Public and private investment of more than 10 trillion yen over 150 years, Japan's GX basic policy

In February 2023, the Japanese government decided on ['Basic Policy for Realizing Green Innovation (GX)' ~Roadmap for the next 2 years~].

Japan has announced that it will respond to climate change issues by making international pledges to reduce greenhouse gas emissions by 2030% by 46 (compared to 2013) and achieve carbon neutrality by 2050.

In the midst of this, Russia invades Ukraine in 2022 and the energy situation changes rapidly, and Japan is also experiencing pressure on power supply and demand and soaring prices.

Safe energy supply is fundamental to people's lives and business activities, but Japan's primary energy self-sufficiency rate was 1% in 2019, which is lower than other OECD countries. In addition, through the energy crisis caused by Russia's invasion of Ukraine, Japan recognized again that its energy supply system was weak and that it had challenges in terms of ensuring energy security.

The Japanese government is entering an era in which the success or failure of GX policies determines the competitiveness of companies and countries, and plans to accelerate GX to provide stable energy supply. At the same time, considering that the policy has the potential to act as a catalyst to bring the Japanese economy back to the growth track, we plan to make efforts for the next 10 years.

 

Main contents of the basic policy for realizing GX

 

1. Thorough energy saving

In the case of businesses, the government plans to create new energy-saving subsidies that can respond to multi-year investment plans for businesses. And large electricity users are obliged to submit medium- and long-term plans to switch to non-fossil energy.

By industry, the government decided to present standards for non-fossil energy conversion for the steel industry, chemical industry, cement manufacturing industry, paper industry, and automobile manufacturing industry, which account for 40% of energy consumption.

In the case of households, it is planned to promote the dissemination of energy-saving devices such as heat pump water heaters and household fuel cells.

 

2. Main power supply of renewable energy

With the goal of achieving 2030-36% of renewable energy in power generation by 38, the government plans to install solar panels in places such as public facilities, houses, factories, airports, and railroads.

And to expand the introduction of offshore wind power, the Japanese version of the 'central method' will be established. The Japanese version of the central method means that the government or an entity equivalent to the government conducts research, which is important in the early stage of offshore wind power, and manages data. In addition, institutional measures to expand offshore wind power beyond Japan's territorial waters to the exclusive economic zone will be reviewed.

<(Reference) 2030 Renewable Energy Source Composition Goal and Plan>

종류	Share in 2021	Target share in 2023	계획
sunlight	8.3	14 ~ 16	Development of next-generation solar cell technology, maintenance of mass production system
wind force	0.9	5	Investigation for the introduction of floating body* type offshore wind power, establishment of a large-scale supply chain related to offshore wind power related industries * An object that floats in a liquid or gas due to buoyancy
geothermal	0.3	1	Investigation of geothermal resources, development of innovative geothermal power generation technology
water power	7.5	11	Business feasibility study, renewal of existing facilities
Bio	3.2	5	Expansion of introduction based on life cycle GHC standard (Life-cycle greenhouse gas)

 

 

 

 

 

(unit : %)

[Source: Ministry of Economy, Trade and Industry 'Reference Materials for Basic Policy for Realizing GX']

3. Utilization of nuclear energy 

The goal is to achieve 2030-20% of the power source composition by 22 from nuclear power generation that does not emit carbon dioxide, has stable output, and has high autonomy. In order to utilize nuclear power, develop next-generation innovative reactors aimed at improving safety, and concretely target reconstruction within the site of nuclear power plants that have been decided to be decommissioned. We also strive to promote research and development through international cooperation, establish supply chains, and secure safety and security.

 

In addition, we plan to promote hydrogen and ammonia introduction, strategically secure LNG, and promote efforts such as R&D and facility investment targeting GX in each field such as storage batteries, next-generation automobiles and aircraft, housing and buildings, food and agriculture, forestry and fisheries. am.

 

Government-private GX investment of over 10 trillion yen over the next 150 years

 

Japan, which needs investment in GX to achieve international commitments, strengthen industrial competitiveness, and realize economic growth at the same time, is expected to invest more than 10 trillion yen over the next 150 years.

In the manufacturing sector, investments are planned to reduce carbon dioxide. In the case of steel, carbon dioxide emissions will be reduced by 2013% and paper pulp by 30% compared to 38. The industrial structure is also expected to be transformed. In the case of chemistry, it will be changed to a green chemical structure, and cement will be changed to a carbon recycling cement structure. In addition, it will continue to invest in semiconductors and related supply chains to promote the realization of GX.

Investments in automobiles amount to 34 trillion yen, with investments of more than 15 trillion yen, including about 9 trillion yen for electric vehicles, about 7 trillion yen for carbon neutralization of next-generation vehicles, and about 34 trillion yen for manufacturing and development of storage batteries. Planning. The aircraft and maritime industries will also invest more than 5 trillion yen and 3 trillion yen, respectively, to commercialize next-generation products.

In the case of renewable energy, about 31 trillion yen is assumed for mass production of solar power, formation of offshore wind power, and construction of a next-generation power transmission network for mass introduction. Renewables' share of Japan's electricity generation barely exceeded 2021% in 20, but is targeting 2030-36% in 38.

