Japan CCS Forum 2023 – Global CCS Institute

The Path for the Development of CCS in Japan
November 2023
Mizuho Bank Industry Research Department
Research & Consulting Unit
Mizuho Financial Group© 2023 Mizuho Bank, Ltd. All Rights Reserved.

Overview of CCSCarbon Dioxide Capture & Storage (CCS) is a technology that captures CO2 from CO2 sources, transports itfrom the place of emission, and stores it in the appropriate place in underground― Carbon Capture & Utilisation (CCU) is a technology for producing materials that can use CO2 as a raw

material, and CCUS is commonly used as a combination of CCS & CCU. This paper mainly discusses CCS
CCS/CCUS Process Overview
CO2 Sources

CO2 Capture

CO2 Transport

CO2 Storage(CCS)

Facilities in the CO2-intensive industries

Using the appropriate
CO2 capture
technology for CO2
sourcesLiquefied CO2 Carriers

Inject CO2 into
the reservoirs

Power
Sole large emission facility

Iron & Steel
Oil

Chemical Absorption

CO2

CO2

Physical Absorption

Liquefaction

Temporary
Storage

Shipping

Physical Adsorption
Industrial Clusters

Cementetc…

＋
Innovative Carbon Dioxide RemovalTechnologies

Membrane Separation

Other Advanced
Methods

CO2 Pipelines

CO2 Utilisation(CCU)
Produce various
materials

Direct Air Capture with CCS,
Bioenergy＋CCS (BECCS) etc…
Compression

Pipeline
Transportation

Source: Compiled by Industry Research Department Mizuho Bank from IEA, etc.

1

Growing global importance of CCSPolicy target and support for CCS/CCUS in developed countries are increasing― The G7 Summit Communiqué also shows the importance of CCS/CCUS
G7 Hiroshima Leaders’ Communiqué

Recent trends in CCS/CCUSCountries /Regions

Overview•

United States•••

Europe••United Kingdom

•
•

Japan

Others••The Inflation Reduction Act of 2022 (IRA) was establishedby President Biden in August 2022.
45Q tax credit, which has been the driving force behind
CCS, is expanded further.
The countries surrounding the North Sea have developed
CCS project and policies.
Germany, which had been reluctant to adopt CCS/CCUS,
recognized the necessity of CCS/CCUS at the end of 2022
and planned to formulate a Carbon Management Strategy
in 2023.
The Net-Zero Industry Act proposed in March 2023
recognized CCS/CCUS as a Net-Zero strategic technology
and set a target of securing 50mt-CO2/y of CO2 storage
capacity by 2030.
UK 10 Point Plan showed the plan to reduce CO2
emissions by 10mt-CO2/y by 2030 in Nov 2020.
The roadmap for CO2 capture by 20~30mt-CO2/y (6mtCO2/y of CCS from industry) was announced in April 2023
The CCS Long-Term Roadmap was published, and set atarget of securing 120~240mt-CO2/y storage capacity in
2050.
Selection of "Advanced CCS Project" with the aim ofstarting the project in 2030 is ongoing. Policy aimed atsecuring 6~12mt-CO2/y storage by supporting 3 to 5 PJs<Energy>
25. We commit to holistically addressing energy security, theclimate crisis, and geopolitical risks. In order to address the current
energy crisis caused by Russia’s war of aggression against
Ukraine and achieve our common goal of net-zero emissions by
2050 at the latest, we highlight the real and urgent need andopportunity to accelerate clean energy transitions also as a meansof increasing energy security at the same time. Whileacknowledging various pathways according to each country’s
energy situation, industrial and social structures and geographicalconditions, we highlight that these should lead to our common goalof net zero by 2050 at the latest in order to keep a limit of 1.5 °C
within reach.
…
We acknowledge that Carbon Capture, Utilization and Storage(CCUS)/carbon recycling technologies can be an importantpart of a broad portfolio of decarbonization solutions to
reduce emissions from industrial sources that cannot be
avoided otherwise and that the deployment of carbon dioxide
removal (CDR) processes with robust social andenvironmental safeguard, have an essential role to play incounterbalancing residual emissions from sectors that are
unlikely to achieve full decarbonization.

