Japan’s recent draft of its seventh Strategic Energy Plan (SEP) fails to make the most of the country’s renewables potential, putting the country off track for decarbonising its power sector. The plan, which outlines Japan’s energy transition goals for 2040, must be updated to reflect its international commitments: tripling renewables by 2030, phasing out coal power and transitioning away from fossil fuels. Ultimately, the consequences of a lack of ambition on clean energy leave Japan at risk from missed investment, climate damage costs and economic drain from fossil fuel imports.
Failure to triple renewables by 2030
The draft strategy fails to make progress on Japan’s existing 2030 target for renewables set out in the sixth plan in 2021. This would see renewables capacity grow only by a factor of 1.7, far below the global commitment to triple renewable capacity by 2030. Instead, it sets a new goal for renewable energy to constitute 40-50% of Japan’s electricity supply by 2040. This would constitute only 2-14% increase in renewables’ share in the 2030s based on the current goal of 36-38% renewables share in 2030.
This extremely low ambition is in stark contrast with power mix simulations showing that renewables could account for 60-80% of the energy mix in 2040. The analytic foundation was in place to support stronger expansion of renewables, but the bureaucracy and political leadership chose not to utilise this.
No phasing out coal power in the first half of 2030s
Although Japan committed with the G7 last year to phase out unabated coal-fired power by the first half of 2030s, the draft makes no mention of phasing out coal plants beyond the most inefficient ones. This is despite several studies, even from traditionally conservative domestic research organisations, reinforcing the confidence in Japan’s ability to transition away from coal between 2035 to 2040 at the latest. Instead, the strategy focuses on mostly the same technological approaches as in previous strategies, which so far have failed to cut Japan’s emissions from coal power.
Not transitioning away from fossil fuels or decarbonising power by 2035
Japan’s draft energy strategy is very vague on fossil fuels. Rather than specifying targets for each fuel, it sets an outlook of 30-40% share of thermal generation in the power mix. This approach leaves huge unanswered questions about the investment outlook and emission intensity of Japan’s future power mix.
What is clear however, is that under this plan continued dependency on LNG and coal, along with unproven emission cutting technologies, would cause Japan to miss its joint G7 commitment of fully or predominantly decarbonising its power sector by 2035.
What comes next for Japan’s energy transition
The strategy is expected to be finalised within the next few months following a public feedback process. Major changes seem unlikely, as it appears improbable that Japan’s current political leadership will make significant changes to how the country powers itself. This can also be seen in the target for nuclear power remaining virtually unchanged at 20%.
Although Prime Minister Ishiba had appeared to be supportive of accelerating the expansion of renewables, there has been a lack of progress. Political turmoil and other international issues may have taken priority, leaving room for the Ministry of Economy, Trade and Industry (METI)’s bottom-up policy process to produce an unambitious outcome that reflects the incumbent power companies’ preferences.
The implications of underwhelming policies
Japan’s leadership is acutely needed to encourage more ambition internationally on the way to COP30 in Belem. Japan recently announced its draft Nationally Determined Contribution (NDC) target, aiming at 60% emissions reduction by 2035 from 2013 levels (translating to 51% from 2019). This has also been met with disappointment, as climate analysts and advocacy groups suggest Japan should aim at a 75-81% reduction.
Both unambitious climate and energy transition plans risk negatively affecting Japan’s attractiveness as a partner in clean energy initiatives and as an investment location. They fail to answer concerns voiced by Japanese politicians about the nation’s loss of wealth through the 26 trillion yen trade deficit in energy in 2023 (USD 185 billion).
Without changes to the strategy, Japan continues to expose its economy to the volatility of global energy markets and will miss opportunities to secure investment in clean energy transition opportunities. In the meantime, Japan will continue paying for the increasing impacts of climate disasters – with a conservative estimate by financial institutions foreseeing climate-related damages causing a 9% hit annually to Japan’s GDP by 2050.