GX (Green Transformation) Basic Policy and Roadmap

Policy Overview

The proposed Green Transformation (GX) Basic Policy, which is open for public comment until January 22, 2023. It is effectively an investment roadmap for 150 trillion yen (over USD 1.1 trillion) of public-private financing over the next 10 years to transform 22 industrial sectors to meet carbon neutrality.

The Japanese government aims to introduce ‘carbon pricing’ combining a ‘carbon levy’ and voluntary emissions trading. The late introduction timelines and the voluntary design brings into question whether this ‘carbon pricing’ can effectively reduce emissions, but given that much is still under discussion, there is room for corporate advocacy for more robust regulations.

Heavy industry has advocated for the funding to be allocated to technologies misaligned with IPCC timelines, including thermal power (LNG, ammonia co-firing with coal, hydrogen, CCS), hybrid vehicles, and weakened the role of renewables. The draft strategy also proposes to build new nuclear reactors in a major reversal of policy since the Fukushima disaster.


On December 22, 2022 the government unveiled the Green Transformation (GX) Basic Policy. It outlines regulatory, financing and technology development priorities for the green transformation of 22 industrial sectors. The strategy was formulated after months of consultations at the GX Executive Council chaired by the Prime Minister of Japan Fumio Kishida and various hearings at the Ministry of Economy Trade and Industry (METI), the Ministry of Environment and others.

Energy and Technology

Despite its name, the Green Transformation strategy’s objective is to encourage investment into key industrial sectors loosely in line with 2050 carbon neutrality. As such it promotes investment into technologies that are not necessarily aligned with IPCC decarbonization timelines, including LNG power generation, hydrogen/ammonia co-firing with gas and coal, and hybrid vehicles.

Carbon Pricing

The Japanese government aims to raise initial 20 trillion yen (USD 140 billion) through ‘GX Bonds.' They will be repaid through ‘carbon pricing’ revenues that combine a ‘carbon levy’ to be introduced in 2028, and voluntary emissions trading introduced in 2023 and expanded to the power sector with allowance auctions in 2033. The late introduction timelines and the voluntary design brings into question whether this ‘carbon pricing’ can effectively reduce emissions, but given that much is still under discussion, there is room for corporate advocacy for more robust regulations.

A carbon levy will be gradually introduced from 2028 on power, gas and oil companies. While the government has not disclosed the price, the Renewable Energy Institute estimates that it will amount to a carbon price equivalent of up to 1,500 yen/t-CO2 (Less than USD 12/t-CO2) under current assumptions disclosed by the government.

Current draft plan proposes introducing emissions trading in phases, with a prolonged initial period of voluntary trading based on carbon allowances set by the companies themselves.

  • Phase I set to begin in 2023, the trading mechanisms will be tested among the voluntary, industry-led group of GX League of companies with self-assigned emission caps.
  • Phase II from 2026, during the so called “full scale operation”, further guidelines on the scope of target companies, allowance allocations and monitoring will be determined – though it is unclear to what extent the industry-led voluntary model will shift towards regulations.
  • Phase III from 2033, trading based on allowance auctions is expected to begin in the power sector.


While being eligible for a significant share of financing (20 trillion yen) under the package, renewables are mentioned with newly added caveats emphasizing that their deployment should be “based on 3E+S Principles” (Energy security, economic efficiency, environmental considerations and safety), reflecting industry narratives that call for their roll out to be moderated because of high cost and intermittency. Moreover, internationally, compared to the long-term support promised to expand hydrogen and ammonia supply chains in Asia (subsidies, regulatory support, export credits, risk insurance etc), support is limited for Japanese companies looking to participate in regional renewable business.


Current draft proposes the construction of new reactors, a major reversal of policy over the last decade since the Fukushima meltdown. The heavy industry sector has been strongly advocating for the restart and development of tradition reactors, as well as new generation technologies including SMR.

Asia Energy Strategy

The focus on supporting the energy transition in Asia is a key pillar of the strategy. Japan aims to play a stronger role as a lender and technology exporter in Asia, and regional cooperation is expected to be high on the agenda at the G7 summit hosted by Japan in May 2023. Based on proposals from the heavy industry, there is a risk that thermal power expansion (LNG, hydrogen and ammonia co-firing, CCS) will feature prominently on the agenda.

Evidence Profile



opposing not supporting mixed/unclear
supporting strongly supporting

Policy Engagement Overview

Evidence of corporate and industry policy engagement gathered by InfluenceMap since the start of 2022 intense and negative advocacy was demonstrated by cross-sector groups likeKeidanren and Japan Chamber of Commerce and Industry (JCCI), as well as steel, power, and auto sectors.

A significant portion of negative advocacy was directed towards the weakening of the carbon pricing policy – supporting voluntary initiatives over regulations, emphasizing economic risks and existing cost burdens, and advocating for slow and flexible introduction timelines.

