Japan has serious work cut out with carbon cutting ambitions

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LITTLETON, Colorado - Japan rolled out a carbon credit trading scheme this week as part of efforts to cut emissions and tackle climate change, but likely faces a tougher challenge than most peers when it comes to transitioning energy systems to fully run off clean power.

The world's third largest economy ranks fifth in greenhouse gas emissions, spewing roughly 1.1 billion tonnes of carbon dioxide (CO2) annually from energy generation and process emissions, according to the Energy Institute.

Japan aims to cut total carbon emissions by 46 per cent by 2030 from 2013 levels, and has pledged to become carbon neutral by 2050.

To hit those targets, Japan must undertake urgent economy-wide measures to slash consumption of fossil fuels in power production and industry, electrify a vast majority of energy end-users, and drastically increase the generation of emissions-free electricity.

All economies attempting significant and rapid emissions cuts face similar challenges.

But factors unique to Japan may not only restrict the scope of clean energy supply solutions available, but also limit any declines in total energy use by critical sectors which are hard to electrify and yet key drivers of the entire economy.

Strained power system 

One the most critical factors determining any country's energy transition efforts is how its power system can accommodate rapid retooling of energy sources from dirty to clean while still generating consistent supplies to consumers.

Any country with decades-old power distribution systems is likely to face difficulties in maintaining service while making crucial upgrades to transmission and generation hubs.

In Japan, those difficulties are made worse by the already-strained state of the national power system due to the sharp drop in nuclear power generation since the 2011 Fukushima disaster.

Nuclear power historically generated around 25 per cent of Japan's electricity until the Fukushima plant was hit by a tsunami that caused a meltdown at three of six reactors.

Public confidence in the nation's entire fleet of nuclear reactors collapsed following the disaster, spurring the shutdown of nearly all nuclear plants in the ensuing years.

In turn, the country's power producers were forced to dial up generation from fossil fuels, mainly coal and natural gas, which accounted for 73 per cent of Japan's electricity in 2022, data from think tank Ember shows.

That high reliance on fossil fuels is second only to India among the world's largest economies, and compares to 65 per cent in China and 59 per cent in the United States, Japan's larger economic rivals.

China and the United States are also by far the world's largest deployers of renewable energy, with extensive expertise in the development of utility-scale wind and solar installations which are making rapid advances in electricity generation mixes of both countries.

Both China and the United States also have vast areas of sparsely populated land that are expected to become sites for additional solar and wind farms.

In contrast, Japan ranks sixth in total renewable power generation, according to the Energy Institute, has limited spare land suitable for large renewable installations, and is focusing on rooftop solar systems as a key means of boosting renewable power generation over the near term.

Over the longer term, Japan is also targeting increases in wind power generation, especially from offshore sites.

However, structural issues have recently delayed the commissioning of the country's first floating offshore wind farm by two years to 2026, jeopardising the wind industry's goal of generating a third of Japan's power by 2050.

Dogged demand 

While the pace of progress in terms of clean power generation may be slow but steady, the needed declines on the demand side of Japan's energy equation may be even slower.

The country's transportation system remains a key source of fossil fuel use, especially in passenger cars that remain overwhelmingly powered by combustion engines.

Thanks to new incentives from the government, sales of electric vehicles (EVs) jumped by a record 127 per cent in 2022 from 2021, according to International Energy Agency (IEA) data.

However, EVs represented just three per cent of total car sales last year, and account for less than one per cent of Japan's total car stock.

In contrast, EVs accounted for nearly 30 per cent of car sales in China last year, 21 per cent in Europe, and nearly eight per cent in the United States, suggesting that Japan's famed auto sector has a lot of catching up to do in terms of contributing to national decarbonisation efforts.

Japan's massive industrial sector is also struggling to make a dent in fossil fuel dependence.

The carbon intensity of Japan's energy consumption from industry was 54.2 grams of carbon dioxide per megajoule in 2020, according to the latest data available from the IEA.

That compares to 64.28gCO2/MJ for China, the world's most industry-intensive economy.

However, China's industrial carbon intensity was down more than 13 per cent since 2010, while Japan's intensity dropped less than two per cent over the same period, suggesting China's manufacturers and smokestack sectors have done a better job of cleaning up their act than their counterparts in Japan.

Naturally, Japan's industrial behemoths have made strides to boost energy efficiency since 2020, and hope to accelerate that momentum via the planned use of green hydrogen as a power source and input over the coming decades.

But with Japan's power system still lagging global peers in terms of clean energy generation, industry's uptake of clean power may be limited, especially among energy intensive sectors such as steel production, ship building and car manufacturing which are key pillars of Japan's economy.

Government schemes such as carbon trading systems may help speed things along, but ultimately Japan's power producers, car buyers and commercial power users will have the most say in determining Japan's energy transition progress. And each have a long way to travel before the country's goals are met.

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