November 2023

Latest CCS Commercialization Trends in Japan
1. Recent CCS trends in Japan
In recent years, the Japanese Government has been promoting Carbon Dioxide Capture and Storage (CCS)
projects as part of its stated aim to achieve carbon neutrality by 2050. So far there has only been one CCS
project in Japan, a demonstration project located in Tomakomai, Hokkaido.
However, in March 2023, a council from within the Ministry of Economy, Trade and Industry (METI)
officially released the "CCS Long-Term Roadmap Study Group - Final Summary" to promote CCS projects
in Japan over the medium to long term, and in addition recommended certain actions that should be taken
toward the full-scale implementation of CCS projects.
In June 2023, the Japan Organization for Metals and Energy Security (JOGMEC), 1 a government agency
supporting energy and resource development, announced the selection of seven projects 2 (some in Japanand some overseas) as "Advanced CCS Projects" that are expected to scale up projects and reduce costs.
The agency plans to provide support for the commercialization of these projects.
As can be seen from the above, there is now a growing movement in Japan towards the commercializationof CCS projects.
In the next section, we will take a brief look at the history of CCS trends in Japan, following which we will
set out further details of the new trends described above.

2. History of CCS Trends in JapanIn October 2020, the Government declared its aim that Japan would "achieve carbon neutrality by 2050,"
together with an announcement April 2021 stating its policy that Japan would "aim to reduce greenhousegas emissions by 46% over 2013 levels by 2030".
The Government has emphasized the promotion of CCS to help achieve these policy goals. For example, inits Sixth Strategic Energy Plan 3, finalized in March 2021, it states that "as for CCS, Japan will work toestablish the technology, reduce the cost, develop suitable sites, and improve the environment for CCS
commercialization, while formulating a long-term roadmap and sharing it with stakeholders". This is aclear expression of the Government’s intention to support the development of CCS technology and suitablesites.
In Japan, there are various ongoing efforts to utilize CCS, including those listed below:(1) The design, construction and commissioning of a large-scale CCS demonstration project in Tomakomai,
Hokkaido commenced in 2012 (with the underground injection of CO₂ starting in FY2016). By
November 2019, the project had successfully achieved its target of storing a total of 300,000 tons ofcarbon dioxide (CO₂) underground.
JOGMEC is an incorporated administrative agency that provides funds and other services necessary for the developmentof energy and natural resources.
2 Please refer to the table at the end of this Article for further details.
3 The Strategic Energy Plan is a plan formulated by the Government of Japan under the Basic Act on Energy Policy in order
to set out the fundamental direction of its energy policy.
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(2) Considering the practical realization of CCS will necessitate the long-distance shipping of large
quantities of CO₂ from the emission source to a suitable storage site, a liquefied CO₂ shipping
experiment has been under preparation since 2021, with the long-distance transportation of CO₂ fromMaizuru, Kyoto to Tomakomai, Hokkaido (approximately 1,000 km) scheduled to commence in 2024.

3. Official Announcement of "CCS Long-Term Roadmap Study Group - FinalSummary"
On March 10, 2023, the CCS Long-Term Roadmap Study Group (Study Group), a council formed within
METI, officially announced the "CCS Long-Term Roadmap Study Group - Final Summary" (FinalSummary).
Among other things, the Final Summary:•summarizes the discussions held by the Study Group since January 2022, together with making
recommendations regarding the medium-to-long-term promotion of CCS in Japan;•sets the future goals of "improving the environment for commercialization of CCS by 2030 andcommencement of full-scale operation of CCS businesses from 2030 onward, with the aim of enablingstorage of approximately 120 to 240 million tons of CO₂ annually by 2050"; and•states that certain specific actions (see below) should be taken to achieve these goals.

Specific action to be taken:(1) Government support for CCS businesses
With the aim of achieving CCS commercialization by 2023, business operator-led "advanced CCS
businesses" will be selected by the Government to receive targeted support. Commencing from FY2023,
related Governmental agencies will conduct geological surveys to locate suitable sites for CCS.
(2) CCS cost reduction efforts
A goal has been set to reduce the costs of CCS by approximately 60% or more by 2050 when compared to2023 levels.
(3) Promotion of public understanding of CCS
CCS businesses should be carried out based on the premise that they should gain the understanding of thepublic, particularly in regions where CO₂ storage sites will be located. The Government will also hostinformation sessions for each region of Japan on CCS.
(4) Promotion of CCS business overseas
For Japan, utilization of suitable overseas storage sites provides a promising option for CO₂ storage.
Planning is underway to commence negotiations with certain target countries that will undertake theimport of CO₂ from Japan, and requests for financial support from potential host countries to develop CO₂
storage sites will be examined by relevant government agencies. In addition, project support (in the formof risk money, etc. from the "Asia CCUS Network" under the Asia Energy Transition Initiative (AETI) led
by Japan, or from relevant governmental agencies) will be provided to Japanese companies when acquiring
related rights and interests in appropriate sites and CCS projects in other countries. There could also bebenefits for overseas companies by participating in the development of CCS sites utilized by Japanesecompanies.
(5) Discussions regarding the development of CCS legislation
In Japan, there is a move to develop a business law relating to CCS. Together with the publication of theFinal Summary, the Study Group also published a document titled the "Ideal shape of the CCS BusinessAct (tentative)". This document discusses details of a proposed business law concerning CCS. Under theproposed CCS Business Act, "storage business rights" (consisting of prospecting rights (for a maximum of2©Atsumi & Sakai 2023

