deciding who can get support,
or making other choices, technology and market projections, program impacts, and other elements
will be considered. Checks will also be in place to assess the progress of supported programs andto assess them, in order to determine, for example, if those programs still need to be supported.
Projects eligible for support will be reviewed flexibly through these provisions.
17

2)

GX Economy Transition Bonds

The government, in order to promote long-term multi-year investment, will issue GX
Economy Transition Bonds worth ¥20 trillion for 10 years, with annual caps to be decided by theDiet. The bonds will be financed by future revenues coming from the introduction of a carbon
pricing mechanism.
Plans for issuing the GX Economy Transition Bonds will not be limited to offering them asfinancial instruments identical to existing government bonds (including Construction, Special
Deficit-Financing, and Reconstruction Bonds), but will include a new approach in line withinternational standards. This requires solutions to difficult challenges such as a. ensuring a certain
level of market liquidity, b. technical readiness in private and other sectors to accept the bonds,
and c. controlling how bond revenues are spent (by following up on the expenditures, compilingreports, among other actions). An international accreditation is needed for issuing these bonds
with the new approach. A body for considering these issues by members from ministries andagencies will be established at an early stage.
Revenues from the GX Economy Transition Bonds will have to be expressly spent for
promoting GX investment. To this end, the fund will be managed by the Special Account forEnergy Measures, together with the provisional budget set by the government as part of the GX
investment under this Basic Policy. The bonds will be designed so they will be redeemed by
FY2050, the target year for achieving net-zero GHG emissions.
3)

Principles of government actions for promoting investment

As for the principles of government actions for promoting investment, in addition tocombining these actions with regulatory and systemic methods so as to promote GX investment
effectively, matching benefits with the cost burden will be considered when choosing the target
areas for investment, which will be projects that are too difficult for private businesses to maketheir own investment decisions by themselves, and at the same time will help reinforce Japan’s
industrial competitiveness, grow its economy, and reduce GHG emissions at the same time. These
principles are different from traditional approaches which were solely aimed at curbing energy
consumption or reducing emissions.
Government support will be offered based on these principles and to projects fulfilling thefollowing requirements.
Basic requirements
I. Candidate projects must be, due to their innovative technologicalapproaches or by the nature of their enterprise, very difficult to make investment
decisions for by private businesses alone. As a starting point, each candidate business18

must fully commit to innovating corporate management, including methods for raisingfunds.
II. They must help bring stronger industrial competitiveness, economic growth,and emissions reductions all at once. The government will set priorities for the
candidate projects based on their market size, reduction scale, necessity of domestic
supplies indispensable for clearing GX goals, and other factors, all of which will beconsidered comprehensively. Projects will then be supported in the order of theirpriorities.
III. Support must be offered in combination with regulatory and structural
approaches that will induce mechanisms for changing corporate investment anddemand-side behaviors.
IV. The scope of support will be limited to projects that will increase investment
in human and physical resources inside Japan (including investment in resource
circulation, domestic-only markets, and other areas that will help value circulation
within Japan’s domestic economy). Capital investment that are completed outside
Japan or any other projects that do not help emissions reduction inside Japan, as wellas projects such as credits of which effect is limited to only help clear targets, will not
be eligible for support.
In addition to the principles above, candidate projects must fulfill one of the requirementsfrom A to C for industrial competitiveness enhancement and economic growth, and also fulfill oneof the requirements from 1) to 3) for emissions reductions, and will be given priorities accordingly.
Industrial competitiveness enhancement and economic growthA.
Growth investment that has technological or business innovativeness, andis aimed at capturing foreign demand or expanding domestic demand
B.
Growth investment with advanced technology that helps both reducing
fossil feedstocks/fuels and energy as well as improving profitability (such as integration,
reorganization, or mark-up)
C.
Measures to address domestic demand in the initial stage of introduction of
key goods for which a nationwide market is expected (accompanied by supply-side
investment)
Emissions reduction
1)
Investment in research and development that can help future reduction
inside Japan through technological innovation
2)
Capital investment that can directly help reduction inside Japan with ahighly effective reduction technology
3)
Measures to induce initial stage demand for introducing new key productswith long-lasting reduction effect and have nationwide demand19

(3) Carbon pricing that will give incentives for early GX investment
1)