  • In January 2023, the Japan Iron and Steel Federation (JISF) supported the growth-oriented carbon pricing policy concept proposed in the December 2022 Draft GX Basic Policy, after repeatedly opposing a carbon tax, emissions trading, and the Tax for Climate Change Mitigation in September 2022, and again opposing a carbon tax in the GX roadmap in October 2022.
  • In September 2022, Nippon Steel did not support carbon pricing, appearing instead to support voluntary emissions trading through the GX League.
  • In November 2022, Keidanrenwelcomed the recent government announcement of a new 'carbon levy' instead of a 'carbon tax' because it allows to 'set the burden more flexibility' and appeared to request leeway related to taxes on oil, gas and coking coal.  And while Keidanren reversed its longstanding opposition to emissions trading in a May 2022 policy proposal on the Green Transformation (GX), it advocated for free allocations and discussions/testing of the scheme within a voluntary group of companies known as the 'GX League'. 
  • Despite top-level support for carbon pricing in July 2022, Federation of Electric Power Companies of Japan (FEPC)cautioned about cost duplication and impacts of a hybrid system that combines carbon taxes and ETS in November 2022.
  • In November and December 2022, Japan Chamber of Commerce and Industry (JCCI) requested clarity on the schedule of phased introduction and the expected total cost burden with existing levies such as the petroleum and coal tax and the feed-in tariff.
  • ENEOS appeared to support the carbon levy, while also repeatedly emphasizing that “GX should be borne fairly by society as a whole” in November and December.

The advocacy on the power mix has been generally negative, with a strong emphasis for the need of thermal power including LNG and hydrogen/ammonia co-firing with gas and coal and mixed messaging on renewables. The advocacy for nuclear energy is very strong, occasionally at the expense of renewable energy.

  • In November 2022, FEPC supported the use of nuclear power along with renewable energy and supported the renewable Feed in Tariff in July 2022.
  • In October 2022, Keidanren Chair, argued for the longer role of nuclear in the energy mix because of “the difficulty of supplying electricity from abroad and the lack of suitable sites for renewable energy” and “the fact that renewable energy is a variable power source”. In August 2022, Keidanren also appeared unsupportive of the Feed in Tariff, emphasizing the concern that “the burden of the levy will be heavily skewed toward the manufacturing industry.” In May 2022, Keidanrenadvocated for the development of LNG and hydrogen and ammonia supply chains.
  • In October 2022, Petroleum Association of Japan (PAJ) advocated for ammonia produced with fossil fuels, including ammonia co-firing with coal-fired power.
  • In August 2022, JCCI supported the restart and increased utilization of nuclear power plants, alongside renewables and fossil fuels such as crude oil and LNG. At a roundtable in December 2022, JCCI advocated for the restart of nuclear power plants and development of nuclear power-related technologies to promote GX. Nevertheless, in August 2022, JCCI requested government support for offshore wind power development abroad and the introduction of renewable energy in local communities.
  • In January 2023, the chairman of JISF supported the inclusion of nuclear power generation in the draft GX Basic Policy. In September 2022, JISF supported a long-term role for thermal power generation.

There a push for policy-lock in and developing export markets for thermal power technologies in Asia.

  • In May 2022, Keidanren appeared to support fossil gas without clear conditions related to CCS or mitigating methane emissions in Asia. In March 2022, Keidanren promoted continued export of coal combustion technology, and ammonia blending with existing coal plants, and requested the Japanese government to engage on policy formulation with other countries in Asia to create export markets.
  • In August 2022, JCCI requested government support for the expansion of ammonia and coal co-firing technologies to Southeast Asia and the development of offshore wind power in Asia.

There has been an intensified engagement by the Japanese auto sector with the Japanese government opposing regulations and advocating for a prolonged role of combustion engines and hybrids in the transition.

  • In September 2022, Japan Automobile Manufacturers Association (JAMA) published scenario modeling which concluded that hybrid and plug in hybrid vehicles are compatible with 1.5C scenarios.

  • Keidanren Chairman Masakazu Tokura and Akio Toyoda, chairman of the Keidanren Mobility Committee and Head of Toyota and JAMA, met with the Prime Minister in November 2022. Chairman Tokura cautioned against overestimating the outlook on vehicle electrification, while Committee Chair Toyoda cautioned against starting with regulations in the sector.

Evidence Profile



opposing not supporting mixed/unclear
supporting strongly supporting

Entities Engaged on Policy

Influencemap Performance BandOrganizationEngagement Intensity
B+Renewable Energy Council (REC)19UtilitiesAsia
DPetroleum Association of Japan (PAJ)29EnergyAsia
C+Real Estate Companies Association of Japan23Construction MaterialsAsia
DJapan Chamber of Commerce and Industry (JCCI)26All SectorsAsia
D+Japan Business Federation (Keidanren)50All SectorsAsia
DENEOS Holdings (formerly JX Holdings Inc)29EnergyAsia
A-Japan Climate Leaders Partnership (JCLP)39All SectorsAsia
D+Mitsubishi Corporation23IndustrialsAsia
D+Central Japan Economic Federation (CJEF)20All SectorsAsia
E+Japan Iron and Steel Federation (JISF)44Metals & MiningAsia
B-Japan Association of Corporate Executives (Keizai Doyukai)38All SectorsAsia
DFederation of Electric Power Companies of Japan (FEPC)36UtilitiesAsia
C+Daikin Industries29IndustrialsAsia
C-Japan Electrical Manufacturers' Association (JEMA)16IndustrialsAsia
DJapan Gas Association26EnergyAsia
D+ITOCHU11Business ServicesAsia
DJapan Society of Industrial Machinery Manufacturers (JSIM)10IndustrialsAsia
DJapan Paper Association (JPA)10Paper & Forest ProductsAsia
DJapan Chemical Industry Association (JCIA)19ChemicalsAsia