9 Nov 22

Japan: sustainability on hold?

Japan’s 2023 budget had included a carbon emission surcharge, aimed at supporting the country’s transition to net-zero. Surcharges are the “light” version of an actual tax, easier to adjust by the regulator, but less predictable for businesses and consumers.

The surcharge has now been put on hold in the midst of conversations about green transformation bonds. These bonds are to raise an impressive $136 billion to finance Japan’s transition. However, with bonds come debt-servicing costs, which are to be covered by a carbon-pricing scheme, initially composed of a surcharge on electricity bills, an emissions-trading market and a carbon tax.

The latter is now, at least temporary, suspended as companies and consumers struggle with high energy costs. Japan has already a global warming tax in place on petroleum and coal, which is not under review.

The surcharge on electricity bills is still being considered; this tax is supporting the growth of renewable energy.

Japan's plans to become net zero

Back in 2020, Japan announced its plans to become net zero by 2050, and it has already achieve 46% reductions compared to its 2013 levels. As with most countries, Japan couples decarbonization to an industry-wide revamp, called Green Growth Strategy. The strategy sets out 14 growth sectors; automobile and battery are combined into one, part of the Transportation/Manufacturing group. Energy and home/office related industries are the two other groups.

Japan's hydrogen plans

Hydrogen is a focal point of the Strategy: increasing the volume of hydrogen introduced in society, developing hydrogen powered generators and turning fuel cell trucks into marketable products are pillars of the strategy, alongside storage and transportation of hydrogen. Only recently, the Japanese Government published an article about the transformation of gas turbines into hydrogen turbines, a specialty of Mitsubishi Heavy Industries.

At scale, such turbines can influence the EF (electricity efficiency factor) of Japan’s power supply, and hence the efficiency of an electric vehicle.

The cancellation of the carbon emission surcharge should not be assessed as a U-turn of Japan’s sustainability intentions, but it will interrupt the “all-in” approach that Japan has been showcasing for a while.

More specifically, Japan is inherently resistance to change and it’s a Sisyphus task to implement (unpleasant) sustainability measures; the “all-in” approach and strong conviction of the Government to do the right thing, was trying to overcome that resistance. With the cancellation of one of the items, and especially its rationale (energy price surge and its impact on businesses and consumers), an excuse for diverting has become acceptable.

Image: Shutterstock

Authored by: Yves Helven