Basic concept

Carbon pricing is a scheme for adding value to GX products and businesses by setting prices
for carbon emissions. At the same time, if this scheme were introduced without considering
availability of alternative technologies or impact on international competition, Japan risks hurting
its economy and triggering an exodus of production facilities (carbon leakage). Therefore, thisapproach will not be introduced immediately and deferred until after a period for focusing on GX.
Also, announcing in advance the policy to set low initial prices and gradually raising them
can attract more early-stage GX investment. A structure for giving business incentives to startinvesting in GX at an early stage can be created by using these carbon pricing features effectively.
These methods, combined with early-stage investment of ¥20 trillion by the government andutilization of new financial instruments, will target over ¥150 trillion of GX investment throughpublic-private partnerships.
With regard to designing concrete carbon pricing schemes, ambitious reduction goals set byindividual companies based on their different business situations and with focus on industries withlarge emissions will form the basis for an emissions trading system that can be introduced tostrengthen industrial competitiveness and also reduce emissions efficiently and effectively. Also,
for incentivizing general GX approaches not limited to industries with large emissions, GXSurcharge will be also introduced as a way of applying the carbon pricing scheme to all carbon
emissions equally.
The principle for introducing these carbon pricing schemes is that it will be synchronizedwith medium- to long-term reductions in total energy costs. To be specific, their introduction will
be planned to align with the expected decrease in petroleum and coal tax as a result of GX
evolution and the decrease in total renewable energy surcharge revenues 10 after it has peaked asa result of falling renewable energy purchasing prices.
2)

Next steps

a. Full-scale launch of the emissions trading system
The emissions trading system to be experimentally launched in FY2023 and steered by the
GX League is a voluntary scheme based on member companies’ leadership. Businesses that set
their own voluntary goals will be held accountable and strongly incentivized to commit toreduction. With that expectation, setting reduction targets and clearing them will be left to theirvoluntary efforts.

10

Renewable Energy Power Promotion Surcharge
20Even as member companies’ voluntary efforts are emphasized, in order to further improve
the system’s fairness and effectiveness, methods to expand the system’s membership, independent
non-government certificates for reduction targets based on government guidelines, stronger
discipline for achieving targets (including instructions, guidance, and mandatory compliance), andother measures will be considered after the emissions trading system is launched full-scale in
FY2026, while its further development will be discussed in line with the system’s evolution andinternational developments.
There is still a concern over the emissions trading system that, while it can reduce emissions
efficiently and effectively by leveraging the market mechanism, the low predictability of trading
prices due to market price changes may be an issue. To address this concern, the programs will be
designed by taking examples from outside Japan and to increase trading pricing predictability andpromote corporate investments by incorporating a gradual and medium- to long-term carbon priceincrease, appropriately combining lower and higher price limits, and also disclosing these priceranges in advance.
These price ranges will be set after FY2026 when the carbon trading market will be launchedfull-scale, and incorporate behavior-changing effects in favor of GX, trading prices in the carbon
credit market due to be launched in FY2023, international carbon prices, and other factors. The
price ranges can also be reviewed to a certain level to increase their predictability, with a projected
price increase over around five years and based on changing economic situations, among otherconsiderations.
With these future developments in scope, the government and GX League member
companies will collaborate to gather required data, accumulate insights and expertise, and discuss
government guidelines, among other things from FY2023.
Also, with focus on emissions trading system member companies with large emissions, andbased on the idea of Government support integrated with regulation for GX investment, asynchronized assistance program leveraging GX Economy Transition Bonds will be considered.
b. Gradual introduction of auctioning for power generation utility
For giving stronger incentives to reduce emissions and achieve net-zero GHG emissions,electrification coupled with decarbonized electricity will be important. Accordingly, based on
examples in the EU and other countries outside Japan where auctioning are used in the power
generation sector and targeting the power generation sector with renewable or any other alternative
sources, an auction scheme will be gradually introduced for power generation utility (the power
generation utility defined in Article 2, Paragraph (1), item (xv) of the Electricity Business Act 11)
with large emissions.