Various Project initiatives are being announced in the
Middle East, Southeast Asia, and others.

Source: Compiled by Industry Research Department Mizuho Bank

Source: Compiled by Industry Research Department Mizuho Bank from G7
Hiroshima Leaders’ Communiqué2Trends of CO2 Emissions in Japan


Japan emitted approx. 1 billion tons in FY2021, accounting for about 3% of global CO2 emissions― It was peaked in 2012 when the transition from nuclear to gas-fired power generation occurred after theearthquake, and then decreased
Breakdown of CO2 Emissions in Japan

Trends of CO2 Emissions in Japan(Million tons)(Million tons)
1,600
Public Power Generation

Others
10,61529%

China
12,12933%

1,400

CO2 emissions
2021
Japan
36.6 billion tons
1,027
3%
U.S.
RussiaEurope 4,610
1,811
3,974 12%
5% India
Residential,
11%
2,472
52, 5%
7%

The breakdown of Japan’s
CO2 emissions by source

Oil Products & Chemical
Other industries
Residential

Iron & Steel
Ceramic, Stone & Clay Products
Transportation
Others

1,200

1,000

Others117
11%

800
Public Power
Generation
396
37%

Transportation
178
17%
CO2 emissions
2021
1,064 million tons

600

400

200
Other industries, 65, 6%
Ceramic, Stone & Clay Products, 54, 5%

Iron & Steel
124
12%

0
(FY)

Oil Products & Chemical, 79, 7%“Oil Products & Chemical” and ”Ceramic, Stone & Clay Products” include
Industrial Processes. CO2 emissions breakdown include statistical errors
Source: Compiled by Industry Research Department Mizuho Bank from IEA,
National Institute for Environmental Studies
Note:“Oil Products & Chemical” and ”Ceramic, Stone & Clay Products” include
Industrial Processes.
Source: Compiled by Industry Research Department Mizuho Bank from National
Institute for Environmental Studies
Note:

3

CCS Business Environment in Japan


Japan is rapidly proceeding considerations of policies to secure 6~12 mt-CO2/y CCS storage capacity by 2030

【Mizuho’s Understanding】 Outline of the “Advanced CCS PJ” in Japan, the CCS Long-Term Roadmap and GX Basic Policies••••

To establish advanced CCS business models that can be expanded in the future, the Japanese Government will intensively support the “Advanced CCS
Business Model” project with the goal of starting the projects by 2030.
Starting with 3~5 PJs with different combinations of Carbon Capture Sources, Transportation methods, and CO2 storage areas. The Japanese Government aims toestablish diverse CCS business models and to secure an annual storage capacity of 6~12 mt-CO2/y by 2030.
The Model PJ should focus on large-scale operations and significant cost reduction by establishing a hub and cluster model.
Project selection criteria; Early feasibility, Scalability and Economics of PJ. In addition, it is expected that the development has a focus on integrating social
acceptance across storage sites and that the PJ’s has a contribution to the future development of CCS businesses.

Business Model Development StageCCS Roadmap & GX Basic Policies~2023

Deployment Stage

~2026

~2030

Support for “Advanced CCS Business Models” & Secure 6~12 mt-CO2/y CCS capacity by 2030

2050 Target: 120~240mt-CO2/y

Schedule CCS Feasibility Studies

Operation

Test Drilling, Evaluation

FID

Construction

Government Support for CCS
Businesses
Early Establishment of Advanced CCUS Value Chains: Investment of Approx. 4 Trillion Yen over the
Next 10 Years

Action to Reduce Costs of
CCS

Promotion of Public
Acceptance of CCS~2050

To Achieve the 2050 Target,
Further Investment of Trillions of
Yen Will be required

Setting the CCS Cost Target for 2050 to be 75% Lower for Capture, 30% Lower for Transport, and 20% Lower for Storage Compared to2023
Promotion of Research and Development of Technologies that Enable Cost Reduction
To promote Public Acceptance of CO2 Storage Areas, Support Mechanisms for promoting
CCS-Based Hubs & Clusters and job creation by Local Governments is needed

Development of Promotion

Until 2030, CCUS explanatory meetings will be held in each region under the government initiative
Development and Review of“CCS Action Plan”

Development of CCS action plan:
Storage & Cost targets, TechnicalDevelopment Guidelines, etc.

