Japan’s competitive edge in renewable technologies is helping the nation overcome the unique challenges of transitioning to a net-zero carbon economy. The RBC Asian Equity team focus on the milestones achieved in the region over the last few years, creating a positive cycle of economic growth and environmental protection. With increased investment by government, businesses and households expected to change Japan’s energy mix in the coming years, this is certainly an investment landscape which will continue to evolve.
Whilst Japan’s emissions profile continues to change, the transition to net-zero is well underway with more than a third of the nation’s power generation set to be renewable by 2030 according to its government’s energy plan. The team discuss the current emissions profile, investor opportunities available through government and private sector initiates, and the renewable technology emerging from the region.
Watch time: 06 minutes 32 seconds
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Hi. Thanks for joining. I’m Selina Lu from the RBC Asian Equity Team and I’m joined today by our Japan PM, Maya Funaki.
As we continue our decarbonization journey through Asia, we find ourselves with a lot to discuss when it comes to Japan. In today’s video, we’re going to speak about Japan’s competitive edge in renewable technologies, which can help it overcome the unique challenges it faces in transitioning to a net-zero-carbon economy.
Maya, could you please provide us with a bit of background with regards to the initiatives that are taking place with Japan currently?
Sure. In 2020, Japan announced its plan to achieve carbon neutrality by 2050. Japan is currently the world’s fifth-largest greenhouse gas emitter, and the government has set a goal to reduce emissions by 46% from 2013 levels by 2030.
With large targets set, you might wonder how they plan to achieve a positive cycle of economic growth and environmental protection. In order to do this, they have set 14 goals falling into 3 buckets, which are focused around energy related industries; transport- and manufacturing-related industries; home- and office-related industries.
We expect increased investment by government, businesses, and households to change Japan’s energy mix in the coming years. The government estimates total investments are about JPY290 trillion, providing the environmental opportunities for about 18 million people, which is 14% of population.
Selina, I think you’re best suited to discuss more of the specifics on how Japan is set to improve its emission profile.
Sure. With most investors well aware that Japan has a strong history with nuclear power, it may not be a surprise that Japan’s dependence on fossil fuel power generation increased after Fukushima nuclear power plant accident in 2011.
Since then, nuclear power’s contribution to Japan’s annual electricity supply has decreased from 30% to less than 7%. Coal power now accounts for 30% of energy mix; a 5% increase from 2010.
Japan finds itself in a unique situation compared to other developed markets as it’s more dependent on fossil fuels due to Japan’s lower renewable potential. For instance, its deep coastal waters make it difficult to install offshore wind turbines, and its mountainous terrain limits open space for onshore wind and solar farms. As a result, offshore wind is seen as a key to reduce dependence on fossil fuels, along with hydrogen, ammonia, and carbon capture and storage technologies.
While the power sector is Japan’s biggest source of emissions, accounting for 37% of carbon emissions in 2018, industry accounts for 23% of Japan’s total emissions, and transport accounts for 18% of Japan’s carbon emissions.
While much of the efforts around these largest emitters are supported by government funding, Maya, can you talk more about the private sector commitments?
Japan’s commitment to sustainable initiatives are not only government supported, but more than 50 private Japanese companies have signed RE100, a global pledge to use 100% renewable electricity. After the U.S., Japan has had the highest number of companies sign the pledge.
Japanese companies are also leading the world in supporting the Task Force on Climate-Related Financial Disclosures. From April 2022, listed companies on the prime market of the JPX will be required to disclose information based on the TCFD recommendations or an equivalent framework.
All this work taking place is only supporting Japan in taking the lead with renewable technologies. For instance, Japan has the most international patent applications in the world for renewable energies. Between 2010 and 2019, Japan filed 9,394 patent applications relating to solar, fuel cell, wind, and geothermal technologies. It also leads patent filings for battery technologies, accounting for roughly one-third of the global total in 2018. In addition to all this, Japan has also been a leader in the race toward hydrogen economy.
Thanks, Maya. Given the complex landscape Japan is faced with, this means that Japan’s reliance on expensive technologies we have discussed is much higher than other developed markets. In addition, the country's stance on restarting and expanding nuclear power facilities is still uncertain.
Lastly, reducing greenhouse gas in all sectors of the economy will require an increase in energy efficiency through innovation or changes in the industrial structure, which will require intensive investments.
Japan’s decarbonization target provides an opportunity for Japanese companies to get ahead of global competition and develop technologies and business models that can succeed in a decarbonized world; one story we believe in supporting and look forward to the continuous investment opportunities we hope to see come from this region as they move to carbon neutrality.
Thank you for listening and stay tuned for our next topic on decarbonization.
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