Japan’s Model for Climate Change Innovation
By Satowa Kinoshita
Japan’s Model for Climate Change Innovation
By Satowa Kinoshita
As the third-largest economy and fifth-largest greenhouse gas emitter in the world, Japan’s government policies and private sector activities still pack a punch. Japan emits around 1.1Gt CO2e per year, with the largest source being power and electricity (~40%), followed by industry (~30%), transportation (~15%), buildings (~10%), and agriculture (<5%). Japan itself is vulnerable to climate impacts, as annual typhoons become more powerful and unleash record rainfalls and landslides, heatwaves threaten an increasingly aging population, rising sea levels loom on the horizon, and disruptions in agriculture and marine ecosystems pose an existential threat to local economies and culture.
Policy context: government support for climate solutions
The government has stepped up its climate commitments while framing tackling climate change as an opportunity for economic growth. Over 2020 and 2021, the former Prime Minster Suga announced Japan’s commitment to reducing greenhouse gas emissions to net-zero by 2050 and an interim 2030 goal to reduce emissions by 46% relative to 2013 levels. To achieve this, the government has launched a Green Growth Strategy, identifying a broad range of priority sectors and policy action plans, from budget and taxes to regulatory reforms, as well as emphasizing international cooperation. The Ministry of Economy, Trade, and Industry (METI) also established a 2 trillion yen (~18 billion US dollars) Green Innovation Fund in 2021 as part of the government’s COVID-19 stimulus measures, to support decarbonization R&D and implementation over the next decade.
Challenges: domestic barriers to overcome
The major hurdle for Japan’s decarbonization pathway remains its fossil fuel dependency. The country derives 85% of its energy from fossil fuels including ~25% from coal, one of the highest proportions among developed economies. After the 2011 Fukushima nuclear disaster, nuclear power’s share of energy consumption dropped from a growing >10% in 2010 to <3% today, with uncertainty still surrounding the reopening of many plants. Spatial constraints and fragmented local regulation hinder the adoption of mature renewables such as solar and wind power, although offshore wind has attracted attention with mega-projects planned in several prefectures. Even as other sectors electrify, the need for more early-stage or breakthrough technologies increases the technical and financial cost of complete decarbonization.
Opportunities: climate tech solutions for Japan and the world
That said, resiliency and innovation are part of the DNA of a country that has always grappled with resource scarcity. The following innovations and trends especially hold promise for Japan to lead the way, both for domestic and international decarbonization.
Hydrogen
Both private and public sectors have hedged their bets on blue/green hydrogen to wean off fossil fuels and as a key input for industrial processes. In 2021 alone, METI allocated a budget of 85 billion yen (~800 million US dollars) in 2021 for hydrogen R&D and consumer subsidies. The first round of funding under the Green Innovation Fund has also been awarded to projects in hydrogen supply chain construction and production via water electrolysis. Toyota has continued to invest in fuel-cell vehicles including its Mirai sedan and compact fuel cell modules to promote applications across sectors, while Nippon Steel aims to commercialize production technology that replaces coal with hydrogen. As ammonia also gains attention as a bridge fuel to co-fire with or replace coal, so has decarbonizing its synthesis with sustainable hydrogen. Hydrogen even played a starring role at the Tokyo 2020 Olympics, powering the Olympic flames and the Olympic Village to preview a future of the “hydrogen economy.”
Circular economy & efficiency
Japan has already achieved the near-lowest energy intensity (energy consumption per unit of GDP) among developed economies. Beyond pursuing energy efficiency and conservation since the 1970s oil crisis, Japan is well-known for its high recycling rates and companies continue to invest in technologies such as enabling chemical plastic recycling via depolymerization and new materials. On the other end of the molecular spectrum, CO2 itself serves as a raw material for “carbon recycling” or CCUS for chemical synthesis, fuels, and concrete products. Progress towards commercialization includes the production of concrete with recovered CO2 from factory exhaust by Taisei Corp, a major construction company, and CO2-based plastics by Asahi Kaisei Corp, a multinational chemical company.
Sustainable and smart cities & buildings
Japan is also leading the way in sustainable and smarter urbanization, enabled by local policy and technology. In addition to its advanced railway and public transportation infrastructure, pursuing the “fourth industrial revolution” has long been a government priority, where AI, big data, IoT, and other technologies are used to resolve socio-economic challenges in cities and communities. Local smart city initiatives have also proliferated across Japan, many of which include a decarbonization and/or environmental focus. Yokohama partnered with energy and construction companies to implement home energy management systems, solar panels, and EVs, while Kashiwa City in Chiba Prefecture implemented grid management software to operate a smart grid and efficiently integrate solar generation.
International climate finance and investment
Japan has a strong history of foreign aid and investment in emerging markets and can drive the global climate agenda, especially in Asia and the transition phase of decarbonization. In accordance with Article 6 of the Paris Agreement, the government initiated the Joint Crediting Mechanism (JCM), where Japan bilaterally collaborates with developing countries to facilitate projects that lead to GHG emission reductions or removals and enable both countries to progress towards their NDCs. So far, Japan has partnered with 17 countries across the world, from collaborating with Mongolia on solar PV projects to supporting Mexico on power generation with methane gas recovery systems. In the private sector, power and steel companies have been actively conducting M&A/minority investments to introduce and implement GHG-reducing technologies while also expanding their business, such as JERA’s investment in Philippines’ Aboitiz Power and Nippon Steel’s acquisition of Thai steelmakers.
Solutions so far tend to be led top-down or by large industrial players, which allows for large-scale investments and changes, especially when policies align. There has also been a trend for these companies and other investors to seek investments in climate tech startups abroad, both to strengthen their international footprint as well as import best practices back into Japan. Japan’s own climate tech ecosystem has great potential for growth, leveraging strengths in hardware development for advancing technologies like energy storage and artificial photosynthesis, while supporting the emergence of unicorns like TBM (limestone-based plastic alternatives), Spiber (bioderived materials), and Clean Planet (quantum hydrogen energy). Japan’s strong research and academic environment, industry and government support, and a strong respect for nature will be more relevant than ever in tackling the climate crisis.
Thank you for reading – please don’t hesitate to get in touch with your thoughts or questions! I’d also like to thank Ryo Kamezawa and Taihei Mizukoshi for their input (and proofreading).
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