Conducted necessary revisions based on progress in decarbonization initiative, such as energy
conservation and electrification, and progress in cost reduction, etc.

Source: Compiled by Industry Research Department Mizuho Bank from ANRE

4

【Emitter】 Current Status of Power Sector in CCSPower sector participates in R&D and PJs to support one of the effective technology options of CO2 reduction― The utilization of CCS may change depending on the progress of other carbon neutral technologies

Emission CO2 characteristics in the power sector
Characteristics

Major CCS Project and policy proposal from the power sector

Overview

CO2 emissions (Mt)

FY2021: 396 (37% of total domestic emissions)Combustion CO2 /Process CO2

CO2 emissions mainly from fuel combustion (in IGCC,
pre-combustion emissions during gasification is also
captured)

Emissions per productCO2 concentration /pressure

CO2 capture method

Natural gas-fired: 943g-CO2/kWh
Coal-fired: 474-599g-CO2/kWh
Gas-fired

7~10% / 0.1MPa

Coal-fired

12~14% / 0.1MPa

Oil-fired11~13% / 0.1MPa

IGCC

8~20% / 2~7MPa

Oil

Coal

Participation in
Advanced CCS
Projects, etc.

In the "Advanced CCS Project," Hokkaido Electric Power,
Tohoku Electric Power, and J-Power are participating. Other
consortiums are also in the process of being launched

Other CCS
related Initiatives

Participation in Tomakomai CCS through Japan CCS, CO2
capture demonstration in Osaki CoolGen, cooperation insolid absorption technology at Maizuru Power Plant, andliquefied CO2 transportation demonstration test

FEPC “Status Report of Efforts by the Power sector to deploy CCS”

Chemical absorption methods are major. Physicalabsorption and solid absorption is in R&D stage(CCS is one of the effective technologies to significantly reduce CO2 emissions,and presented the following requests)
 In promoting technological development of capture, financial support isneeded for progress under the leadership of the governmentCO2 concentration rate in emission gas depending on fuel type(Gas-fired 7-10%, Coal-fired 12-14%)

Combustion

Pre-combustion
emissionsPost-combustion
emissions

Source: Compiled by Industry Research Department Mizuho Bank from IPCC,
NEDO, METI, ANRE, NIES, etc.

There are issues in determining the feasibility and cost reduction of each CO2
capture method
At present, there is a high degree of uncertainty regarding the establishment oftechnology and social implementation

 Development of CO2 transport and storage infrastructure(IGCC)
Gasification

×

O2

Initiatives【February 2022: Summary of proposal from Power sector in the CCS Long-Term
Roadmap Study Group】

CO2 emission flow in the power sector
LNG

Case

Need to consider that transportation and storage are common processes to allindustries and that there are risks that are difficult for the private sector to assume,
such as long-term storage liability

 Policy support for energy price control, fostering public understanding of costburdens, appropriate burden sharing, related legislation, and gaining public
acceptance of CCS are important.
Source: Compiled by Industry Research Department Mizuho Bank from FEPC,
and ANRE5

【Emitter】 Current Status of Oil Sector in CCSOil sector proactively moves to CCS as a measure of reducing CO2 emissions from their refinery facilities― ENEOS leads "Advanced CCS PJ" with upstream development expertise of a group company

Emission CO2 characteristics in the oil sector
Characteristics

Major CCS Project and policy proposal from the Oil Sector

Abstract

CO2 emissions (Mt)

FY2021: 79(Refining and petrochemicals together
account for 7% of the total)

Combustion CO2 /Process CO2

CO2 emissions are mainly from refining and chemical
processes and from fuel combustion.

Emissions per productCO2 emissions of 21.73 kg per 1kL of oil equivalent

CO2 concentration /pressure

Hydrogen production

CO2 capture method

Methanol production

15~20% / 0.3~0.5MPa10%/ 0.27MPa

Process CO2: Physical adsorption / Chemical absorption
Combustion CO2: Chemical absorption

CO2 emission flow in the oil sector
H2

Hydrogen production

Process CO2
LPG

Atmosphericdistillation
・Vacuumdistillation

H2
Hydrodesulfurization

EmissionsHydrodesulfurization
BoilerEmissions

Catalytic reforming

Emissions

Catalytic cracking

Gasoline

KeroseneGas oilFuel oil

Case

Initiatives

Participation in
Advanced CCS
Projects, etc.

