NTCT Working Group on“Toward Carbon Neutrality in East Asia”

Final Report

December 2023

1. Background
Under the Paris Agreement, all the Parties agreed to a long-term temperature goal of limiting
global warming to well below 2°C and pursuing efforts to limit it to 1.5°C above the pre-industrial
levels. After the adoption of the Paris Agreement, the Intergovernmental Panel on Climate Change(IPCC)’s Special Report “Global Warming of 1.5 °C” (hereafter, the 1.5° C Special Report),
published in 2018, highlighted robust differences in regional climate characteristics between global
warming of 1.5°C and 2°C, and indicated that it is necessary to achieve global net-zero CO2emissions around 2050 to limit the global temperature rise to 1.5ºC above pre-industrial levels.
To keep a limit of 1.5°C temperature rise within reach, there is a growing momentum formaking commitments to achieve carbon neutrality or net-zero emissions by 2050. Reflecting theIPCC 1.5°C Special Report, in 2019 UN Secretary-General António Guterres called on all world
leaders to make concrete and realistic plans to achieve carbon neutrality by 2050. At the Carbis Bay
G7 Summit of 2021, leaders of G7 member countries made a commitment to 2050 carbon neutrality1and called upon all countries, in particular major emissions economies, to join their efforts inrealising carbon neutrality by 2050. In 2022, G7 Leaders’ Communiqué of 2022 reconfirmed theircommitment to keep a limit of 1.5 °C temperature rise within reach, and at the Bali G20 Summit of2022, the leaders of G20 also announced that they resolve to pursue further efforts to limit thetemperature increase to 1.5 °C.
China, Japan and Republic of Korea (ROK) have already submitted and updated their
Nationally Determined Contributions (NDCs), and announced their commitment to achieving carbon
neutrality by 2050 (Japan and ROK) and by 2060 (China). However, NDCs submitted by Parties toCOP27 last year for the period up to 2030 were found to be unable to limit the temperature increase
to 1.5 °C. Therefore, COP27 requested Parties to revisit and strengthen their 2030 targets by the endof 2023. In addition, COP27 urged those Parties that have not yet done to submit their LTSs toward
just transition to net zero emissions by or around mid-century by COP28, and also invited Parties toupdate their LTSs in line with the best available science.
In East Asia, the situation of each country is different in their efforts to achieve carbon
neutrality, including the re-setting of NDCs, and the region should further cooperate and collaborate

1

The G7 commitment on 2050 carbon neutrality refers to a net-zero GHG emissions target. However, in this concept

paper, a carbon neutrality refers to a net-zero CO2 emission target unless specifically mentioned.

1with each other. Therefore, this WG will share the contents and efforts of each country's NDCs andLTSs, elaborate the contents of each country's strategy, and explore what kind of cooperation ispossible in the region.

2. Discussions at the Working Group Meetings
The WG was established in 2021, and its members from the three countries met online threetimes on July 20 and August 18, 2022 and November 20, 2023.
At the first two meetings, the participants updated climate policies toward carbon neutrality inthe three countries and discussed possible common grounds for the trilateral cooperation. Suchcommon grounds include: 1) the implementation of the Paris Agreement; 2) green recovery; 3)city-to-city cooperation for sharing best experiences; 4) clean energy development (such as greenhydrogen); 5) green finance initiatives; and, 6) educational cooperation including exchanging
students and teachers.
Regarding technology cooperation, the participants argued that the three countries are providersof green technologies and are competing each other for developing and selling the technologies toothers. It is important for the three countries to cooperate for creasing markets for green technologiesin Asia. To do so, a step-wise approach, beginning with mutual learning and then developing
common standards, can be taken.
The participants also discussed external pressure like Carbon Boarder Adjustment Measure(CBAM). Though they see some values from external pressures from key global markets to promoteclimate action, they also pointed out challenges: 1) difficulty in calculating carbon contained in
products and production process; 2) possible incomparability with World Trade Organization (WTO)
agreements; and 3) negative impact on the UNFCCC and Paris Agreement process where consensuswas established by multilateral negotiations over thirty years.
In 2020, China, Japan, and ROK each put forward the goal of achieving carbon neutrality
around the middle of this century, and since then, has been intensively formulating various strategies
and plans related to energy transition, clean energy and green industrial development. Under the goalof carbon neutrality, the participants argued that there would exist a growing consensus between
China, Japan and ROK in addressing climate crisis in fields of green recovery, clean energy
cooperation, green finance and low-carbon education.
At the meeting held in November 2023, the participants elaborated further the possibility of2

collaboration in specific sectors and/or industries in which policy coordination and cooperation
among the three countries would be possible. Looking at clean hydrogen, steelmaking, transport
sector and renewable development in rural areas, the participants discussed the following points:lWhich sectors/industries would be most promising for the three countries’ cooperation?

l

Are there any specific form or mode of such cooperation?

l

Are there any preconditions for such cooperation to be realised?