11Electricity Business Act (Act 170 of 1964).
21

Specifically, the emissions quota proportional to the volume of emissions that must be
acquired for the power generation business will be auctioned. This emissions quota will initiallybe allotted for free and gradually decreased (in other words, its charged proportion raised), basedon emissions volume projection, power generation efficiency (benchmarks), and other factors andalso in line with relevant information such as the company’s GX transition status.
The timing to start the gradual introduction will be set at FY2033. The approach is the sameas GX-Surcharge, since the auctioning auction system will also be introduced while medium- tolong-term total energy costs will decrease and total revenues from renewable energy surcharges
will have peaked out by then. At the same time, this program will be harmonized with the existing
Sophisticated Methods Act12 and other legal provisions to make different policy measures more
effective.
c. Introduction of GX-Surcharge
For incentivizing general GX approaches not limited to industries with large emissions, GXSurchargea will be introduced as a way of applying the carbon pricing scheme to all carbon
emissions equally. Specifically, if this scheme were introduced without considering the availabilityof alternative technologies or the impact on international competition, Japan risks hurting its
economy and triggering an exodus of production facilities (carbon leakage). Therefore, thisapproach will not be introduced immediately and deferred until FY2028 after a period of five years
for focusing on GX. More early-stage GX investment by private companies can be promoted by
setting a policy for fossil fuel importers and other businesses that sets low initial prices andgradually raise them, with this approach announced in advance.
Also, with regard to the scope of this scheme, considerations will be given to exemptions andother requisite measures that will be in place for a certain period of time based on classifications
and other mechanisms used by similar, existing structures, while for the paid auction and GXSurcharge under the emissions trading system, considerations will be given to introducing
requisite adjustment measures such as preventing dual payment for the same carbon emissions.
Additionally, with the basic understanding that this scheme will be introduced as medium- tolong-term total energy costs go down, the scheme will be designed to allow GX-Surcharge levels
and other parameters to be decided based on factors such as that trading prices in the emissions
trading system will ultimately be decided by the market.
d. Establish the GX Promotion Organization for implementing carbon pricing and othersystems
The GX Promotion Organization will be established as an institution that manages theemissions trading system and carries out operations such as collecting contributions and GXAct on the Promotion of Use of Non-fossil Energy Sources and Effective Use of Fossil Energy Materials by
Energy Suppliers (Act 72 of 2009).
12

22

Surcharge (including part of early stage investment support). In order to introduce a hybrid carbon
pricing scheme using the emissions trading and carbon surcharge systems, the Organization willcomprehensively manage coordination, control, and collection activities for both systems.
Also, with regard to the full-scale launch of the emissions trading system in FY2026, in orderto smoothly operate various processes in this scheme and for stable operation of this system in a
way which achieves both medium- to long-term industrial competitiveness and efficient andeffective emissions reduction, the Organization will carry out activities such as the managementof emissions reduction and trading results, paid auctioning auctions, and monitoring operations
aimed at stabilizing trading prices.
(4) Leverage new financial instruments
1)Basic concept
In order to invest over ¥150 trillion in GX for10 years through public-private partnerships
for achieving net-zero GHG emissions by 2050, active financial services from private financial
institutions and corporate investors are needed, together with government support in the form of
GX Economy Transition Bonds.
To achieve the target of net-zero GHG emissions by 2050, funds provided by investors andfinancial institutions to transition initiatives undertaken by hard-to-abate industries are absolutely
necessary, along with expanding green finance. As such, initiatives to build international support
for transitional finance will be strengthened.
At the same time, in some GX areas there exist cases that require extensive funding for a long
period of time, but private financial institutions cannot take these risks by themselves because ofhigh levels of uncertainties in technologies and demand. Therefore it is important to establish
financing approaches combining public and private funds, or blended finance.
Additionally, Japan has the largest number of entities supporting the Task Force on Climaterelated Financial Disclosures (TCFD), and the industrial and financial sectors have engaged indialogues through active corporate information disclosures. From now on, based on discussions
at the International Sustainability Standards Board (ISSB) and other bodies, an enabling
environment will be developed to promote sustainable finance as a whole, including disclosuresof climate-related information.
2)Next stepsa.

Calling private sector fund into GX areas(Green Finance)

23

The government will create the enabling environment for the development of the green
finance market in Japan by, for example, enhancing the list of green projects to further clarify thecriteria for green eligibility in the Green Bond Guidelines, and establishing a new platform targeting
issuers to increase green bond issuance with the cooperation of market participants. (Transition

Finance)
For enhancing initiatives to build international support for transition finance, actions must be
taken to ensure its eligibility and credibility. Transition finance also needs to extend its financing
outreach by improving sector-specific technology roadmaps and taking other steps to attract
investors to relevant projects.
Especially, signatories of coalitions under the Glasgow Financial Alliance for Net Zero
(GFANZ) are required to achieve net-zero emissions by 2050, including their financed
emissions. They might hesitate to finance hard-to-abate industries that will increase their own
financed emissions depending on disclosure methods. As such, a framework for having transition
finance positively evaluated will be discussed, taking into account global calculation anddisclosure methods. Relevant ministries and the industry will jointly continue to consider
competition policy measures that will encourage collaboration among multiple companies.

b.