In the "Advanced CCS Project," ENEOS and JX Nippon Oil &Gas Exploration are promoting a CCS project off the north towest coast of Kyushu with J-Power. Idemitsu is participating in
the Tomakomai CCS project

JX Nippon Oil & Gas Exploration has been involved in CO2Other CCS related
EOR for the Petra Nova project in the USA and in theInitiatives
development of CCS projects in Malaysia and other countries【October 2022: Summary of proposals for the Introduction and Spread of CarbonNeutral Fuels】
PAJ (October 2022) Proposal Summary(CCS is recognized as an indispensable technology not only to contribute todecarbonization and stable energy supply in the transition period, but also toachieve global carbon neutrality in 2050. The following requests are presented)
 Promote R&D, demonstration, and cost reduction related to CO2 capture andstorage technologies
 Promotion of public understanding and development of suitable sites
 Legislation adapted to the life cycle of CCS
 Consideration and introduction of long-term support for CCS implementation
 In particular, since CCS projects are not profitable at this time, full support isrequested for the construction and operation phases of the entire value chain,including capture, transportation, and storage.
 Also, JOGMEC's risk money support function (investment and debt guarantee)
for CCS projects is requested to be further strengthened

Emissions

Source: Compiled by Industry Research Department Mizuho Bank from IPCC,
NEDO, METI, ANRE, NIES, etc.

Source: Compiled by Industry Research Department Mizuho Bank from PAJ, ANRE

6

Set a CCS cost reduction target of at least 40% by 2050
Aim to reduce costs of CCS at least 40% by accumulating cost reductions in Capture, Transport and Storage

The Targets of the Cost Reduction in CCS in the CCS Long-Term Roadmap
CCS Value Chain

Yen/t-CO2

Current Status

6,000
1

2030

4,000

4,000

CO2 Capture

2050

2,000

2,000

1,000

0
2

Pipelines Transport (20km)

3

LCO2 Carrier Transport(1,100km)

4

Onshore Storage

5

Offshore Storage

Pipelines +Onshore9,300

Bﾊﾟｲﾌﾟﾗｲﾝ
Pipelines
LCO2
船舶

6,000
2,600

4,000

2,600

Carriers

1,600

0
6,200

8,000

6,900

6,900

6,200

5,400

陸上
OnshoreOffshore
海上

5,400

4,000
0

1+2+4

Yen/t-CO2

Current Status

24,000

1+2+5

16,0002030

12,800 13,500

LCO2 Carriers+ Onshore

1+3+4

D

LCO2 Carriers +Offshore

1+3+5

PL＋海上
B (1+2+5)
D (1+3+5)
船舶＋海上17,500 18,200
12,400 12,400

10,800 11,500

12,000
C

2050
PL＋陸上
A (1+2+4)
C (1+3+4)
船舶＋陸上

19,500 20,200

20,000
Pipelines +Offshore

9,300

8,000

12,000Total Cost of CCS
A

12,0008,000 8,000

8,000

4,000
0

A

B

C

D

A

B

C

D

A

B

C

D

Note:

Assumptions for transport (2, 3): The Current Transport Capacity will be 0.5mt-CO2/y until 2030, and the Capacity will expand to 3.0mt-CO2/y until 2050
Assumptions for Storage (4, 5): The Current Storage Capacity will be 0.2mt-CO2/y until 2030, and the Capacity will expand to mt-CO2/y until 2050
Source: Compiled by Industry Research Department Mizuho Bank from ANRE7

【CO2 Capture】 The Direction of R&D and Cost Reduction
In the CCS value chain, CO2 capture is an area where cost reduction is expected to be significant― In particular, progress of R&D to solve the challenges of capturing low-concentration CO2 is important

Roadmap and Direction of Cost Reduction in Carbon Capture

CO2 capture from low concentrations of CO2 (<10%) requires large
volumes of gas to be processed, resulting in larger equipment andincreased energy consumption for pumps and auxiliary machinery

