Please also see "Japan's $1Tn GX (Green Transformation) Policy" report published in November 2023, which compares GX policy and IPCC guidelines.
To achieve the 2050 carbon neutrality goal, the Japanese government has introduced the Green Transformation (GX) policy, which aims to transition from fossil fuels to a clean energy-based society while promoting economic growth. The GX policy is a set of policies, including a 10-year roadmap outlining the allocation of 150 trillion yen of public-private investment for various sectors and technologies.
Part of the government's investment will be issued in the form of government bonds called GX Economic Transition Bonds, financed with a carbon levy and the emissions trading system introduced in the future. The government calls this the "growth-oriented carbon pricing concept" and has made it a major pillar of its GX policy.
In May 2022, Prime Minister Kishida announced that over 150 trillion yen of public-private GX investment would be made over 10 years. Subsequently, after discussions at the GX Executive Committee and other meetings, the Cabinet approved the "Basic Policy for the Realization of GX - Roadmap for the Next 10 Years (GX Basic Policy)" in February 2023.
The GX Basic Policy aims to achieve Japan's 2030 and 2050 climate change goals and economic growth through technology, investment and policy.
Unlike most Japanese environmental and climate change policies, which are led by the Ministry of the Environment, the GX policy is primarily led by the Cabinet Secretariat and the Ministry of Economy, Trade, and Industry (METI).
The Financial Services Agency (FSA), METI, and the Ministry of the Environment jointly held a "Transition Finance Environment Improvement Study Group" and released the "Basic Guidelines for Basic Guidelines for Climate Transition Finance" in May 2021.
Subsequently, roadmaps were formulated to promote transition finance in major sectors such as steel, power, and automotives.
The GX Promotion Act (Law Concerning the Promotion of Smooth Transition to a Decarbonized Growth-Oriented Economic Structure), enacted in May 2023, has resulted in the issuance of GX Economic Transition Bonds (Decarbonized Growth-Oriented Economic Structure Transition Bonds) as the world's first sovereign transition bonds.
The aim is to achieve over 150 trillion yen of GX public-private investment over 10 years from 2023, and the GX Economic Transition Bonds of about 20 trillion yen were issued as pump-priming to spur investment.
A portion of the GX Economic Transition Bonds will be issued individually as "Climate Transition Interest Bonds”. Prior to the individual issuance, the Cabinet Secretariat, the FSA, the Ministry of Finance, METI, and the Ministry of the Environment formulated the Climate Transition Bond Framework in November 2023. In addition, DNV of Norway and Japan Credit Rating Agency (JCR) have issued second party opinions (SPO) on the framework.
The first round of Climate Transition Interest Bonds was auctioned on February 14, 2024 for 10-year bonds and on February 27 for 5-year bonds for a total of 1.6 trillion yen. There are plans to issue more after October 2024, and the use of the proceeds will be determined at the time of each issue. The framework may be revised depending on the response to the issuance and sociopolitical conditions.
The Japanese government aims to raise 20 trillion yen through "GX Economic Transition Bonds”. Growth-oriented carbon pricing that combines emissions trading (GX-ETS) and a "carbon levy" will be used to finance the bonds. Emissions trading has already been introduced in FY2023, but it is a voluntary system led by GX League participating companies; a phased auction is scheduled to start in FY2033, but it is limited to the power sector.
A carbon levy will be phased in from FY2028. For more information, please refer to the "Carbon Pricing" page here.
While the GX Basic Policy mentions "fading out inefficient coal-fired thermal power generation," it also includes promotion of hydrogen/ammonia co-firing and direct combustion, as well as investment in upstream LNG development in cooperation with Asian countries. According to the Japanese government's roadmap for fuel ammonia, the anticipated introduction of ammonia direct combustion is in the 2040s. In other words, ammonia co-firing with coal will leave coal in the power generation sector until ammonia direct combustion is achieved in mid-century. Given that there is no mention of fading out of fossil fuels, including coal, their use is expected to continue under the current policy.. For more information on Japan's overall thermal power and fossil fuel policy, please refer to the "Power Sector Transition" page.
Around 31 trillion yen will be provided to next generation renewable energy according to the draft investment plan of the GX Transition Bond . It is partially in line with the recommendations of the IPCC and others in that it provides support for offshore wind and solar power. However, the target for the share of renewable energy in the FY2030 energy mix is 36~38%, which is below the 53.6% average share of renewable energy in global electricity generation in the IPCC modeled pathway to the 1.5°C target with limited or no overshoot. For more information on Japan's overall renewable energy policy, please refer to the "Renewable Energy" page.
The GX policy promotes investment and development in electric furnaces and hydrogen reduction steelmaking, which appears to be in line with IPCC recommendations for decarbonizing the steel sector. However, the transition to non-fossil energy sources in steel production is described only in broad terms, and specific energy sources, technologies, and timelines for the transition are unclear. It also does not take a clear position on the decarbonization of hydrogen production methods used in the steel sector. For more information on Japan's overall steel sector policy, please refer to the "Steel Sector" page.
The GX policy sets a goal of "100% electric vehicles in new passenger car sales in 2035," but this definition of electric vehicles includes hybrid vehicles.While the IPCC acknowledges that hybrids "can reduce emissions by up to 30% compared to ICEVs (internal combustion engine vehicles), depending on the fuel" the IPCC concludes that "mitigation opportunities are limited”. Furthermore, the IPCC also states that "electric vehicles using low-emission electricity offer the greatest decarbonization potential for land transport on a life-cycle basis”. For more information on Japan's overall automotive sector policies, please see our Automotive Sector page here.
