News Release

Japan unlikely to meet 46% emissions reduction by 2030

Low-carbon hydrogen demand to hit 1.7 Mt while renewables investment reaches US$147 billion this decade

Japan is unlikely to reach a 46% reduction in emissions by 2030 compared to 2013 levels, according to research by Wood Mackenzie.

Announced at the Leaders’ Summit on Climate organised by US President Joe Biden in April, Japan pledged a 46% reduction in emissions by 2030 compared to 2013. The previous target was a 26% cut by 2030 from 2013 levels. The country's Environment Minister Shinjiro Koizumi added that the government will “work together to make renewable energy a mainstream power source".

Wood Mackenzie Asia Pacific Head of Markets and Transitions, Prakash Sharma said: “It is going to be extremely challenging for Japan to meet its revised 2030 target. According to our analysis on the scenario where global warming is limited to 1.5 degrees Celsius (AET-1.5), we see Japan’s emissions dropping to 34% in 2030 from 2013 levels and reaching net-zero by 2050.

“To get there, Japan needs to accelerate decarbonisation on all fronts backed by clear policies and incentives for businesses to ramp up investments. This include expanding sales of electric and fuel cell cars and ending sales of gasoline-only vehicles by 2035 and increasing hydrogen refuelling stations to 1,000 in the same timeframe, a six-fold increase from today. Hydrogen and carbon removal, including carbon, capture and storage (CCS) and nature-based solutions, are also required to tackle hard to abate sectors.”   

Wood Mackenzie expects Japan’s low-carbon hydrogen demand to reach 1.7 million tonnes (Mt) by 2030. To meet its net-zero ambitions by 2050, the figure would grow ten-fold to 16.5 Mt. Japan is moving quickly to unlock hydrogen demand. Strategic policies are being put in place to develop new use cases in road transport, steelmaking and power generation sectors. Pilot tests on co-firing ammonia in thermal power stations and recycling waste CO2 into synthetic fuels are also underway and commercialisation is expected after 2030.

Domestic hydrogen production, however, will not be enough and imports will meet up to 80% of total demand in Japan by 2050. “Majority of Japan’s low-carbon hydrogen imports will come from Australia due to proximity and lower costs. Together, both countries will take the lead in facilitating seaborne hydrogen trade, and ammonia will likely be the main carrier for green hydrogen,” Sharma added.

Complementing the surge in hydrogen demand, Japan’s demand for renewables in power generation has also seen promising progress. Wood Mackenzie expects the country to source 30% of power demand from renewables by 2030, surpassing its national target of 22-24%.

Wood Mackenzie Asia Pacific Head of Power and Renewables, Alex Whitworth said: “Falling renewables costs and US$147 billion of renewables (new-build solar and wind) capacity investment to 2030 will help Japan exceed its official renewables target easily, supporting Minister Koizumi’s statement to make renewables a mainstream power source.”

Japan aims to decrease coal’s share in power generation from over 30% in 2019 to 26% by 2030. Decreasing coal power generation is challenging due to competitive economics of coal power. Without further policy support from the government, coal’s share could increase due to a pipeline of 9 gigawatts (GW) of coal plants under construction and public opposition to expanding the operating nuclear fleet. The country is expected to make little progress towards its target to restart controversial nuclear plants and double nuclear share of generation to 20-22% by 2030.

“The power shortages and record-breaking power price spikes seen earlier this year in Japan bring into focus the challenges of shutting down coal and nuclear. Japan still needs a strong fleet of dispatchable power including gas and coal to support renewables build-out and more importantly, to replace a massive 50 GW of coal, gas and nuclear plant retirements expected in the current decade,” commented Whitworth.

Gas plays a critical role in Japan’s power supply, but its share of generation is falling. Generation will fall from over one-third in recent years to 26% share by 2030 due to relatively high cost of gas. By 2050, gas generation in Japan is expected to fall 40% from today’s levels, even as the installed base increases.  Gas capacity will gradually move towards a peaking and load balancing role as economics and policies drive up the share of renewables.

Wood Mackenzie estimates Japan’s power sector CO2 emissions to fall by 70 Mt between 2020 and 2030 to 350 Mt.

Whitworth said: “Although significant, the expected 16% drop in carbon emissions from the power sector by 2030 will not be enough to support the 46% government target for national emissions. Renewables are playing their part but there are significant challenges to decarbonising dispatchable power and non-power sectors.”

Wood Mackenzie is organising the inaugural Power and Renewables Asia Pacific Conference on June 22-24.