Current Policy Projections
The COVID-19 continues to have a significant effect on Japan’s economy. Consequently, Japan’s energy and industry CO2 emissions for the first six months of 2020 dropped by 7.5% compared to the same period in 2019 (Carbon Monitor, 2020). The post-COVID GDP projections up to 2030 are grim for Japan (see table below). It is very likely that the GDP will fall by more than 5% in 2020 with limited rebound projected for 2021. The Japan Center for Economic Research projects a worst case scenario (“Nightmare scenario”) in which Japan falls into serious deflation where tourism and manufacturing industries suffer catastrophic damages (Kobayashi, Saruyama, & Ochiai, 2020b, 2020a).
Taking into account the above-mentioned external post-COVID GDP projections and assuming the emissions-intensity up to 2030 remains consistent with our pre-COVID projections, currently implemented policies will lead to emissions levels of 1,080-1,150 MtCO2e/year (10–15% below 1990 levels) in 2020 and 900-1,040 MtCO2e/year (18–29% below 1990 levels) in 2030, excluding LULUCF. These results indicate that Japan is on track to overachieve its NDC target under current policies. The uncertainty range of emissions is largely due to the potential impact of the COVID-19 on the Japanese economy as well as the future development of the power sector.
Japan’s energy and industry CO2 emissions for the first six months of 2020 are estimated to have dropped by 7.5% compared to the same period in 2019 (Carbon Monitor, 2020). The impact of COVID-19 on CO2 emissions was estimated to be the largest in the aviation sector ( a 29% drop compared to the same period in 2019), followed by industry (12% reduction) and the ground transport sector (8% reduction) (Carbon Monitor, 2020). By contrast, CO2 emissions from the electricity sector are estimated to have reduced by less than 3% (Carbon Monitor, 2020). The Climate Action Tracker estimates that GHG emissions in 2020 overall would be 6‑11% lower than 2019. This adds to an already declining trend in GHG emissions (excluding LULUCF), which marked on average ‑2.5%/year between 2013 and 2018 and a -3.9%/year in 2018 (UNFCCC, 2020).
In terms of COVID-19 response measures, the Japanese government has agreed on USD 2.2 trillion in fiscal measures but only a very small fraction of this is allocated to green measures (Vivid Economics, 2020). It is therefore not possible at the time of writing to estimate the impact of COVID-19 response measures on future GHG emissions in Japan. METI acknowledges the structural changes that the COVID-19 is causing on energy demand and supply (METI, 2020c) and we expect that, together with the revision of the Basic Energy Plan, there will be more green response measures in the coming months.
The range of the projections also depends partly on the future development of the power sector. The lower end projection is from a scenario in which all 25 nuclear reactors that applied for restart (including the two that have applied to resume construction) as of August 2020 would be approved and complete their 60-year extended lifetime. The upper end projection, by contrast, is from a scenario where only 16 reactors currently approved for restart, on the condition that necessary additional safety measures are taken, will be in operation until 2030 at a capacity factor half of that assumed under the lower end projection taking the possible court cases and unplanned inspections into account (see Assumptions section for details).
The table below illustrates the fuel mix in the power sector in 2018, and the different assumptions for our projections, in comparison to the IEA World Energy Outlook (WEO) 2019. Our upper end projection of renewable electricity share in 2030 (27.5%) based on the latest projection by the Central Research Institute of Electric Power Industry (CRIEPI) (Asano & Obane, 2020) is higher than that projected in the WEO 2019’s Current Policies Scenario (24.4%).
Before the recently initiated transformation of the electricity supply sector, Japan had already introduced effective policies for energy efficiency in transport, industry, and buildings. One longstanding policy is the Energy Conservation Act, the main energy efficiency law implemented in 1979. To achieve the energy savings target under the NDC, an amendment to the Energy Conservation Act was enforced in 2018 (METI, 2018a). The amendment establishes a new certification system which allows for an inter-business initiative to enhance systemic energy savings, in addition to energy savings at individual operator level, and ensures the coverage of e-commerce retailers under the Act.
Other policies include the Global Warming Tax, an upstream environmental tax, with a maximum price of JPY 289 (about USD 3) per tCO2 in 2016, which is low. The government expected the impact to be 6–24 MtCO2/year by 2020, on a baseline of 1,115 MtCO2/year for energy related emissions (MOEJ, 2017). There is no ex-post impact assessment on this tax scheme available to date.