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eight years) and storage rights (for an indefinite period)) will be newly created by METI. The business
operator will be selected through a public tender and must obtain the permission of the Minister of METI.
The business operator must, as a rule, be a Japanese citizen or a Japanese corporation pursuant to the lawsof Japan, meaning it will be possible for foreign companies to participate in CCS projects in Japan asshareholders in the Japanese corporation.
(6) Formulation and review of "CCS Action Plan"
Following more detailed deliberations on the CCS annual storage target, cost target, technical development
policies and suitable site survey plans, METI will formulate a CCS Action Plan which will be made available
to the public as well as updated at appropriate times in the future.

4. Selection of seven projects by JOGMEC for "Business Feasibility Study on JapaneseAdvanced CCS Projects”
Although there has been some progress with CCS in Japan, it still remains the case that there are currently
no commercial projects in operation, with the only project making progress of any kind being thedemonstration project in Tomakomai. Nevertheless, considering the Government's goal of commencing
CCS projects in 2030, there is a need to select suitable sites for CCS projects and to further consider
developments for commercialization at an early stage.
In light of the above, in June 2023, JOGMEC selected seven role model projects as "Japanese Advanced
CCS Projects" that are expected to scale up operations and reduce costs in due course (see the table at theend of this article for further details).
The seven projects are expected to involve companies in a wide range of industries, including power
generation, oil refinery, steel, chemicals, pulp/ paper, and cement. The projects are also anticipated to belocated in a well-balanced geographical manner throughout Japan in order to capture the CO₂ emitted
from various regions.
Furthermore, two of the seven projects will involve the transportation and storage of CO₂ from Japan tooverseas locations (Malaysia and Oceania). The aim of this is to develop CCS projects for decarbonization
not only in Japan but throughout the Asia-Pacific region.

5. Future Development of CCS
In Japan, therefore, the movement toward the launch of CCS in 2030 is gaining momentum. As a result,various investments and development work relating to CCS projects are expected to occur. Since CCS
projects are also expected to be utilized overseas, related industries are expected to become more active invarious areas in both Japan and abroad.
Overview of the projects selected for the "Business Feasibility Study on Japanese Advanced CCS Project"for FY2023 4
Location of CO₂ storage

4

Annual storage volume(Mtpa)

CO₂ emission source

Transportation
methodApproximately 1.5

Oil refinery and electric
power plant inTomakomai area

Pipeline

1Tomakomai area(oil and gas field or salineaquifer – not yetdetermined)2

Tohoku region west coast,etc.
(offshore saline aquifer)

Approximately 2.0

3

Niigata Prefecture(Oil and gas field)

Approximately 1.5

Wide-area of CO₂
emissions in Japan
steel plant, cement
plant and local emitter
near CO₂ storage
Chemical plant, pulp
mill and electric power
plant in Niigata

Ship andPipeline

Pipeline

Reorganized by the authors based on the information on JOGMEC’s website(https://www.jogmec.go.jp/english/news/release/news_10_00036.html)
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Location of CO₂ storage

Annual storage volume(Mtpa)

4

Metropolitan area, etc.
(offshore saline aquifer)

Approximately 1.0

5

Off the northern to western
shore of Kyushu(offshore saline aquifer)

Approximately 3.0

6

Offshore east coast of Malay
peninsula in Malaysia(offshore depleted oil andgas field and saline aquifer)

Approximately 2.0

7

Oceania (offshore depletedoil and gas field and salineaquifer)

Approximately 2.0

CO₂ emission source

Multiple industries
including steel plant inmetropolitan area
CO₂ emission inSetouchi/Kyushu
region Oil refinery andelectric power plant inwest Japan
Multiple industries
including chemical/oilrefineries in
Kinki/Kyushu region,etc.
Multiple industries
including steel plants in
Chubu region (Nagoyaand Yokkaichi)

Transportation
methodPipeline

Ship andPipeline

Ship andPipeline

Ship andPipeline---------------------------------------------------------------------------------------------------------------------------THIS NEWSLETTER IS PROVIDED FOR INFORMATION PURPOSES ONLY; IT DOES NOTCONSTITUTE AND SHOULD NOT BE RELIED UPON AS LEGAL ADVICE.
----------------------------------------------------------------------------------------------------------------------------Authors/Contacts
Miho Niunoya
Senior Partner
E: miho.niunoya@aplaw.jp

Tomoko WatanabePartner
E: tomoko.watanabe@aplaw.jp
Daniel JarrettPartner
Registered Foreign Lawyer (The Laws ofEngland & Wales*)E: daniel.jarrett@aplaw.jp

Kimiharu Masaki
Partner
E: kimiharu.masaki@aplaw.jp* Atsumi & Sakai is not regulated by the Solicitors Regulation Authority for England and Wales.

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