The participants also discussed room for cooperation in the field of carbon markets. China andRepublic of Korea have already established and operationalised their domestic emissions trading
schemes (ETS), and Japan recently decided to develop its ETS in a stepwise manner from 2023. Inaddition, the detailed rules for Article 6 of the Paris Agreement were developed, and various bilateral
initiatives, such as the Joint Crediting Mechanism (JCM), have been already implemented.
Considering these developments, the participants discussed the following points:lWhat is the current status of the domestic ETS in each country, and are they going to belinked with Article 6 mechanisms?

lWill there be competition among China, Japan and Korea in their efforts to produce carbon
credits overseas and to use them to meet their NDCs?

lWill there be any room for cooperation for the three Northeastern Asian countries in theform of joint development of carbon offsets, and setting up of a regional carbon market?

3. Policy Recommendations
Based on the discussions above, the Working Group on “Toward Carbon Neutrality in EastAsia” summarized the following policy recommendations. In addition, at the third meeting, theparticipants elaborated two issues of cooperation on clean technologies as well as carbon market.
With regard to cooperation on clean technologies, the participants discussed specific sectors and/orindustries in which policy coordination and cooperation among the three countries would be possible.
With regard to carbon market, they explored the possibilities of cooperation among the threecountries on the joint development of carbon offsets as well as the setting up of a Northeast carbonmarket.
Following the Joint Action Plan for China-Japan-ROK Environmental Cooperation (2021-2025),
we should fully mobilize the governments, enterprises, universities and research institutions todevelop a carbon-neutral action plan in phases, jointly draw a carbon neutrality blueprint in East3

Asia. We thus suggest to develop cooperation in these following areas:lJointly promote the Paris climate process:ØGiven the fact that now the multilateral climate process entered a new phase ofimplementing the Paris Agreement, China, Japan and ROK should forge further consensus
in building a fair and reasonable global climate governance system with win-wincooperation. Implementation should be the key, with the focus of mitigation, adaptationand finance. China, Japan and ROK should further support developing countries toimplement their climate action under the principle of Common but DifferentiatedResponsibilities, and translate the goals of Nationally Determined Contributions into solidactions.

lWorking together for green recovery: UN Secretary-General Antonio Guterres said at the One
Planet Summit that the post-pandemic economic recovery was an opportunity to achieve agreen transition, and that environmental protection is not opposed to economic growth, but cancreate new jobs.
ØGovernments of China, Japan and ROK should deliver green stimulus packages to recoverfrom the COVID-19 pandemic and energy crisis with an aim to both facilitatingtransformation of economic, energy and social systems toward decarbonisation andensuring just transition which allows such transformation to be made in a smooth and“no-one-left-behind” manner, including reskilling of workers, green job creation, andfinancial support for them. In the process of green recovery, the three countries could also
support environmental protection industries, for example, industries related toenvironmental protection equipment and industries in waste recycling and disposal.

lDeepen China-Japan-ROK low-carbon multi-level cooperation:
ØIt is important to promote China-Japan-ROK information exchange and cooperation in thefields of sustainable and resilient infrastructure construction, carbon market, and climate
adaptation at the national, local, industrial and enterprise levels. In order to achievesustainable economic development, concrete actions and practical efforts at the local
government levels are extremely important. The promotion of low-carbon cooperation
among local governments, exchanging best practices and sharing governance experiences
thus will be the next priority for China, Japan and ROK.

4l

Strengthen cooperation in the field of clean energy development and promotion.
ØUnder the goal of carbon neutrality, clean energy cooperation is a comprehensive solution
to address the climate crisis. China's 14th Five-Year Plan and Japan’s Green
Transformation (GX) Basic Policy have common priorities on a clean, safe and efficientenergy system, and multi-energy complementary clean energy bases such as wind power,hydropower, photovoltaic and nuclear power, laying the foundation for clean energy
cooperation between China, Japan and ROK. Relying on regional multilateral mechanisms
and platforms, the three countries could strengthen clean energy cooperation in clean
energy technologies such as solar PV, batteries and energy storage, onshore and offshorewind, hydrogen and renewable gas.

ØThe three countries should initiate joint research on the possibility of mutual recognition ofcertification. Cross-country inconsistencies in standards for evaluating emissions fromhydrogen production and transport and certificate programmes for, for example, receiving
government subsidies could become a barrier for international investment in hydrogenprojects, international hydrogen trade and the establishment of international supply chains.
Currently, the International Partnership for Hydrogen and Fuel Cells in the Economy(IPHE) in which China, Japan and ROK participate as member countries together withother 21 members is taking the lead, in partnership with the International Organisation forStandardisation (ISO), in developing methodologies for evaluating emissions fromdifferent hydrogen production methods and carriers. Full standardisation of suchmethodologies and certification systems across countries is ideal for effectively promotinginternational trade of hydrogen and minimising the administrative burden for companies,
but takes time for coordination. Therefore, mutual recognition of certification schemes
across countries can be the initial step towards the full standardisation. The three countries
should initiate research on barriers and challenges for mutual recognition of low carbonhydrogen certificates, and possible way forward to overcoming such barriers andchallenges.