After the 2011 Great East Japan Earthquake and tsunami, the Japanese Government revised its energy policy in which the country committed to reducing its reliance on nuclear energy. In 2011, all nuclear power plants stopped operating and were not allowed to restart until they complied with higher safety standards. The 2014 Basic Energy Plan called for a resumption of nuclear energy (METI, 2014). As of August 2020, 25 reactors in 15 nuclear power plants have applied for a restart (and two in construction applied for operation) under new, more stringent safety standards—16 reactors with a total of 16 GW have passed the safety examination and have been approved for restart (under the condition that the plans for the construction work are approved by neighbouring local governments and the required safety measures are properly installed), of which nine are currently in operation (JAIF, 2020). It is likely, however, that the nuclear power plant operation would be disrupted by legal action to stop them; there have already been a few district court rulings to halt the operation of restarted reactors (National network of legal teams for nuclear phase-out, 2020).
In 2018, the Japanese government adopted its new Basic Energy Plan (METI, 2018d). The new plan provides no vision nor strategy on how Japan can go beyond its 22–24% by 2030 renewable electricity target, which is likely to be achieved with existing policies. Instead, it focuses on whether new nuclear reactors could be constructed toward 2050 and how to reduce the economic costs resulting from the renewable electricity support scheme. A more positive sign is that the documents refer to renewables as “main power sources”—this suggests an important policy shift from the current 2014 Basic Energy Plan’s “important low-carbon and domestic power source”. Nuclear power remains as an “important power source” in the 2018 plan.
The electricity mix for 2030 assumed in Japan’s NDC is based on the 2015 Long-Term Energy Demand and Supply Outlook. The Outlook foresees that 20–22% of electricity will be supplied by nuclear energy, 22–24% by renewable energy and the remaining 56% by fossil fuel sources. The 2018 Basic Energy plan reiterated the 2015 Outlook target. On the one hand, these targets stand in strong contrast to what would be compatible with a long-term 2°C pathway, let alone a Paris Agreement-compatible 1.5 °C pathway. On the other hand, this 2030 electricity mix target is also unrealistic given the status of nuclear power (i.e. share as high as 20-22% will not be achieved), likely overachievement of renewable electricity target (see below subsection on renewable electricity generation for details) as well as the impact of COVID-19 on future electricity demand.
In recent months, Japan has seen a number of policy developments on coal-fired power and offshore wind power, described in detail below. While there are potential loopholes and limitations to the effectiveness of the coal-fired power policies, they—together with its recent plans to boost offshore wind power deployment— may indicate a major (albeit reluctant) shift in Japan’s climate policy and that the Japanese government is at last officially acknowledging there’s no bright future for coal. Based on these developments, we anticipate substantive changes in the 2030 energy mix target with a higher renewable electricity share and shares for nuclear and fossil fuel-fired power, in the next revision of the Basic Energy Plan, which the government plans to communicate by mid-2021.
For coal-fired power, the Japanese government is finally starting to officially shift, albeit gradually, away from developing coal power, both domestically and overseas. On 3 July 2020, the Minister of Economy, Trade and Industry (METI) Hiroshi Kajiyama announced that Japan would develop concrete plans to phase out inefficient coal-fired power plants (METI, 2020g). He provided few details, but news reports suggested the government was considering shutting down or mothballing about 100 out of total of 110 existing inefficient coal plants by 2030 (The Japan Times, 2020).
Our July 2020 analysis shows the reported new coal policy would ensure that Japan’s coal-fired power generation would only be reduced to the level indicated in its NDC, but nothing more; it is likely that more than 30 GW of coal-fired power capacity will remain in 2030. Analyses by other NGOs and think tanks came to similar conclusions (Kiko Network, 2020; Renewable Energy Institute, 2020a; Tamura & Kuriyama, 2020). The discussions to develop a concrete implementation plan has started (METI, 2020a); in our projections we consider the announced plan would be fully implemented. According to Climate Analytics analysis, Japan as an OECD country needs to phase out coal-fired power plants by 2030 to decarbonise electricity generation in line with the Paris Agreement (Yanguas Parra et al., 2019).