Cost Target for High-Pressure CO2:
Assuming Chemical Processes or
Combustion Gas with High Concentrations
Using Physical Absorption, Membrane
Separation, or Physical Adsorption

CarbonRecycleTechnologies
Roadmap(July 2021)

by 2030 around 1,000 Yen/t-CO2

Cost Target for Low-Pressure CO2:
Assuming Combustion Gas, Blast FurnaceGas, Etc. with Low Concentrations of gas(<10%). Using Chemical Absorption, Solid
Absorption, and Physical Adsorption

1
After 2040, the goal isto achieve practicalapplication of CO2
capture with a cost of
1,000 to several
hundred yen/t-CO2

CCS LongTerm
Roadmap(March 2023)

Achieve Capture Cost of less than 2,000 yen/t-CO2 for LowPressure/Low-Concentration Gas (Atmospheric Pressure andConcentration of <10%) by 2030
Current Status 6,000 Yen/t-CO2,
By 2030 around 2,000 Yen/t-CO2
Reduce capture costs by approx. half compared to 2023 by 2030
and by 2050, aim to reduce costs to one quarter or lessCurrent Status 4,000 Yen/t-CO2, by 2030 around 2,000 Yen/tCO2, by 2050 around 1,000 Yen/t-CO2
Current

2030

2040~

Source: Compiled by Industry Research Department Mizuho Bank from METI and
ANRE

To Address the Technical Challenge:
To minimize the increase in the size of equipment, it is necessary to design
equipment to reduce pressure loss and improve the energy efficiency ofauxiliary equipment
To efficiently recover CO2 from a low concentration of CO2, it is necessary
to use a CO2 separation material with strong CO2 absorption andadsorption characteristics and increase the amount of material injected.
However, both strategies require more energy for CO2 capture.

2

by 2030 around 2,000 Yen/t-CO2
GreenInnovation
Fund PJ
R&D Plan(Jan 2022)

The challenges of CO2 capture from low-concentration CO2

3

To Address the Technical Challenge:
To solve these challenges, the following strategies can be pursued:
Amine absorption: Develop new solid materials that can absorb CO2 by
reducing water enthalpy or latent and sensible heat.
Physical Adsorption: Develop phase change materials that can beregenerated by pressure difference rather than heat.
In addition, comprehensive energy management such as effective
utilization of waste heat is important.
Exhaust gas with Low-concentration CO2 is relatively high in oxygen
concentration, which promotes the degradation of materials and leading toan increase in maintenance costs, such as material replacement
To Address the Technical Challenge:
Developing materials with strong resistance to oxidation and degradation

Necessary to establish CO2 capture technologies suitable for low-concentration
CO2 and systems that incorporates the most appropriate technology
Source: Compiled by Industry Research Department Mizuho Bank from METI8

【CO2 Capture】 Potential of the Cost ReductionCO2 capture process is assumed to have room for innovation and is expected to result in large cost reduction― Development of CO2 capture technologies with cost advantages is an important field that will lead to thecompetitiveness of future carbon removalIn the US, pipelines are mainly used for CO2 transport, and there is moderate expectation for cost reduction.
However, in Japan, there is also expectation for cost reduction in transport by Liquefied CO2 (LCO2) Carriers

Potential of the Cost Reduction in CCS process based on the U.S. Department of Energy (2023)
CO2 transport
CO2 capture

Current costs(US$/t-CO2)

25~175

Cost reductions
possible?

Current cost
Reduction levers

CO2 storage

Large Reductions•

Economies of scale, targetinglargest capture sources•

Technology innovations fornovel capture technologies•

Learning by doing•

Modularization andstandardization

Pipeline

Ref. LCO2 Carrier

5~25

14~25

5~15

Moderate Reductions【Mizuho's View】
Compared to the pipelines, there
is a possibility of cost reduction
through the scale-up developmentof ships and other innovations

Small Reductions•

Siting close to reservoirs tominimize distance•

Economies of scale (e.g.,increasing diameter andadded compression)•

Aggregation of various CO2
sources in a hub•

Utilization of existing right-of
ways【Mizuho's View】• Large-scale development,
R&D and innovation of LCO2
Carriers••

Siting on well-characterizedsite with existing infrastructureand good monitorability•

Economies of scale,leveraging large reservoir
capacities•

Reduction of MMV(Measurement, Monitoring andVerification) costs by R&D andlearning by doingStandardization

Source: Compiled by Industry Research Department Mizuho Bank from U.S. Department of Energy, etc.

