As the development of new technologies and the introduction of new systems and policies aimed at achieving a carbon-neutral society is progressing around the world, Japan has also introduced policies to encourage innovation of private businesses in hydrogen and other technologies with the potential of decarbonizing society.
2050 CN Declaration and Green Development Strategy
In October 2020, Japan declared itself "Carbon Neutral by 2050," setting a goal of virtually zero greenhouse gas emissions by 2050 (2050 CN Declaration).
Based on the 2050 CN Declaration, the Green Development Strategy for 2050 CN (Green Development Strategy) was formulated in December 2020 as a new growth strategy for Japan to lead to a virtuous cycle between economic growth and environmental protection.
In addition, the Japanese Prime Minister, Yoshihide Suga, announced on 22 April 2021 a new greenhouse gas emission reduction target for fiscal year 2030 of a 46% decline from fiscal year 2013 levels. On 22 October 2021, Japan announced 36-38% renewable power by 2030.
Foundation of the Green Innovation Fund
The 2050 CN Declaration is significantly more ambitious than previous Japanese governmental policies for carbon neutrality, and in order to achieve this goal, the structural transformation of the energy and industrial sectors and innovation through bold investments will need to be greatly accelerated.
Based on the Green Development Strategy, the Ministry of Economy, Trade and Industry (METI) launched the Green Innovation Fund Project (Fund), a JPY 2 trillion (around USD 16 billion) fund set up with the New Energy and Industrial Technology Development Organization (NEDO) to provide 10 years of continuous support to business-led decarbonization initiatives, ranging from R&D and demonstration to social implementation, with ambitious and specific goals shared between the public and private sectors.
Targets and features of the Fund
The Fund will support the following priority areas for which action plans have been formulated in the Green Development Strategy, focusing on areas where the effects of governmental policies may be significant and where long-term, continuous support will be needed with a view to social implementation:
- Energy-related industries — offshore wind, solar and geothermal, hydrogen, fuel and ammonia, next-generation thermal energy and nuclear
- Transportation and manufacturing-related industries — automotive and battery storage, semiconductor and telecommunications, shipbuilding, logistics, circulation of individuals and civil infrastructure, food, agriculture, forestry and fisheries, aircraft, carbon recycling and materials
- Home and office-related industries — housing and building, next generation power management, resource recycling and lifestyle
In addition, one of the features of the Fund is that, in order to maximize the results, the following measures are being taken to ensure a strong commitment from the management of the companies receiving support from the Fund to tackle decarbonizing challenges:
- Cancellation of the project and partial return of commissioned funds in the event of inadequate efforts
- Introduction of incentives such as a contingency fee, in which the percentage of the costs borne by the government varies depending on the degree of achievement of the targets set for the management and other factors
Hydrogen-related projects supported by the Fund
The Fund's first project, a hydrogen-related project developing technologies for transportation, storage and power generation with a view to establishing an international hydrogen supply chain, started in August 2021.
According to NEDO's website, as of 7 April 2022, 11 projects have already been selected to receive support from the Fund, including the following seven projects related to hydrogen and ammonia:
- Establishment of a fuel ammonia supply chain
- Utilization of hydrogen in the steelmaking process
- Development of next-generation ships (hydrogen-fueled ships, ammonia-fueled ships, etc.)
- Development of next-generation aircrafts (hydrogen aircrafts)
- Development of plastic raw material production technologies using, among others, hydrogen and CO2
- Hydrogen production by water electrolysis using electricity derived from renewable energy among other sources
- Development of technologies for transportation, storage and power generation for the establishment of an international hydrogen supply chain (see above)
Japan has been a world leader in the development of hydrogen-related technologies and the introduction of hydrogen-related policies, but with the recent international momentum toward decarbonization, other countries have also published policies and action plans focusing on the hydrogen sector.
The Fund is considered an important policy tool for strengthening Japan's international competitiveness in a decarbonized society.
We expect that additional projects will be added to the Fund's scope from time to time, that hydrogen-related laws and regulations will be revised and that new systems and policies will be created in the future, so related businesses, investors, financial institutions and other stakeholders should continue to closely monitor developments in this space.