Japan has also been a major funder of coal-fired power plants overseas, alongside China and South Korea (EndCoal, 2020). Among G20 members, Japan has been the largest supporter of international fossil fuels projects through export credit agencies (DeAngelis & Tucker, 2020). The Japanese government’s policy on overseas coal power finance also shows a sign of change. On 9 July 2020, in its new strategy document on infrastructure exports, the Japanese government stated that it will - in principle - not finance coal-fired power plants in countries that do not have a decarbonisation strategy in place. The effectiveness of this new export strategy is also under scrutiny. First, it is somewhat contradictory because any country with a decarbonisation plan will not be investing in new coal plants, given the average lifetime of such plants being 46 years (Cui et al., 2019); this also goes against the urgent need for all regions to phase out coal by 2040. Second, the new export strategy does not completely ban new coal finance overseas and does not apply to running projects (JACSES et al., 2020; Renewable Energy Institute, 2020b). Nevertheless, it marks a significant change from the previous strategy, in which coal power was identified as a pillar of the export strategy.
The private sector is also showing signs of change on financing coal power overseas. The world’s three largest lenders to coal-fired power plant developers globally, Mizuho, MUFG, and SMBC Group, have all recently announced that they will, in principle, no longer finance coal-fired power plants overseas (METI, 2020a). On 25 June, 2020, there was also a first-ever climate motion put to shareholders of a listed company in Japan to align its business to the Paris Alignment; the motion received about 35% of the total votes submitted (Sheldrick & Umekawa, 2020).
Renewable electricity generation has grown steadily in recent years. The share of renewable energy in total electricity generation in Japan has increased considerably from 10% in 2010 to 19% in 2018, but still remains below the OECD average (IEA, 2019). In 2012, the Renewable Energy Act was introduced to support RE deployment in Japan and remains the main policy to achieve Japan’s stated NDC renewable electricity share target of 22–24% by 2030. It institutes a feed-in tariff (FIT) and general funding for distribution networks. The FIT has provided very favourable rates, particularly for solar PV, which led to a large increase in PV installations. However, the generous PV tariff rates has meant significantly increased costs particularly for households, and many FIT-certified companies also purposefully delayed installation of PV systems until prices dropped. Also no significant growth was observed for other renewables, such as wind and geothermal (Renewable Energy Institute, 2017).
Effective from April 2017, the Ministry of the Economy, Trade and Industry (METI) revised the FIT scheme for the first time with a stated intention of avoiding a “solar bubble” and to achieve a more balanced growth of renewable energy while minimising the costs (METI, 2016). An important new instrument is the auctioning system for solar PV installations larger than 2MWe. The auction has been conducted five times to date, and has shown some success in lowering the FIT prices, yet often resulted in insufficient new capacity contracted due to a lack of bidders (Asian Power, 2020). The government is now planning to further revise the FIT scheme, largely by shifting it into a feed-in-premium (FIP) scheme, a trend observed in several European countries, such as Germany and France, which spearheaded the introduction of FIT policy in the early 2000s (METI, 2019b).
Another area where important policy effort is being made is the deployment of offshore wind power. In April 2019, a new law entered into force to facilitate the use of maritime areas for offshore wind power generation (METI, 2019a). In July 2020, a METI committee was set up to formulate a plan to install 10 GW of offshore wind power capacity by 2030 (METI, 2020b; The Mainichi, 2020), compared to the current total installed capacity of 65 MW (2018 figure; IRENA, 2020). While we do not consider this plan in our emissions projections, it would lead to an additional renewable electricity generation of about 26 TWh/year or 2.5% of total electricity generation in 2030 (assuming a 30% capacity factor).
Hydrogen: the long-term strategy reiterates Japan’s long-term commitment to develop hydrogen as a major decarbonised fuel, for which a national strategy was established in 2017 (METI, 2017). The national hydrogen strategy has been updated in March 2019 (METI, 2019c). The members of a progress evaluation group under METI indicated that the lack of clarity on the environmental value of hydrogen is hindering investment on hydrogen-related technologies and expressed concern that the fuel cell vehicle (FCV) market is expanding too slowly (METI, 2020e). In March 2020, one of the largest low-carbon hydrogen production facilities in the world started operation in Fukushima prefecture; The Fukushima Hydrogen Energy Research Field is powered by an onsite solar PV plant of 20 MW capacity (Hiroi, 2020). Australia’s national hydrogen strategy also identifies Japan as a potential major importer of Australian hydrogen (COAG Energy Council, 2019).
Direct CO2 emissions from the transport sector accounted for 19% of Japan’s total energy-related CO2 emissions in 2018 (UNFCCC, 2020). Compared to 1990, the emissions in this sector have increased by 1%, but have been on a decreasing trend since 2001 and the emissions have since reduced by 21% (UNFCCC, 2020). This trend stands out from the Annex I countries (UNFCCC, 2020), which showed an average increase of 3% over the same period (UNFCCC, 2020).