9

【CO2 Transport】 Status of Development of LCO2 Carriers in Japan


Japanese LCO2 carrier is being developed through the NEDO demonstration Project in Tomakomai, and built
by Mitsubishi Shipbuilding― It will actively develop ocean-going vessels in cooperation with other companies to meet global demand

NEDO Demonstration of LCO2 carrier

Direction of Development of LCO2 carriers by Mitsubishi Shipbuilding【NEDO Project “CCUS R&D and Demonstration Related Project /Large-scale CCUS Demonstration in Tomakomai /Demonstration Project on CO2 Transportation”】＜R&D on CO2 Liquefaction and Storage Systems and Social
Implementation on large vessels＞
Japan CCS (JCCS)

Re-entrust

Initiatives to develop LCO2 carriers①

Development and commercialization of the first ship―

Mitsui O.S.K. Lines,
Nippon Steel Pipe & Engineering

Collaboration with global players to develop LCO2 carriers＜Feasibility study ＞②

ITOCHU Corporation, Nippon Steel―＜ R&D on transport vessels ＞
Engineering
Advancement
Association of Japan

Development of First Ship for NEDO Demonstration

Re-entrust

Development of large vessels

Kawasaki Kisen Kaisha, Nippon Gas Line,
Ochanomizu University
Bareboat charter―

Aim to promote develop small to large vessels through joint developmentwith NYK―

Consider Joint development of large LCO2 carriers for ocean-going with
Nihon Shipyard. Aim to complete after 2027

③

Order

Mitsubishi
Shipbuilding

Sanyu Kisen
Construction
and Delivery

Aim to promote the development of LCO2 carriers through collaboration
with Equinor and TotalEnergies and participation in the CO2LOS III project(including FS implementation to verify effectiveness and information
sharing with PJ members).

(Ship Owner)

Limited number of shipbuilders are working on development of
LCO2 carriers in JapanThe shipbuilders currently involved in the development
will be the main players in the shipbuilding in Japan
Source: Compiled by Industry Research Department Mizuho Bank from NEDO, etc.

Other initiatives to improve transportation efficiency andreduce transportation costs④―

Announced the completion of a concept study for an ammonia andliquefied CO2 dual-use vessel in cooperation with Mitsui O.S.K. Lines.
Aim to improve transportation efficiency by transporting ammonia on theoutward route and liquefied CO2 on the return route.

Source: Compiled by Industry Research Department Mizuho Bank from
Mitsubishi Shipbuilding.

10【CO2 Transport】 Competition with Global Shipbuilding CompaniesJapan is expected to build and deliver the world's first liquefied CO2 carrier for CCUS use

However, shipbuilders in South Korea and China are also actively engaged in orders for LCO2 carriers anddevelopment of large ships



In order for Japan to lead the global competition, it is urgent to consider further project creation and earlycommercialization of large ships

LCO2 carriers on order and trends in the development at major shipbuilders in South Korea & China
Shipbuilding company

Owner

Contract period to construction period (year)

Tank Size (m3)2021
Mitsubishi Shipbuilding
Sanyu Kisen (Japan)(Japan)Dalian Shipbuilding Industry
Northern Lights (Norway)(China)Dalian Shipbuilding Industry
Northern Lights (Norway)(China)Dalian Shipbuilding Industry
Northern Lights (Norway)(China)Hyundai Heavy Industries
Capital Maritime (Greece)(South Korea)
Hyundai Heavy Industries
Capital Maritime (Greece)(South Korea)

1,450

small

2022

Sep. 2021

7,500

Oct. 2021

7,500

Oct. 2021

22,000Jul. 2023

Further increase in size is expected In August 2021, announced that it would work withPOSCO to develop larger vessels of 20,000 m3 or larger
by 2025, and to study the rules.
 In July 2022, Korea Register of Shipping granted AiP for
40,000 m3 type design.

