This briefing is for investors, climate-positive corporations, policymakers, and the media as a resource for interventions, engagement, and reporting on the passage of climate policy that is at risk of being weakened or undermined by oppositional corporate and industry influence.
It deals with Japan's proposed draft Green Transformation (GX) Basic Policy. It is effectively an investment roadmap for 150 trillion yen (over USD 1.1 trillion) of public-private financing over the next 10 years to transform 22 industrial sectors to meet carbon neutrality and contribute to the energy transition in Asia. Public comment on the draft policy were solicited until January 22, 2023. Corporate engagement with the climate-relevant policy elements (carbon pricing, energy, electricity and vehicles) of the strategy are expected to intensify ahead of the G7 Summit held in Japan in May 2023, and revisions of the 7th Strategic Energy Plan and NDCs expected to begin this year.
Coming months offer critical engagement opportunities to align the Japanese and global climate change policies with the Paris Agreement.
The Japanese government aims to introduce 'carbon pricing' that combines a ‘carbon levy’ starting in 2028, with voluntary ‘emissions trading’. (Policy details can be found at the hyperlinks.) The late introduction timelines and the voluntary design brings into question whether this ‘carbon pricing’ can effectively reduce emissions, but given that much is still under discussion, there is room for corporate advocacy in favor of robust regulations.
In its current draft, the strategy promotes financial flows to technologies not fully aligned with IPCC science, such as thermal power (LNG, ammonia co-firing with coal, hydrogen, CCS) and hybrid vehicles, while maintaining a cautious outlook on renewables. The draft also proposes the construction of new nuclear reactors in a major reversal of policy since the Fukushima disaster.
Further details on the policy are available on InfluenceMap's Japan GX Policy page.
On December 22, 2022 the government unveiled the Green Transformation (GX) Basic Policy. It outlines regulatory, financing and technology development priorities for the green transformation of 22 industrial sectors.
A key pillar of the GX Basic Policy is the support for energy transition in Asia. Japan aims to play a stronger role as a lender and technology exporter, and regional cooperation is expected to be high on the agenda of the G7 summit hosted by Japan in May 2023. After proposals from the heavy industry, there is a risk that thermal power expansion (LNG, hydrogen and ammonia co-firing, CCS) will prominently feature in the talks.
While significant share of financing under the GX package (20 trillion yen) will be allocated to renewables, they are mentioned with newly added caveats emphasizing that their deployment should be “based on 3E+S Principles” (Energy security, economic efficiency, environmental considerations and safety), reflecting industry arguments that their roll out should be moderated due to high cost and intermittency. Moreover, compared to the long-term support for the expansion of hydrogen and ammonia supply chains in Asia (subsidies, regulatory support, export credits, risk insurance etc), the strategy offers limited support for overseas renewable business.
January 20, 22 and 23 - Deadline for public comments on three policies related to nuclear power.
March 3, 2023 - A public-private investment forum on the Asian Zero Emission Community, one of the pillars of the GX Strategy, will be held on March 3, followed by a ministerial meeting with partner countries the next day.
May 19-20, 2023 - G7 Hiroshima Summit 2023. Some industry associations are putting together proposals to coincide with the G7 summit.
June 16-18, 2023- G7 Transport Ministers' Meeting in Ise-Shima, Mie
Later in 2023 - Consultations are expected to start on the next 7th Strategic Energy Plan (revision of the 2030 energy mix released in 2024) and emission reduction targets under Nationally Determined Contributions (NDC)s
Entities can file comments in support of 1.5℃ aligned policy elements of the GX Basic Policy before January 22, 2023 or seek to attend the public-private investment forum in March 3, 2023.
Investors may challenge the companies identified below on the extent to which their positions align with Paris goals.
Companies in key industries should be asked to publicly clarify their positions and whether they endorse the oppositional stances of their industry associations.
Companies and financial institutions may consider joining the Japan Climate Leaders Partnership (JCLP) business coalition which is advocating for 1.5℃ aligned carbon pricing policy and ambitious 50% target share of renewables by 2030. Current members of the JCLP may seek to engage their other industry groups to amplify their support.
Evidence of corporate and industry policy engagement gathered by InfluenceMap since the start of 2022 demonstrates a pattern of intense and negative advocacy by cross-sector groups like Keidanren and the Japan Chamber of Commerce and Industry (JCCI), as well as steel, power, and auto sectors.
Details on corporate policy engagement are available at the links below and on InfluenceMap's Japan Policy Tracker
Despite top-level support for the “carbon pricing concept”, heavy industry sectors have engaged in intense advocacy to weaken the carbon pricing policy - calling for voluntary initiatives over regulations, emphasizing economic risks and existing cost burdens, and advocating for free allocations as well as slow and flexible introduction timelines. This includes Japan Iron and Steel Federation (JISF), Keidanren, Federation of Electric Power Companies of Japan (FEPC), and Nippon Steel. Mixed positions have been taken by Japan Chamber of Commerce and Industry (JCCI) and ENEOS which supported carbon pricing with some exceptions. By contrast, the Japan Climate Leaders Partnership (JCLP) strongly supports robust carbon pricing, requesting deadlines for eliminating free allowances in line with the 1.5°C target.
Corporate engagement on the Japanese power mix has been generally negative, with strong advocacy for the need of thermal power including LNG and hydrogen/ammonia co-firing with gas and coal. Intense advocacy for nuclear energy has also been observed, occasionally at the expense of renewable energy. Keidanren supported nuclear energy and appeared unsupportive of the renewable Feed in Tariff. JCCI supported the restart and increased utilization of nuclear power plants, alongside renewables and fossil fuels such as crude oil and LNG. Petroleum Association of Japan (PAJ) advocated for ammonia produced with fossil fuels, including ammonia blending with coal-fired power. JISF supported a long-term role for thermal power generation.
Keidanren and JCCI pushed for policy-lock in and the development of export markets for thermal power, including coal combustion as well ammonia combustion with coal. Keidanren appeared to encourage Japan’s role in cultivating demand for fossil gas in Asia without placing clear conditions related to CCS or mitigating methane emissions.
There has been an intensified engagement by the Japanese auto sector with the Japanese government against regulations and in favor of prolonging the role of combustion engines and hybrids in the transport sector. The head of Toyota and Japan Automobile Manufacturers Association (JAMA) urged the Prime Minister “not to start with regulations” and suggested that Toyota had influenced Japanese government’s opposition to ZEV targets at the 2022 G7 summit. Toyota also reportedly pressured the Japanese government to promote hybrids over BEVs in its annual economic policy in 2022.
InfluenceMap would be happy to engage with interested investors and other parties around this content - please contact Monica Nagashima, firstname.lastname@example.org