Just one month after China’s surprise long-term decarbonisation announcement, these were the words of Japan’s Prime Minister, Yoshihide Suga. The Asian powerhouse, and fifth largest GHG emitter in 2018, previously committed to a 26% reduction in emissions by 2030 and 80% by 2050. Unsurprisingly, it received heavy international criticism for being woefully insufficient and failing to lead by example. Prior to this recent commitment, Japan’s Nationally Determined Contribution – efforts, at the heart of the Paris Agreement, by countries to reduce their national emissions – had been deemed highly insufficient, likely in line with warming between 3C – 4C.
Cutting the Coal Habit
Since Yoshihide Suga was elected after Shinzo Abe resigned, Japan’s focus and momentum has shifted. A much bolder, aggressive stance to tackle the impacts of climate change has emerged. “Responding to climate change is no longer a constraint on economic growth,” Suga said. “ We need to change our thinking to the view that taking assertive measures against climate change will lead to changes in industrial structure and the economy that will bring about great growth.” This is a key point that addresses a view many economies used to (and some still do) hold – that increased emissions were a necessary evil to drive economic growth and expansion. Instead, the development of an environment for low carbon growth that fosters innovation in new industries brings about sustainable, yet desirable growth.
Naturally, such a change of direction has birthed a little healthy scepticism about the feasibility of this goal. Japan has long been a major consumer of fossil fuels, with coal providing 48 GW of power capacity – around a third of total electricity generation. It is also concerning that, despite accelerating closures of coal plants in some regions, Japan remains the only G7 nation that is still building them in others. According to data from Global Energy Monitor, 2 coal powered stations are pre-construction, 11 are in construction and 15 have been cancelled between 2010 – 2020. This is certainly a major sticking point. Many inefficient and older plants will be closed by 2030, but no concrete plan or major policy changes to phase out coal has been established yet.
Japanese Ambitions and Investment Opportunities
To see significant, quick changes, Japan must tackle its coal bug. There is a rather strange approach to new coal power stations that sees them fitted with systems using renewable energy as a main source. That is, they are cleaning up an inherently polluting process – reducing emissions by around 10-25% by increasing efficiency – but still opting for fossil fuel use. So-called ‘clean coal’ is not clean. Their reliance on the highly polluting fossil fuel increased in recent years following the nuclear disaster at Fukushima – where public confidence in nuclear power waned substantially. This is reflected by comments by a government spokesman, saying that Japan “is not considering building new nuclear power plants to help it become carbon-free by 2050”.
Instead, changes to renewable energy and safe operation of existing nuclear plants will be ramped up. Suga announced “we will fundamentally shift our long-standing policy on coal-fired power generation.” Policy changes are where Japan’s ambitions will be won or lost. A roadmap developed to champion renewable energy appears to be on the cards, although no specifics have been given. Offshore wind power proposals combined with the falling cost of renewable energy encourages more competition, which, in turn, drives innovation.
Mass investment into solar power generation, battery storage and low-carbon mobility are both expected and required, alongside funding technologies that reduce emissions significantly. But technologies certainly are not a silver bullet. Carbon capture and storage (CCS) has been widely promoted in Japan, but, so far, it remains cost ineffective at the required scale. A statement by the UN Secretary-General noted that there is to be “no doubt that Japan has all the necessary technological, financial and engineering tools to get to net zero emissions by 2050.”
The financial and investment prospects are far-reaching. Japan has several financial tools at their disposal. Major Asian economies, like Japan and China, have a close relationship with Australia, with Japan responsible for over 40% of Australian coal and gas exports. Shinjiro Koizumi, the environment minister, has called for an end to overseas coal finance (and broad changes to coal policy), considering Japan’s vital role in the region. This provides direct opportunities for investment in renewable energy companies in Japan while placing growing pressure on Australia to set net-zero targets themselves. This, indirectly, dims the future of Australian coal – demand may plummet, forcing alternative approaches to be explored. Elsewhere in Japan, large institutional investors have invested in large solar farms, while a sovereign wealth fund invested in renewables. The shift is happening now, with investors no longer flocking to fossil fuels.
2020 needed to be a big year for tackling climate change. Naturally, an unexpected pandemic has brought with it a slew of new global challenges and disruptions to vital international negotiations, like COP 26. However, with three influential Asian economies – Japan, China and South Korea – all announcing more ambitious long-term climate commitments in recent weeks, illustrates a significant shift of major polluting economies commit to large-scale climate action. While Japan remains reliant on fossil fuels in the near term, the changing focus spearheaded by a new Prime Minister certainly forges a new path.