Regarding vehicle decarbonisation, the current government target for ‘new generation’ vehicles (including hybrids, plug-in hybrids, battery electric vehicles, fuel cell electric vehicles, as well as ‘clean diesel’ vehicles and gas-powered vehicles) has been set at 50-70% of new sales by 2030 (METI, 2018d). On the fuel economy of passenger vehicles, Japan has been one of the best performers over the last few decades with the average CO2 intensity of 115 gCO2/km (normalised to NEDC) (ICCT, 2018), but no post-2020 performance standard has yet been set.
For the longer term, a panel under METI compiled an interim report on the long-term strategy for car manufacturing (METI, 2018c). This document included targets of reducing tank-to-wheel CO2 emissions by 80% below 2010 levels by 2050 for all new vehicles produced by Japanese car manufacturers and 90% by 2050 for new passenger vehicles, with the latter assuming a near 100% share of electric vehicles (including hybrids, plug-in hybrids, battery electric vehicles and fuel cell electric vehicles).
While these targets are described in the strategy document to be consistent with the Beyond 2°C scenario of the IEA Energy Technology Perspectives 2017 report (IEA, 2017), it is not consistent with the benchmark for 1.5°C identified by the Climate Action Tracker analysis (Kuramochi et al., 2018), i.e. last fossil fuel passenger car sold by 2035, because the expected shares of conventional and plug-in hybrids under the proposed targets are not clear.
While the proposed targets are not as ambitious as those set in some European countries (e.g. Norway 2025, France 2040 and the UK 2040) (DEFRA & DfT, 2017; Ewing, 2017; Staufenberg, 2016), Japan will become the largest car manufacturing nation (headquarters-based) to date to set a long-term phase-out strategy for conventional internal combustion engine (ICE) vehicles. The final strategy document has not been published, but the main targets from the interim document are reflected in the long-term low emissions development strategy document submitted to the UNFCCC (Government of Japan, 2019b). The outcomes of this METI panel are significant not only because of the ambition of the proposed targets, but also because the panel members include CEOs of major car manufacturers (Toyota, Nissan, Honda and Mazda).
Accordingly, the new fuel economy standards were set for trucks and buses to improve by 13-14 % by 2025 compared to the 2015 levels, and for passenger cars to improve by 32% by 2030 compared to the 2016 levels (METI; MLIT, 2019a, 2019b).
CO2 emissions from the industry sector (including indirect emissions from electricity use as well as emissions from industrial processes) accounted for 38% of Japan’s total energy-related CO2 emissions in 2018 (GIO, 2020). Within the sector, the iron and steel, the chemical, and the cement industries are the three largest emitters, which respectively emitted 43%, 15% and 8% of industrial emissions in 2018 (GIO, 2020). In 2018, emissions in the sector have reduced by 21% below 1990 levels (15% below 2005 levels) (GIO, 2020). A progress report for 2018 shows that the industry CO2 emissions from the member companies of Keidanren, the most influential business association in Japan, including indirect emissions from electricity use in FY2018, was 13.3% lower than in 2005, with the majority of the emissions reductions (10.1%) attributable to the changes in industrial activity levels (Keidanren, 2020).
The main GHG emissions reduction effort in the Japanese industry is Keidanren’s Commitment to a Low-Carbon Society (Keidanren, 2015), a voluntary action plan which has monitoring obligations under the Plan for Global Warming Countermeasures (MOEJ, 2016b).
In November 2018, the Japanese Iron and Steel Federation (JISF) published a long-term decarbonisation vision, which draws global emissions pathways reaching zero in 2100 to achieve the 2°C temperature goal (JISF, 2018). While the JISF should be commended for developing such a strategy document, the document perhaps intentionally misinterprets the Paris Agreement’s long-term temperature goal as “2°C” and hence developing emissions pathways that are not ambitious enough for the Paris Agreement’s “well below 2°C” / 1.5°C target.
The Japanese steel sector had been hard-hit by COVID-19. In 2020 a third of 25 blast furnaces had to halt operation due to the slump in steel demand (Suga, 2020). As a result, total crude steel production in 2020 may fall below 80 Mt (Suga, 2020), worse than the decline experienced during the 2007–2008 global financial crisis. COVID-19 may have a long-lasting blow on the Japanese steel sector; after the 2007–2008 global financial crisis the crude steel production level in Japan never recovered the pre-crisis level of 120 Mt/year but instead remained at about 105 to 110 Mt/year (Worldsteel Association, 2018).