<GX and goals in major fields>

	for the next 10 years public-private investment	Targets or rules/systems by 2030 (some excerpts)
hydrogen and ammonia	7 trillion yen	– Technology development to reduce supply costs – 300 million tons of hydrogen + ammonia combined for domestic import
storage battery	7 trillion yen	– intensive investment in production base for domestic manufacturing base of 150GWh – Full-scale commercialization of all-solid-state batteries
steel	3 trillion yen	– Carbon dioxide emission reduced by 2013% compared to 30 – Supply of 1,000 million tons of green steel
chemistry	3 trillion yen	– Structural conversion to Green Chemical – Building a plastic resource circulation system
cement	1 trillion yen	– Structural conversion to carbon recycled cement – 200 million tons of supply
paper pulp	1 trillion yen	– Cellulose nano fiber composite material market scale to 2 trillion yen – 2013% reduction in carbon dioxide emissions compared to 38
자동차	34 trillion yen	– 50-70% of next-generation vehicles (including EVs)·PV 20~30%) – Commercial vehicles under 8 tons: 20-30% of electric vehicles – Commercial vehicles over 8 tons (large vehicles): 5,000 units introduced in advance – Maintenance of 3 charging infrastructure including 15 public rapid chargers and 1,000 hydrogen stations – Aim for 2030% electric car sales in the 100s
Resource recycling industry	2 trillion yen	– Expanding the circular economy market from about 50 trillion yen to about 80 trillion yen
housing · building	14 trillion yen	– Securing energy saving performance equivalent to Net Zero Energy House (ZEH) and Net Zero Energy Building (ZEB) in newly built houses and buildings
Digital investments for decarbonization purposes	12 trillion yen	– Continuous investment in semiconductors and related supply chain to realize GX – Expand the total sales of semiconductor manufacturing companies in Japan to more than 2030 trillion yen by 15
aircraft industry	5 trillion yen	– From the late 2030s, it is assumed that next-generation aircraft will be put to practical use in small aircraft
Maritime (maritime) industry	3 trillion yen	– Start commercial operation of ammonia fuel ships by 2028 – Start commercial operation of hydrogen fueled ships from 2030
bio manufacturing (Manufacturing)	3 trillion yen	– Supply and expansion of bio-derived products – About 200 million tons of biomass plastic introduced
renewable energy	20 trillion yen	– Establishment of domestic next-generation solar mass production system – floating body formula (浮体式Formation of large-scale offshore wind power agenda including floating foundation – Formation of 36~38% of renewable energy
next-generation network	11 trillion yen	– Maintenance of subsea direct current transmission facilities to transmit electricity generated from offshore wind power generation around Hokkaido to the Tokyo area for the maximum introduction of renewable energy
Carbon Capture and Storage (CCS)	4 trillion yen	– Securing CCS annual storage volume (amount existing in a limited space) – Early construction of CCUS (carbon capture/utilization/storage technology) value chain

[Source: Ministry of Economy, Trade and Industry, 'Reference Materials for Basic Policy for Realizing GX']

future response

1. Investment of 10 trillion yen over 20 years using 'GX Economic Implementation Bond'

In order to realize GX investment, it plans to utilize 'GX Economic Implementation Bonds'. 'GX Economy Implementation Bond' is a kind of ESG bond issued to transition to decarbonization in the mid- to long-term. Unlike 'environmental bonds' limited to green businesses such as renewable energy, performance bonds can be used to promote decarbonization even for companies with large greenhouse gas emissions.

2. Introduction of GX advance investment and carbon-related charges through carbon pricing

The Japanese government has introduced a carbon pricing system that sets a price for carbon emissions, establishing a foundation for companies that reduce carbon dioxide emissions to participate in the GX League on their own and start trading emissions on a trial basis from 2023. Companies will be able to buy and sell the amount of emission reductions that exceed the reduction target set by the government.

From 2026, emissions trading, which purchases emissions for a fee, will begin in earnest, and from 2033, electric power companies using fossil fuels will be required to pay the economic burden according to emissions.

In 2028, it is planned to introduce a levy that can be collected according to carbon dioxide emissions when electricity and gas producers or processors sell to wholesalers or for fossil fuel importers.

The Japanese government initially plans to set a low level of contributions and gradually increase them, and plans to issue 'GX Economic Implementation Bonds' based on financial resources generated after the introduction of the carbon pricing system.

 

implication

Regarding the GX policy, there are various opinions even within Japan.

There is also an opinion that drastic measures are required to achieve Japan's current target of energy composition by 2030. Through the Nihon Keizai Shimbun, Hana and Kazunari said, 'This basic policy is a major policy change. There are still many points that are insufficient in discussion, but if the government and companies do not come up with countermeasures by reinforcing them early, the gap with the world will inevitably widen.”

On the other hand, Taishi Sugiyama, research director of Canon Global Strategic Research Institute, said, 'The only power source that has been able to realize stable and inexpensive power supply in reality is nuclear power yet. In addition, he emphasized that there are a lot of serious problems of budget expansion related to subsidies in the government's plan, and a serious review of the possibility of resolving the energy supply and demand problem at the national level and the design of the economic system is needed.'

Considering these evaluations, it is expected that additional measures such as continuous supplementation of policies, stabilization of renewable energy supply, and clarification of business standards to prevent 'green wash' under the guise of decarbonization are required for the successful implementation of the GX policy. .

Through the public and private investment plan of 150 trillion yen, Japan has shown to the world that there is a decarbonization market and that it will promote strong eco-friendly policies. Through these moves, Japan is also expected to be able to foster domestic industries by attracting funds from abroad. Carbon performance bonds are still in their infancy and are not well known. In the UK, reliability is increased through tasks such as installing a monitoring organization composed of a third party.

Changes in production methods in Japanese industry, such as carbon pricing, are expected to continue over the next few years. As a result, opportunities for Korean companies engaged in various manufacturing and energy sectors, such as carbon reduction, electric vehicles, solar power, and wind power, to enter the market are expected to arise. It is necessary to pay attention to the eco-friendly policy movements of the Japanese government, businesses, and private sector.