ØThe three countries should promote joint R&D in green steelmaking. Three countries canfind common grounds for cooperation in this area because of at least of two reasons: Oneis the low level of technology maturity. A hydrogen-based reduction ironmaking process isstill at the early stage of technology development. No country/steelmaker has establisheditself as the leader of this technology yet. This provides room for cooperation. The otherreason is the impact of CBAM. Steel is one sector within the scope of application. China,
5Japan and ROK have major global steelmakers and have an incentive for cooperation fordeveloping the green steel production process. Between Japan and ROK, the 1st Green
Steel Joint Seminar was held on 21st September 2023 to discussed trade issues and green
steel standards. Chain can be invited to this Joint Seminar. This Joint Seminar can bedeveloped as a platform for further collaboration among the three countries.
ØThe three countries should promote collaboration for learning from new business models
for new, domestic market-oriented technologies, such as a vehicle-to-grid (V2G)
system—a system in which electric vehicle (EV) can sell demand response services to thegrid. Reflecting different domestic regulatory frameworks and market conditions among
the three countries, different business models for V2G are expected to be developed. Thegovernments (or regulators) and V2G service providers can learn from various businessmodels and explore new ideas of business model. A better understanding about domestic
market conditions and regulatory frameworks is a starting point.

ØThe three countries should collaborate for sharing lessons for promoting renewable energy
in the nexus of mitigation and adaptation/resilience in rural areas. The promotion ofdecentralised, renewable energy-based electricity systems can provide multiple benefits:
Mitigation effects, improvement in resilience of local communities against various
external shocks including extreme whether events, and improvement in energy access.
There are several programmes and projects for decentralised, renewable energy systems in
the three countries, which provide opportunities for mutual learning about project design
and implementation as well as business models for such system, including financing.

lPromote information exchange and cooperation in the fields of carbon markets:ØIn order to effectively implement domestic Emissions Trading Schemes (ETSs) in eachcountry, it is important to learn from each other regarding the regulatory frameworks,
market designs, allocation of allowances and the role of offset credits. It is also important
to conduct joint research on key topics which have impacts on the implementation of eachcountry’s ETS. They include demand and supply relations in each market, lessons fromEU ETS regarding their benchmark approach to limit free allocation and automatic
reduction of initial allowances, as well as the operation and implications of CBAM.

lActively promote green finance cooperation:ØThe three countries can and should more aggressively provide finance to support just6

transition from coal to renewable energy in developing countries in Asia. There are notable
examples. Following such examples as Just Energy Transition Partnership (JETP) andAsian Development Bank’s Energy Transition Mechanism (ETM), the three countries
should mobilise the finance through public-private partnership to help decommissioning
coal-fired power plants, providing alternative energy as well as jobs in Asian developing
countries. The three countries have government-led financial arms and contributions tomultilateral/regional development banks. Together with private sectors, such resources
should be mobilised for rolling out renewables and also facilitate just transition.
ØChina, Japan and ROK are also the pioneers of green finance in Asia, and have issued
national-level guidelines on green finance policies to promote the development ofdomestic green financial markets and carbon markets through fiscal policy guidance andpilot project construction. In the next stage, China, Japan and ROK can jointly develop
mutual standards to promote the development of international green finance.

lWidely extend low-carbon education cooperation:ØChina's Ministry of Education has issued the Working Plan for Strengthening Carbon
Neutrality Higher Education Talent Cultivation System, which focuses on incorporating
green low-carbon education into teaching and researching. Given the importance of carbon
neutrality in education and research, we could further promote exchange programs
between universities and research institutions among our three countries under the supportof Trilateral Cooperation Secretariat (TCS) and other organizations in the future.

5. Annexes“Report for the NTCT Working Group on “Toward Carbon Neutrality in East Asia”“NTCT “Toward Carbon Neutrality in East Asia” WG Program：China’s Section”

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List of WG Members
China
LI Xinlei
Professor, Deputy Director of the Environmental Politics Research Institute,Shandong University
DONG Liang
Research Fellow, Institute of Asian Studies, China Foreign Affairs University.
LIU ZheDeputy Director, International Governance Department, Research Center for Sustainable
Development, Chinese Academy of Social Sciences and Director, Urban Economics Society
Japan[WG Members]*Director of the WG
TAMURA Kentaro*
Programme Director,
Climate and Energy Area, Institute for Global Environmental Strategies
MATSUO Naoki
Principal Policy Researcher,
Strategic Management Office, Institute for Global Environmental Strategies[The Japan Forum on International Relations]
WATANABE Mayu
President, JFIRKIKUCHI Yona
Executive Director and Senior Research Fellow, JFIR

Korea
Sangmin SHIM
Professor, Graduate School of Green Growth and Sustainability, Korea Advanced Institute of
Science and Technology (KAIST)In Alphabetical Order of Country Name8