2026

World's First LCO2 carrier for CCUS

Jun 2024
Aug. 2023

large

2025

Mar. 2024

7,500

22,0002024
Dec. 2023

After 2025
Jan. 2026

Jul. 2023

Apr. 2026

China

South Korea
Hyundai Heavy
Industries

2023

China State
Shipbuilding
Corporation

 In August 2021, the company announced that its
subsidiary, Jiangnan Shipyard has developed anammonia-fueled LCO2 carrier. Already obtained AiP from
Korea Register of Shipping.

Hanwha Ocean  In September 2021, announced with ABS (American(Former Daewoo
Bureau of Shipping) that it would jointly develop 70,000
Shipbuilding)m3 LCO2 carriers. In April 2022, obtained AiP from ABS.
Note:
AiP : Approval in Principle
Source: Compiled by Industry Research Department Mizuho Bank from various public materials

11

【CO2 Transport】 Issues and the Importance of Government Support in LCO2 Carrier

While the players in the domestic market for LCO2 carriers are already being in place, government support isneeded to strengthen the competitiveness of LCO2 carrier business and the shipbuilding industry as a whole.
Key points of government support and expected future
developments

Issues in LCO2 carriers
Design and development
 Implement initiatives including development of large vessels, mainly at Mitsubishi
Shipbuilding

Point(Mizuho's View)

Concept of "common design (unification) of LCO2 carriers" in Japan⇒ Narrowindown designs g leads to a virtuous cycle of enhanced cost competitiveness andspeedy performance improvement by concentrating design feedback, etc.

Expansion monetization points
 Expanding the scope of business related to LCO2 carriers, including consideration oflicensing business for each underlying technology (build a business that does not solely
rely on construction).

Support for demand creation for early commercialization

Japanese LCO2 carriers become
global de facto standard

Increase in the number of vessels built by Japanese shipbuilders
Expanding licensing business

Construction
 Collaboration between Mitsubishi Shipbuilding and Nihon Shipyard (NSY) paves the way
for Imabari Shipbuilding and Japan Marine United, NSY’s shareholder’s to build LCO2
carriers.
Point(Mizuho's View)

To achieve carbon neutrality in the marine transport industry, it is expected that there will be an
expansion in the demand energy transportation (such as LCO2, hydrogen, etc.) and a conversion toalternative fuels for marine vessels (ammonia, etc.), which will lead to an increase in capital
investment for various developments.

Support for capital investment

Stimulating capital investment for the construction of
next-generation vessels(Eliminate bottlenecks in construction)

Supply chains From an economic security perspective, it is also important to establish domestic supply
chains that do not rely on other countries. (e.g., large tank manufacturing)
Source: Compiled by Industry Research Department of Mizuho Bank

Strengthen the competitiveness of Japan's shipbuilding industry

Source: Compiled by Industry Research Department of Mizuho Bank

12

The future of CCS in Japan: The horror story and the goal

Based on importance of the CCS in Japan, fostering industry with aim of circulating national wealth is essential【Mizuho’s View】 The future of CCS in Japan: The horror story and the goal
【 The future of CCS in Japan: The horror story in 2050 】•••

In order to maintain Japan's industries and ensure energy security, it isessential for Japan to continue using CCS
However, if it was not possible to foster leading players in CCS technologies
and business in Japan, Japan would have to continuously pay the cost for
using CO2 capture technologies, Liquefied CO2 Carriers, and CO2 storage
to outside of Japan.
In this horror story case, although a huge amount of funds is required tooperate the CCS value chain, the outflow of funds to outside of Japanoccurs and the national wealth does not circulate sufficiently
Outflows due to the use ofstorage in outside of Japanthat Japan does not haveinterests••

Thanks to the domestic demand of CCS and policy support, Japan
succeeds in developing leading CCS players. Japanese companies will win
CCS projects in Japan based on their competitiveness, and CO2 capture
technology and Liquefied CO2 Carriers are exported to outside of Japan. In
addition, some of the storage interests in global are acquired by Japanesecompanies
The amount of funds used to operate the CCS value chain and the inflow offunds from CCS-related businesses in outside of Japan expansion will
circulate in Japan, and it leads further development of the industry