Date of Last Update: August 13th, 2024
The Japan Climate Leaders’ Partnership (JCLP) handed a proposal to the Vice Minister of Environment of Japan on November 20th. In the proposal, JCLP proposed the following factors to be included in Japan's Green Transformation (GX): raising building standards to that of Zero Energy Homes (ZEH)/Zero Energy Buildings (ZEB), the rapid expansion of renewables such as floating offshore wind power, and the accelerated introduction of electric vehicles in Japan. Representatives of Amazon Japan, Sumitomo Mitsui Trust Bank and AstraZeneca participated in the meeting.
In a proposal to the Minister of Energy, Trade and Industry of Japan, the Japan Climate Leaders’ Partnership (JCLP) called for the following factors to be included in the Green Transformation (GX) initiative: raising building standards to ZEB/ZEH, rapid expansion of renewables, such as floating offshore wind power, and accelerated introduction of Electric Vehicles in Japan.
At a GX (Green Transformation) Executive Council Meeting held on November 8th, Mitsubishi Corporation supported the decarbonization of hard-to-abate industry, and the introduction of hydrogen, ammonia and offshore wind power in Japan. However, there is some ambiguity regarding the intended use and decarbonization of these energies, and pace and extent of this increase, as well as the need for policy to support it.
At a panel discussion at the Open Forum 2023 hosted by the World Steel Association on September 12-13, the Chair of the Energy and Technology Committee of the Japan Iron and Steel Federation (JISF) appeared to support a "hybrid" carbon pricing system under the Japanese government’s Green Transformation (GX) Strategy, which would provide R&D incentives for 10 years followed by a higher carbon price. However, JISF did not support a carbon price before industry achieves technological development.
On September 4th, the Central Japan Economic Federation published a position paper on the upcoming FY2024 tax revision, in which it emphasized the need for a tax system that accelerates the green transformation (GX) in Japan. It's requests included an extension of the carbon neutral investment acceleration tax system, tax breaks to spread electric vehicles that contribute to carbon neutrality, and tax reduction measures on capital investment for technologies such as hydrogen and ammonia, carbon recycle fuel, renewable energy, carbon capture and storage (CCS), and next generation automobiles and aircrafts. The paper also stated that growth oriented carbon pricing should be designed to be compatible with Japan’s economic growth, and that its disclosure should be made as early as possible.
According to a Nikkei article published on August 26th, Japan Business Federation (Keidanren) Chairman Maksakazu Tokura supported nuclear power generation and fusion in Japan, while remaining unclear on his position on the need to transition the overall energy mix. In the article, he also supported the Green Transformation (GX) policy, and expressed hope that the government would invest and provide predictability, without mentioning specifics or the need for regulations.
At a committee hearing hosted by the Agency for Natural Resources and Energy of the Japanese Ministry of Economy, Trade, and Industry on June 28th, the President of Nippon Steel supported nuclear energy, while emphasizing “unfavorable” conditions for developing renewable energy in Japan, and also advocated for increased government investment toward Green Transformation (GX).
According to the Keidanren Times published on March 2, Gil Pratt, CEO of the Toyota Research Institute, advocated a long-term role for ICE-powered hybrid light-duty vehicles over a complete transition to BEVs at the February 8 meeting of the Mobility Committee of the Japan Business Federation (Keidanren). This was also reported by JAMA blog.
During its regular press conference in February 17th, the chairman of Federation of Electric Power Corporations (FEPC), Ikebe, appeared to support carbon pricing in Japan, with the exception that it should not impede the promotion of electrification. He also expressed broad support on carbon neutrality, however, it is unclear if the position is aligned with IPCC advice.
According to a Toyo Keizai article released on 15th February, Japan Business Federation (Keidanren) supports GX (Green Transformation) Policy of Japan, stating “I appreciate that the government has incorporated most of our recommendations”, though it is unclear if Keidanren supports other policies.
In a February 8th press release, Chairman of the Japan Gas Association, Takehiro Honjo, appeared to indicate support for e-methane.
According to a February 7th Nikkei GX news article, the Chairman of the Japan Gas Association, Takehiro Honjo, did not specify whether he supports carbon pricing, although he insisted that carbon pricing "should not undermine companies' willingness to invest".
According to the article on its website on January 23rd, Japan Business Federation (Keidanren) has submitted the position paper on the Green Transformation (GX) Basic Policy, generally supporting an increase in renewables and nuclear in Japan.
According to a January 23rd article on its website, Japan Business Federation (Keidanren) submitted a position paper on the GX Basic Policy, in which it generally supported an increase in renewable and nuclear energy.
During its regular press conference on January 20th, the chairman of the Federation of Electric Power Corporations of Japan (FEPC), Kazuhiro Ikebe, appeared to support the mid-to long-term use of nuclear, the use of renewable energy as the main source of power, and the realization of zero-emission thermal power generation, without being clear if the associations timelines are aligned with IPCC guideline.
In January 23rd, Central Japan Economic Federation (CJEF) has submitted a position paper to the Japanese Cabinet Secretariat’s public comment on the Green Transformation roadmap, generally supporting the renewable energy legislation including feed-in tariffs. It also supports emissions tradings but emphasizes that it should be flexible. CJEF expressed mixed support on carbon pricing, stating that a carbon price should not affect the competitiveness of the sector. CJEF also supported maintenance of a high greenhouse gas emissions energy mix in the power sector and transport, while supporting government support for decarbonizing the steel sector. Further, the association supported energy transitions in Asian countries, while emphasizing that each countries’ situation (such as fossil fuel dependency) should carefully be considered.
At a press conference on 23rd January, the Chair of the Petroleum Association of Japan supported the Green Transformation Basic Policy, and advocated for sustainable aviation fuels and synthetic fuels in Japan.
| Influencemap Performance Band | Organization | Policy Position | Policy Engagement Intensity |
|---|