Develop and establish a financial method combining public and private funds (blended
finance)
Appropriate actions for different risks are important for promoting GX investment bybusinesses and fund-raising through private finance. In addition to promote private
investment by announcing medium- to long-term government policy road maps to improvepredictability of the future, it is important to skillfully combine public and private funds (i.e.,
blended finance) to accelerate the overall social implementation of decarbonizing
technologies.
In the United States and Europe, public and private entities are developing measures tofacilitate GX investment by offering financial assistance such as subsidies, funding, or loan
guarantees depending on the risks of each project to overcome uncertainties never experienced
before. Japan also needs to understand GX investment as a new asset class to develop and set
up new financing methods, with an eye to boosting its own industry’s global competitiveness.
As of today, there are not enough people with expertise in GX-related technologies, finance,
climate change policies, etc. To address this issue, a system will be built in which members of
public and private entities can work together sharing their insight and expertise to develop andimplement the new financing methods.
Specifically, the GX Promotion Organization, a public institution formed on the basis of
public interest, fairness, and neutrality, will consider and implement risk mitigation measures24

(such as loan guarantees) using financial methods for GX technologies’ social implementation
stages, by, as required, gathering project stakeholders (including businesses, public andprivate financial institutions, national research and development agencies that support
technological developments, institutional investors, lawyers, accountants, and other relevant
experts), interviewing different parties to understand and analyze the risks they can accept, inorder to identify the risks private banks or any other players cannot take (including periods
longer than standard investments and loans, as well as the large scale of funds required).
During the process, the GX Promotion Organization will work together with private financial
institutions as well as Japan Finance Corporation, Development Bank of Japan, Japan
Investment Corporation, Japan Green Investment Corp. for Carbon Neutrality, and otherpublic financial institutions to expand private investment.
c. Facilitate sustainable financeFollowing the revision of the Tokyo Stock Exchange Corporate Governance Code inJune 2021, companies listed on the Prime Market are required to make disclosures based on
TCFD recommendations, along with other information. Such efforts have resulted in Japan
having the largest number of TCFD-supporters. However, there is room for improvement in
the contents of disclosure, and it is important to enhance disclosures based on each company’sbusiness strategy. To this end, assistance for further disclosures will be offered through humanresource development programs provided by the TCFD Consortium, among other support.
Disclosure of non-financial information, especially those related to sustainability
including decarbonization, has been gaining attention and becoming more important than everin parallel with the progress of the ISSB’s discussion internationally.A new section is to becreated for disclosure of sustainability-related information in the Annual Securities Reports,
and necessary procedures, including the revision of the Cabinet Office Ordinance, will betaken accordingly.
Additionally, initiatives to promote sustainable finance, such as those listed below, will
be taken to further mobilize capital to GX areas.
(Leverage market functionalities to expand ESG markets)
To ensure the objectivity of green finance and transition finance, among othertargets, adherence to the Code of Conduct for ESG Evaluation and Data Providers,created in December 2022, will be promoted, and guidelines for overseeing ESG
investment trusts that have green-washing concerns will be developed by the end of
FY2022.
(Leverage financial institutions’ functionalities)

25

In addition to the Supervisory Guidance on Climate-Related Risk Management
and Client Engagement released in July 2022, other guidelines for facilitating
dialogues between financial institutions and businesses will be developed by June
2023, with the purpose of advocating support for decarbonization by financial
institutions to businesses, with reference to how to design engagement between
financial institutions and businesses aimed at giving financial assistance for transition.
(Multi-area initiatives)
With regard to impact investments for solving social problems, ways to fundinnovations for decarbonization and other approaches will be considered, with theaim of formulating basic guidelines for impact investing by June 2023.