As of November 2019, no such concrete visions beyond 2030 have been developed by the other major emitters such as the chemical or cement industries. However, it is worth mentioning that in 2017 the cement industry reduced its industrial process CO2 emissions by 32% below 1990 levels, compared with much smaller reductions achieved in the iron and steel (9%, energy-related CO2 including electricity-related) and the chemical (14%, energy-related CO2 including electricity-related and process emissions) industries (GIO, 2020).
CO2 emissions (including indirect emissions from electricity use) from the commercial and residential building sectors together accounted for 34% of Japan’s total energy-related CO2 emissions in 2018 (GIO, 2020). Compared to 1990, the emissions in these two sectors have increased by 51% and 27%, respectively (GIO, 2020). Although these significant increases are partially attributable to the increased electricity CO2-intensity post-Fukushima, there’s an urgent need for strengthened action on the demand side in the building sector.
An important development here is the revised building energy efficiency standards that entered into force on April 2017 under the Buildings Energy Efficiency Act (MLIT, 2016). Under the revised standards, new non-residential buildings larger than 2000 m2 floor area must meet the energy efficiency standards, and the plan is that all new builds including residential buildings must meet the standards from 2020 onward. The lower limit was accordingly revised to 300 m2 in May 2019 (MLIT, 2019). This is a major step forward in improving energy efficiency in the building sector because the standards were not previously mandatory: in 2015, the compliance rate for residential buildings was 46% (MLIT, 2017). It should, however, also be noted that the effective stringency of the standards for residential buildings is the same as the previous 1999 standards, which is lax compared to those in other developed countries, such as France, Germany, Sweden, the UK, and the United States (MLIT, 2013).
Under the 2014 Basic Energy Plan, and remained unchanged in the 2018 version, Japan also aims to reduce the average net primary energy consumption of newly constructed buildings and houses to zero by 2030 (METI, 2014). Japan’s targets for Zero Energy Houses (ZEHs: for residential buildings) and Zero Energy Buildings (ZEBs: for commercial buildings) may not be as ambitious as the EU Energy Performance of Buildings Directive (European Parliament and the Council of the European Union, 2010), which requires all new buildings to be nearly zero energy by the end of 2020 (European Parliament and the Council of the European Union, 2010), even though the definitions of “near zero energy” vary across EU Member States (BPIE, 2016). The share of ZEHs and “Nearly -ZEHs” (more than 75% reduction in net primary energy consumption) in total new residential buildings in 2018 was 13% (Sustainable open Innovation Initiative, 2019b), far below the 50% target for 2020 set in the 2014 Basic Energy Plan. The deployment of ZEBs is still in an initial phase (Sustainable open Innovation Initiative, 2019a).
Japan aims to reduce F-gas emissions through enhanced management of in-use stock and regulating consumption levels. On the management of in-use stock, under the Plan for Global Warming Countermeasures (MOEJ, 2016b), Japan aims to increase the recovery rate of hydrofluorocarbons (HFCs) from end-of-use refrigeration and air conditioning equipment up to 50% by 2020 and 70% by 2030. The Act on Rational Use and Proper Management of Fluorocarbons (“F-gas Act”; last amended in 2013) addresses this, but the recovery rate has stagnated: the recovery rate of refrigerants in 2017 was only 38% (METI; MOEJ, 2019). To resolve this, the F-gas Act has been further amended (the bill passed the Diet in May 2019 and will enter into force in April 2020) (House of Councillors, 2019), including several penalty and obligatory measures to increase the F-gas recovery rates up to the targeted 50% by 2020 (MOEJ, 2019; Yoshimoto, 2019).
To meet the HFC reduction target under the NDC and the targets under the Kigali Amendment of the Montreal Protocol, the Ozone Layer Protection Act was amended in 2018 and measures took effect in April 2019. The amendment sets a ceiling on the production and consumption of HFCs, establishes guidelines to allocate production quota per producer as well as regulates exports and imports (METI, 2018b). The consumption levels are projected to be below the Kigali cap at least until 2029, when the Kigali cap lowers significantly. Since there is some time lag between consumption and emission, we assume that the amended Ozone Layer Protection Act will not affect HFC emission levels up to 2030 (METI, 2018b).