Photo by Walter H on Unsplash
Japan shifting toward Green Transformation (GX)
In May 12th 2023 the Cabinet Office of Japan passed the GX (Green Transformation) Promotion Act. Starting from the year 2023 the Government of Japan is planning to invest 150 trillion Japanese yen (1 trillion euro) of public-private financing over the next 10 years.
Green Transformation, better known as “GX,” is an initiative led by the Government of Japan to bring a shift from an industrial structure centered on fossil energy to one centered on clean energy.
According to the investment roadmap of 150 trillion JPY published in February 2023, the Government of Japan specified 22 industrial sectors to meet carbon neutrality and contribute to the energy transition in Asia.
Out of the total amount of 150 trillion JPY, the Government of Japan is planning to spare 20 trillion JPY (133 billion euro) and cover the rest with the investment from private sectors.
Reference:
Basic Policy for GX — Roadmap for the next 10 years
Photo by Arūnas Naujokas on Unsplash
Growth-oriented carbon pricing concept
Ministry of Economy, Trade and Industry (METI) researched about public investment made toward Green Transformation across the world.
According to the data that METI summarized in February 2023, EU invests 1 trillion euro over the 10 years, Germany invests 50 billion euro over the 2 years, France invests 30 billion euro in 2 years, the United Kingdom invests 26 billion pound in the next 8 years, and the United States invest 369 billion USD over the next 10 years.
Japan decided to invest the same size of budget as what the EU accumulated for the green shift.
Energy Self-Sufficiency Rate by country based on IEA Data Base (METI)
Compared to the other countries Japan relies on majority of fossil resources to abroad and the energy self-sufficiency rate is only 11%.
The Cabinet Office set three main initiatives in order to accelerate the Green Transformation:
- 20 trillion JPY initial investment over the next 10 years using GX Economic Transition Bonds
- Growth-oriented carbon pricing concept
- Utilization of new financial methods
(1) GX Economic Transition Bonds
The bonds
i. target projects and businesses that private companies cannot solely make investment decisions due to high risks involved into the innovation
ii. prioritize businesses with high impact on carbon emissions and big market size that contribute both economic growth and emission reduction
iii. need to focus on measures that holistically change the behavior of corporate investment and demand side
iv. only invest in projects that contribute the increase in volume of investment in terms of human capital & physical assets in Japan
(2) Growth-oriented carbon pricing concept
A specific timeframe for Green Transformation was announced.
From 2026
Legalize emission trading for industries with high emissions
From 2028
Tax levy on importers based on CO2 emissions per fossil fuel
From 2033
Auctioning of CO2 emission allowances for electricity providers
(3) Utilization of new financial methods
Attracting more investment from private sectors
Based on the financed emissions, forming a framework that transition finance is more appreciated in regard to the measurement and disclosure measures that are implemented internationally.
Establishing blended finance
A public organization named “GX promotion agency” will implement risk supplementation measures such as debt compensation by utilizing financial method. In collaboration with not only private financial institutions but also Japan Finance Corporation, Development Bank of Japan, The Innovation Network Corporation of Japan (INCJ) and Japan Green Investment Corp. for Carbon Neutrality (JICN).
Promoting sustainable finance
With the Corporate Governance Code Revisions in June 2021, listed companies on “Prime Market” under Tokyo Stock Exchange in particular should collect and analyze the necessary data on the impact of climate change-related risks and earning opportunities on their business activities and profits, and enhance the quality and quantity of disclosure based on the Task Force on Climate-Related Financial Disclosures (TCFD) Recommendations or an equivalent framework.
Reference : JPX Publishes “Survey of TCFD Disclosure in Japan (FY2022)
Thanks to this revision, the number of Japanese corporates supporting TCFD is the biggest in the world, but the contents of the disclosure is still under the development. Along with the promotion of sustainable finance, the Government of Japan will offer trainings through TCFD consortium for developing human resources that are knowledgeable about green technologies, finances and climate policy.
Hokkaido going green
Finally how is Hokkaido going green?
Naomichi Suzuki announcing the launch of 500 million JPY foundation (Nikkei News Paper)
The mayor announced the launch of 500 million JPY foundation
On April 25th, 2023 the mayor of Hokkaido Government, Naomichi Suzuki announced to build 500 million JPY foundation (3.3 million euro) fund by utilizing donation from Mitsubishi UFJ.
Photo by Fredrik Öhlander on Unsplash
Mitsubishi UFJ financial group pointed out that the offshore wind power generation in Hokkaido is expected to reach 15 gigawatt by 2040 whereas Japan as a whole produce 45 gigawatt. By region, Hokkaido will also be the biggest offshore wind power generator surpassing Kyushu region which generates up to 12 gigawatt.
Hokkaido Electric Power Co., Inc. joined GX League
Hokkaido Electric Power Co., Inc. (HEPCO) announced to officially join GX League, a forum for cooperation between a group of companies and the government, universities, and academic institutions in order to meet greenhouse gas reduction targets and increase industrial competitiveness by using Japan’s goal of carbon neutrality by 2050 as an opportunity for economic growth.
By joining GX League, HEPCO aims to accumulate knowledge and know-hows to achieve carbon neutral missions and actualize “Zero Carbon Hokkaido”.
Zero Carbon Hokkaido
Hokkaido aims to achieve net zero by 2050 (48% less emission by 2030 compared to 2013). In 2022 Hokkaido especially worked on the followings:
- supported each municipality to work towards decarbonation
- visualized CO2 emissions by raising awareness and promoting behavioral changes of citizens and corporates in Hokkaido
- worked toward zero-energy building (ZEB) and installed next-generation vehicles
In order to work toward the goal, Hokkaido Government enacted “Zero Carbon Hokkaido promotion act” on April 1st, 2023 and newly added articles to raise awareness of
- Bio-diversity
- Climate change and its affects
- Renewal energy sources
- Green tourism
- Carbon offset
- Zero-energy building
Reference: 北海道地球温暖化防止対策条例
By further strengthening the public and private collaboration on achieving “Zero Carbon Hokkaido” Hokkaido is becoming a leading GreenTech hub in Japan, and it was selected to lead G7 ministers’ meeting on Climate, Energy and Environment in April 2023.
Leading G7 Ministers’ Meeting
Sapporo / Hokkaido hosted the G7 Ministers’ Meeting on Climate, Energy and Environment. On April 15th and 16th, 2023, G7 members were gathering in Sapporo City in order to discuss the global promotion of Green Transformation (GX), and transform the entire economic, social and industrial structure to be driven by clean energy to pursue net zero, circular and nature positive economies in an integrated manner.
Carbon Capture Utilization and Storage (CCUS) national project in Tomakomai City
One of the cities in Hokkaido, Tomakomai City is currently working on a large-scale national Proof of Concept project for the first time in Japan to separate, collect, press, store and monitor the use of CO2.
From 2012 to 2015, the project mainly worked on designing, constructing and testing equipments for the PoC, and started CO2 injection to the land from 2016. On November 22nd, 2019, the KPI of injecting 300,000 tons of CO2 was achieved and now it is on monitoring phase.
According to IEA — International Energy Agency, CCS is expected to contribute the 14% carbon emission in the world by 2060.
As the leading GreenTech hub in Japan Hokkaido is pursuing to build a society that is more circular, sustainable and regenerative, and we are learning from the success case in European countries in particular some Nordics to accomplish “Zero Carbon” by 2050.