4. Strategy for global actions(1) Basic concept
Combating climate change is a common challenge we face, and we must work together andtake actions to achieve net-zero GHG emissions. Today, each country is taking steps toward
decarbonization in accordance with national circumstances. By leading the formation of a clean
market and collaborations for innovation, Japan will contribute to the realization of global GX.
Considering the fact that Asia accounts for more than half of global emissions, Japan will
also contribute to GX in the region. We will make efforts to materialize the Asia Zero Emission
Community (AZEC) initiative, as a regional platform, to provide various supports, coordinate
policies, pushing further energy transition with Asian countries, and promote efforts for
decarbonization in various and practical ways while also ensuring energy security.
Japan will contribute to global GX by taking initiatives both globally and regionally.
(2) Next steps
In order to contribute to global decarbonization, efforts will be advanced to form a global
clean market by leveraging technologies of Japanese businesses, and actions required will be taken,
such as providing financial support, to finance the growing energy investment in Asia.
1)GlobalCreation of markets where the values of green steel, green plastics, energy efficient products,
and other goods are appropriately evaluated will be promoted by establishing global evaluation
methods for the diffusion of green products.
In addition, the development of a new way to evaluate the contribution of companies to the
reduction of GHG emissions throughout the society (including “avoided emissions”) will be
26

promoted so that such evaluation will be recognized as value and become an additional perspective
to mobilize financial resources.
2)AsiaIn Asia, we will back up enormous future energy investment by accelerating the formulationof clean energy projects, including renewable sources. As part of this effort, work is underway
within the Asia Energy Transition Initiative (AETI) framework to support the formulation of aroadmap towards achieving net-zero GHG emissions, back up financing activities for transition
technologies and projects based on the Asia Transition Finance Guidelines and other relevant
schemes, support programs to develop decarbonization technology experts and other talents, forexample. These undertakings will be in line with each Asian country’s unique requirements andtake sustainable economic growth, national and regional energy security, and measures against
climate change into consideration.
We will also utilize JBIC, Nippon Export and Investment Insurance, JOGMEC, Japan
International Cooperation Agency (JICA), and other government arms to offer public financing
assistance. Furthermore, we will promote further utilization of the Joint Crediting Mechanism(JCM) by expanding the number of JCM partner countries, enhancing its implementation structure,
and also envision implementing large-scale projects including CCS. In addition, we will promote
ASEAN-Japan Climate Change Action Agenda 2.0 initiative.

5. Promoting GX for entire society(1) Just Transition
1)Basic concept
Just Transition is a concept proposed by the International Trade Union Confederation (ITUC)
at the COP15 meeting in 2009. From this Just Transition perspective, shifting the workforce
appropriately to emerging industries becomes important when promoting GX in Japan. Supportingsmooth workforce transition from fossil fuel industries to low-carbon industries can ensure thelivelihoods and jobs for citizens, and also help Japan’s economic growth. Therefore, thegovernment will offer required support to talent development programs in universities and otherinitiatives, based on each industry’s unique situation.
2)Next steps

27

The original investment policy package of ¥400 billion over three years has been extended
to ¥1 trillion and five years, by taking in, among other developments, the comprehensive economic
measures decided by the Cabinet in October 2022 to overcome inflation and rebuild the economy.
Just Transition will be backed up by acquisition of new skills and smooth transition of the labormarket to green and other emerging industries using measures such as offering support for smoothtransition of the labor market to emerging and other industries as well as support for workers
upgrading their careers by changing jobs or employers, among other initiatives.
(2) Promoting demand-side GX
1)GX amongst communities and daily life
Decarbonization in communities and daily life will be achieved through collaboration withfinancial institutions, businesses, and other players within each community, and leveraging
creativity of each municipality according to its characteristics to transform social and industrial
structures and generate widespread demand for products contributing decarbonization.
To this end, based on the Plan for Global Warming Countermeasures and targeting net-zero
GHG emissions by 2050, the government is to designate at least 100 Decarbonization Leading
Areas by FY2025 and also leverage support programs offered by ministries and agencies toencourage social implementation of GX. Also, in order to implement priority measures forregional decarbonization and accelerate the progress, municipalities will leverage financial
assistance from the government to accelerate business- and resident-driven initiatives and to takethe lead in implementing priority measures that form the basis of regional decarbonization (e.g.,
introduce renewable energy that can benefit and coexist with local communities, ZEB into public
facilities, and electrified vehicles into public fleets) in all administrative work and projects,
including municipality-owned corporations. The National Movement for New and Prosperous
Lifestyles toward Decarbonization and other initiatives will be used to induce behavioral changes
and life-style transformation for citizens and consumers, stimulating demand.
2)

