Japan has announced its intention to be carbon neutral by 2050 – putting it on course for the emissions cuts necessary to limit temperature rises to 1.5°C, in line with the Paris climate agreement. But carbon neutrality will require a deep rethink of the country’s energy mix and a significant restructuring of its economy, especially in reducing the high reliance of fossil fuels.

The world’s sixth-largest emitter of greenhouse gases had already pledged to cut emissions by 26 per cent by 2030 from 2013 levels and in 2019 Japan proposed an 80 per cent reduction by 2050, based on a Strategic Energy Plan that still relied heavily on fossil fuels to drive the economy. But that was not enough.

The new carbon-neutral target will require a major revision of that plan. Fossil fuels must be drastically reduced from the energy mix while renewable energy capacity is ramped up significantly with the country’s grid transformed to allow for energy storage.

Japan’s primary energy production from carbon sources has been declining since the 2011 Tohoku earthquake that closed nuclear reactors even though total energy output has risen by an average 7.2 per cent a year. Renewable sources are filling the gap that arises from lower use of carbon energy sources, even after the resumption of nuclear energy.

However, the shift in energy composition came at the cost of higher electricity power rates. Residential tariffs rose by 23 per cent between 2010 and 2018 while industrial rates increased 27 per cent, even though crude oil import prices fell 14 per cent.

With Japan dependent on fossil fuels for 77 per cent of its electricity, the initial investment into renewable energy will be steep and consumers face the potential of further cost increases for carbon neutrality to be achieved by 2050.

The goal will also require Japanese companies to accelerate their decarbonisation strategies. But innovation such as carbon capture and storage could help to revive the economy.

The clearest benefit of carbon neutrality for the Japanese economy will be higher energy self-sufficiency, which was just 11.8 per cent as of 2018. Cutting the cost of importing energy from abroad could offset the expected fall in the current account trade surplus as Japan’s ageing population saves less.

Additionally, investment in new areas such as the hydrogen and battery industries plus carbon capture and other recycling technologies could lead to productivity gains that help offset the loss of competitiveness.

Japan’s 2050 target matches the European Union’s and is a decade earlier than China’s commitment to be carbon neutral and adds to the pressure of other major economies to commit to a mid-century net zero timeline.

First published 27 October 2020.

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