Japan’s bet on green(ish) technology

I am in Japan to understand how the country aims to become climate neutral in 2050, a difficult task that I am undertaking together with my Dutch partner-in-crime, Tobias Arnoldussen, and the incredible Japanese researchers, Prof. Suami Takao and Shuji Koba. I have talked to around 20 key actors connected to the Japanese climate plans. These actors include academics, government officials, industry representatives, NGO leaders, and trade union leaders.

Based on the policy documents and the interviews, the Japanese ambition to become climate neutral is led by two ministries: the Ministry of Industry (METI) and the Ministry of Environment. Whereas METI is responsible for the supply side of climate policies, the Ministry of Environment is responsible for the demand side of climate policies. The two main policy documents are the Green Growth Strategy (GGS) and the Green Transformation (Gx) basic policy. The task for METI in relation to GGS and Gx is mainly to transform energy production and decarbonize Japanese industries, whereas the Ministry of Environment mainly focuses on behavioral changes for consumers. Thus, the heavy lifting in terms of decarbonization efforts comes from METI.

Japan aims to transform energy production by investing in a broad spectrum of technologies: solar and wind power, thermal power, hydrogen/ammonia, nuclear, and fossil fuels (coupled with carbon capture), such as oil, LNG, and ‘clean’ coal. Thus, Japan’s goal to become climate neutral in 2050 contains an energy mix consisting of fossil fuels. My interviewees explained the difficult geographical challenges of Japan. Whereas European countries can depend on each other when there is under- or overproduction of energy, Japan is an isolated island. It is also densely populated, limiting the options for renewable energy projects. Moreover, the deep oceans around Japan make it harder to develop wind parks. Next, the combination of tensions between China and Taiwan, the unpredictability of North Korea, and the aggression of Russia places Japan at the forefront of a geopolitical fault line. Therefore, it is too risky to bet on only renewable energy sources such as solar and wind power. According to my interviewees, Japan needs to focus on a diverse set of energy sources. They couple this with investments in carbon capture technologies to reach climate neutrality. But again, the geographical context of Japan creates difficulties; for example, there are no empty gas fields to store captured carbon. Therefore, Japan is exploring deals with Australia and New Zealand to store carbon (and import hydrogen). In order to decarbonize the Japanese industry, METI works closely together with Keidanren, the powerful Japanese business federation. Together, they more or less agree on a set of new regulations, financing strategies, and technological goals. The new regulations mainly come in terms of the introduction of carbon pricing, which will be very cautiously and slowly introduced in Japan. Importantly, although carbon pricing will be introduced, there will be no cap on carbon emissions. The new financing strategies and technological goals are summarized in eight detailed ‘technology roadmaps for transition finance’ plans. Those plans target the following sectors: iron and steel, chemical, power, gas, oil, pulp and paper, cement, and automobile. The documents explain the current position of the sector in Japan, the global competitiveness of the sector, which technologies to invest in, and planning how the sectors will decarbonize. A representative of Keidanren summarized the Gx strategy as follows: ‘we do not need new regulations, we need new technologies.’.

The policies of Japan can be easily criticized from a European perspective. Betting on the development of technologies seems risky. There is no phase-out of fossil fuels. There are many carrots for decarbonization, but not that many sticks. Those arguments are very valid; however we need to consider that Japanese society works differently. In the book ‘The Business Reinvention of Japan,’ Ulrike Schaede (2020) describes how Japan reinvented itself after WWII and after the Asian financial crisis in the 1990s. Basically, the tight culture of Japan creates a reciprocal relationship between employers and employees based on respect and stability. Employees work hard and loyally, whereas employers provide stability in terms of lifelong career prospects and benefits. This is the opposite of the American ‘move fast, break things’ slogan. This makes change difficult, and the transition toward a decarbonized society is a huge change. However, when goals are set, it also makes it highly likely that goals are achieved. Japan proved this after WWII when it almost overtook the US as the number one economy in the world and after the Asian financial crisis. Although the Japanese economy is often described as a low-growth economy, it reinvented itself as a supplier of highly advanced technologies and has a strategic position in the global supply chain of chemicals, automobiles, and semiconductor sectors.

Both METI and Keidanren seem to be serious about decarbonization; not necessarily to save the planet, but because the global market increasingly values climate neutrality. The world needs highly complicated technologies in order to prevent further global warming. Japan might be the perfect country to deliver those technologies. Moreover, also within Japan, there is a growing call for more ambitious climate plans. The Japan Climate Initiative is an alliance of more than 500 organizations – businesses, governments, and NGOs – that call upon the Japanese government to be at the forefront of global decarbonization efforts. The interesting thing is that large corporations such as Sony, Ricoh, Softbank, and Hitachi are members, mainly because they feel like they are losing competitiveness because the world economy is moving towards climate neutrality. Sony, Ricoh, Softbank, and Hitachi are large Japanese companies; but they are not part of carbon-intensive industries such as the steel, automobile, or transport sectors. Therefore, it is interesting that also Nissan – as the only big Japanese car maker – is part of the alliance. This is a clear sign that climate neutrality becomes an important value in the global economy. So, while it might be difficult for Japan to achieve climate neutrality in 2050 based on the current policies, it might achieve it through the efforts of big corporations and technological innovation.