Funds forJapan’s
CCS

CO2
Storage

Outflows to outside ofJapan due to the use of
Non-Japanese Liquefied
CO2 Carriers【 The future of CCS in Japan: The goal in 2050 】

Funds forJapan’s
CCS

CO2
CaptureCO2
Transport

CO2
Storage

Outflows to outside ofJapan due to the useof Non-Japanese CO2
capture technologies

Inflows due to the use of Japanese
CO2 capture technologies

CO2
CaptureCO2
Transport
Inflows due to theuse of storage thatJapan have interests

Inflows due to the use ofJapanese Liquefied CO2Carriers

Source: Compiled by Industry Research Department of Mizuho Bank

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【Mizuho's View】 How to realize the future vision of CCS in JapanTo realize the future vision of CCS in Japan, it is crucial for Japan to demonstrate its strength and presence atevery stage of the CCS value chainIn order to achieve the goal, Japan should effectively leverage its large CO2 emissions and centralize andstandardize the technologies and best practices of top runners within the country, ultimately refining them toachieve lower costs and higher quality

In addition, when the trade volume of CO2 increases in the future, frictional inefficiency in the value chain of
CCS will become a cost push issue― If Japan can establish an entity that plays the role of an “aggregator” that performs optimization functions inorder to minimize cost inefficiencies, Japan may be able to promote optimization in the use of CCS in Japanand use it as an advantage in acquiring CCS business in global basis【Mizuho's View】 How to realize the future vision of CCS in Japan
How to realize the future vision of
CCS in Japan

Strategies to Strengthening
Competitiveness of CCS in JapanThe future of CCS in Japan:
The goal in 2050

It is crucial for Japan to demonstrate its strength andpresence at every stage of the CCS value chain

Japan should effectively leverage
its large CO2 emissions

Avoid the Outflow of Japanese Capitaland Develop CCS Industry in Japan

R&D of cost-competitive
CO2 capture technologies

Centralize & Standardize the technologies
and best practices, refining them to achieve
lower costs and higher quality

Construction of Ships for Liquefied CO2
Transportation in Japan
Securing CO2 storage capacity

Establishing an “Aggregator” Function for
Optimizing the operation of CCS Value
Chain

Create a Growth Industry that canContribute to the Realization ofJapan’s Carbon-Neutral Society, theexpansion of Japanese Capital at
Each Stage of CCS value chain, andSuccess in the Global Business

Source: Compiled by Industry Research Department of Mizuho Bank

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Strengthening Competitiveness Through Establishment of Best Practices
Japan should leverage its large CO2 emissions and standardize technologies based on the best practices of
top runners. By thoroughly utilizing these technologies, their lower cost and higher quality can be achieved【Mizuho's View】 Strengthening Competitiveness in the CCS Value Chain Through Establishment and Refinement of Best Practices
CO2 Utilisation

CO2 Sources

CO2 Capture

CO2 Transport

Facilities in the CO2-intensive
industries

Using theappropriate CO2
capturetechnology forCO2 sources

Liquefied CO2 Carriers

Power
Sole Large
Emission Facility

Iron & Steel

Produce various
materials

CO2

CO2

Liquefaction Temporary
Storage

Shipping

CO2 Pipelines

CO2 Storage

Oil
CementIndustrial Clusters

Etc…

Compression

Pipeline Transportation

Focusing early on industry-wide CO2 capture technologies that match thecharacteristics of each CO2 intensive-industries

Standardize specifications for eachtransportation method

Developing a testing system for actual gas in Japan and establish a demonstrativeenvironment on a national scale. The technology that has shown a high level of
performance should be treated as the optimal technology for the industry

Constructing the infrastructure based on thebest practice standards and utilize Japanesefinance support to build LCO2 Carrier

Inject CO2 into thereservoirs

Establishing bestpractices for monitoring
methods and introduce
them at storage sites

Effectively leverage Japan’s large CO2 emissions and centralize & standardize the technologies and best practices of top runners, ultimately refining them to achieve lower
costs and higher quality
Expand low-cost green products and industry-specific capture technologies foreach global markets

Expansion of Japan’s LCO2 Carrier andtransportation technologies

Expansion oftechnologies for global

Source: Compiled by Industry Research Department of Mizuho Bank15

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