Japan
With a cumulative score of 2.02, Japan ranks number 23 among developed markets and number 29 in the global ranking.
- Developed markets
- Asia-Pacific
2.04 / 5
Power score
1.99 / 5
Transport score
1.99 / 5
Buildings score
Low-carbon strategy
Net-zero goal and strategy
Japan is aiming to cuts its emissions to zero by 2050. At 289 yen, or about $2.60 per metric ton of CO2, Japan’s carbon tax (called the climate change mitigation tax) is too low to encourage more low-carbon solutions. The country has established a 2 trillion yen ($18 billion) Green Innovation Fund for research and development over the next 10 years in 14 key sectors including clean energy, hydrogen/ammonia, energy storage, shipping, aviation, and buildings.
Nationally Determined Contributions (NDC)
Japan’s nationally determined contributions (NDCs) aim for a cut of 46-50% in greenhouse gas emissions by 2030 compared to fiscal year 2013. The country’s sixth Strategic Energy Plan, unveiled in 2021, outlines emission reduction targets for each sector of the economy by 2030. The targets are: 37% in the industry sector, 50% in the commercial sector, 66% in the residential sector, 38% in the transport sector, and 42% through energy transformation. Despite the plan, Japan lacks any concrete decarbonization strategies to support these targets. Indeed, each sector tends to rely on energy efficiency improvements and voluntary corporate actions.
Fossil fuel phase-out policy
The government is encouraging the retirement of inefficient coal plants by 2030 by setting a higher coal fleet efficiency standard for each power generator. Such a measure is, however, weak as co-firing with biomass or ammonia or converting to combined heat and power enables inefficient coal plants to raise efficiency in the calculation and remain operational.
Power
Power policy
Japan’s reliance on fossil fuels has increased following the Fukushima nuclear accident in 2011. Fossil sources accounted for more than 70% of Japan’s annual generation mix in 2020, half of which comes from natural gas. Feed-in tariff subsidies introduced in 2012 boosted the shares of solar and wind in the nation’s power supply to 9% and 2% by 2020 from essentially zero.
The sixth Strategic Energy Plan calls for more renewables in the country’s 2030 power mix at the expense of thermal power plants. The government aims for 38% of the 2030 power supply to come from renewables. Offshore wind is a key focus; the government plans to host 30-45 gigawatts of offshore wind auctions by 2040. For nuclear, the government remains keen to resume the operation of more reactors despite the slow pace of restarts due to strong public opposition.
Power policies
Power prices and costs
Electricity retail is classified into three segments by voltage levels: low voltage for the residential sector, high voltage for the commercial sector, and extra-high voltage for the industrial sector. The average electricity retail tariffs in 2020 including the green surcharge are 25 yen (23 U.S. cents) per kWh for residential customers, 18 yen (16 U.S. cents) per kWh for commercial customers, and 14 yen (13 U.S. cents) per kWh for industrial customers.
Power market
Japan’s wholesale power accounts for about 30-40% of total power demand, with the majority supplied through bilateral contracts between power suppliers and retailers. The vast majority of generation assets – which could be higher than 85% – are owned by incumbent utilities, which makes it difficult for new entrants to compete in retail markets.
Since power demand is expected to fall amid a shrinking population and an economic slowdown, opportunities for new capacity additions are limited except for the replacement of retiring capacity. Japan has 10 different power markets. Each region is poorly connected, resulting in price distortion between east and west regions in the wholesale market. The Organization for Cross-regional Coordination of Transmission Operators (OCCTO) manages long-term grid planning.
Installed Capacity (in MW)
Electricity Generation (in GWh)
Utility privatisation
Which segments of the power sector are open to private participation?
Wholesale power market
Does the country have a wholesale power market?
Doing business and barriers
The biggest hurdle to decarbonizing the power sector is the high cost of clean energy. Costly land development and lack of economies of scale due to fewer suitable flat project sites push costs higher. The past generous subsidy scheme, which did not include operational deadlines, also discouraged cost reductions on the part of developers. The shift to a feed-in premium from a feed-in tariff for certain projects from 2022 will expose developers to more risks such as balancing and price volatility.
Currency of PPAs
Are PPAs signed in or indexed to U.S. Dollars or Euro?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Fossil fuel subsidies
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) down through subsidies?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Fossil fuel taxes
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) up through taxes?
Transport
EV market
Electric vehicle (EVs) uptake has been slow, with EV share at around 1% of new vehicle sales.
EV policy
The main support for EVs and fuel cell vehicles (FCVs) has been to subsidize the purchase of those vehicles. Depending on models and years, the subsidies can be up to 400,000 yen ($3,627) for battery electric vehicles (BEVs), 200,000 yen ($1,814) for plug-in hybrid electric vehicles (PHEVs), and 2,250,000 yen ($20,403) for FCVs. Similarly, subsidies for EV chargers and hydrogen refueling stations are available. Another support for cleaner vehicles is reduced taxes on vehicle purchasing and vehicle inspections. Internal combustion engine (ICE) vehicles do not receive this support and must pay for fossil fuel consumption taxes, which totals 53.8 yen per liter of gasoline, on top of the carbon tax. ¦ As part of the Green Growth Strategy unveiled in 2020, Japan said it is aiming for all sales of new passenger vehicles to be electrified (including hybrids) by 2035, though it has not legislated such a clean transport target. The strategy document also calls for 150,000 units of EV chargers by 2030 (including 10,000 units of fast chargers at service stations and 30,000 units of public fast chargers).
Transport policies
Fuel economy standards
Does the country have a fuel economy standard in place?
Buildings
Buildings market
The current Building Energy Conservation Act mandates that commercial buildings whose areas exceed 300 square meters must meet the Building Energy-efficiency Index (BEI) target. The government is considering revamping the target, as well as expanding coverage to smaller buildings including new residential houses.
Energy performance standards
Are there minimum energy performance standards for buildings?
Energy efficiency plan
Does the country have a national energy efficiency plan?
Buildings policy
Japan released a decarbonization roadmap for buildings in 2021. The two main pillars are improving energy efficiency and implementing more clean energy in buildings. As for clean energy use, Japan aims for 60% of all new residential buildings to have installed rooftop solar by 2030. The government also plans to install rooftop solar on both existing and new public buildings.