Visualizing carbon footprints and other actions to generate new demand

Generating demand to develop the market for green products and promote innovation holds
the key to a successful GX. With regard to low-carbon products already available in the market toa certain degree, their procurement by public and private entities will be expanded by further
leveraging carbon footprints, environmental labels, and other tools, as well as reviewing anddiscussing criteria, calculation rules, other requirements for products that should be procured
under the Act on Promoting Green Procurement13 and other legal provisions. Also, to generatedemand for innovative technologies and products, appropriate actions for developing demand
Act on Promotion of Procurement of Eco-Friendly Goods and Services by the State and Other
Entities (Act No. 100 of 2000).
13

28

based on various characteristics including purchasers and the level of innovativeness oftechnologies and products, e.g., incentivizing innovative products and technologies as well as theirprocurement, will be studied.
Furthermore, in order to reduce emissions from the entire supply chain together with eachplayer’s own emissions and indirect emissions e.g., buying electricity, as well as developing
relevant products’ and industries’ competitiveness, a guideline for carbon footprint calculations
will be developed by around FY2022 to drive public and private procurement of green products
as defined by the results of calculations based on these guidelines.
(3) Driving GX in small and medium-sized enterprises1)Basic concept
Supply chain is one of Japanese industries’ strength in industrial competitiveness. Achieving
net-zero GHG emissions while maintaining and enhancing competitiveness will not be possible
without GX covering the entire supply chain including small and middle-sized businesses (SMEs)
as well as large corporations.
As SMEs employ almost 70% of Japan’s workforce and generate some 20% of the country’s
total GHG emissions, they will play a very important role in achieving net-zero GHG emissions
by 2050.
Therefore, SMEs will be never left behind when driving initiatives aimed at GX for the entire
society. To be specific, different supports for different levels of initiatives -from learning actions
required for net-zero GHG emissions to understanding (measuring) own emissions to reducing
those emissions - and promoting supply chain decarbonization will be important for SME
decarbonization. In addition, talent development and a stronger support framework fororganizations supporting SME initiatives, more support for supply chain collaboration initiatives
and message dissemination, green product market generation, and more actions will be promoted.
2)Next steps
The launching of an online inquiry portal, creation of documents showing examples ofdecarbonization in business management, and other actions by the Organization for Small &Medium Enterprises and Regional Innovation, Japan will be leveraged to promote support forlearning about net-zero GHG emissions actions, visualizing (measuring) emissions volumes andother data to enhance programs for evaluating an energy efficiency improvement and providing
SMEs with easy ways to calculate their emissions volumes by updating national electronic
reporting systems and other tools, and reducing emissions and others by assisting capital
expenditures that will improve energy efficiency and further reduce CO2. Also, efforts to develop
products helping green transition and promote them in green areas will be supported.

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Also, in order to build a structure to provide push-type assistance from SME support
organizations and local financial institutions to SME initiatives, talent development for supportingorganizations and other players will be supported by, e.g., organizing training courses for the
supporting organizations and establishing a certification program for experts supporting
decarbonization. Additionally, support organizations will be strengthened through measures suchas providing information on net-zero GHG emissions-related actions to them and building a
support structure covering entire communities.
Furthermore, the decarbonization of the entire supply chain including SMEs will be promoted
by having added provisions for initiatives relevant to subcontractor decarbonization to thepromotion criteria of the Act on the Promotion of Subcontracting Small and Medium-sizedEnterprises14 and further expansion of the “Declaration of Partnership Building”.
Additionally, taking into account the goals for the Startup Development Five-year Plan
created in November 2022, support for research, development, and social implementation
programs by startup businesses in GX areas will be fundamentally strengthened.

6. Evaluating and reviewing the status of progress in the implementation of new policy
initiatives for realizing GX
Having established the insurance of stable energy supply as a primary prerequisite, as ProGrowth Carbon Pricing Concept and other new policy initiatives for realizing GX are
implemented, the GX Implementation Council and other bodies will regularly evaluate theirprogress and, based on the result, effectively review them as required, taking into consideration
aspects such as the progress of public and private GX investment, global development and its
impact on the economy, and trends in technological development. These ideas will be explicitly
stated in the bill for smooth transition to a decarbonized growth-oriented economic structure
submitted to the 211th session of the Diet, then steadily implemented.

14Act on the Promotion of Subcontracting Small and Medium-sized Enterprises (Act No. 145 of 1970).

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