Policy Update 100

Discussions at "Japan's Climate and Energy Security Strategy" Virtual Workshop

Consulting Fellow, RIETI

On November 24, I participated – as Counselor of the Institute of Energy Economics, Japan – in the "Japan's Climate and Energy Security Strategy" Virtual Workshop organized by the Atlantic Council and Howard Baker Forum. The keynote speech was made by Izuru Kobayashi, Deputy Commissioner of the Agency for Natural Resources and Energy, on "Japan's Energy and Nuclear Policy for Carbon Neutrality." The other panelists in addition to me were Clara Gillispie (National Asian Studies Bureau), Tobias Harris (Center for American Progress) and Jane Nakano (Center for Strategic and International Studies). Jennifer Gordon of the Atlantic Council played the role of moderator.

Mr. Kobayashi talked about:
- 2050 Carbon Neutral Declaration and 2030 Climate Goal
- How we realize 2050 Carbon Neutrality
- Green Growth Strategy
- Nuclear Power in Green Growth Strategy
- The 6th Strategic Energy Plan
- Japan's nuclear power plants
- Japan's Initiative for Accelerating Nuclear Innovation

During the panel discussion, Ms. Gordon asked me the following questions to which I have answered as follows:

Q1. What are your key takeaways from Japan's new Basic Energy Plan?

A. As an energy expert, I wouldn't say it is Mission Impossible, but I would say it is Mission Almost Impossible. But I believe we have to try. The biggest challenges in my view are:
1) Energy Efficiency
We need to improve energy efficiency by 35% by 2030, which is much higher than the 14% improvement achieved in the last 20 years. We have to make tremendous efforts like we did in the 1980s, with no more low-hanging fruits. We may need some drastic industrial structure change, such as decreasing steel production by 30%. The magnitude of industrial structural change will be enormous. Thus, we need a "Just Transition."
2) Renewable Energy
Renewable power's current share of 18% has to increase to 36-38% by 2030. But Japan's solar power installation per square km is already No. 1 in the world – higher than that of the US, China and Germany. Thera is no more flat land area available, and only mountainous areas are left, on which it would be costly and dangerous to install solar power. Onshore wind power is in same situation, so we have to go to offshore. However, Japan's offshore land gradient is much steeper than, say, the North Sea in Europe, so we have to install a relatively new technology – floating vessels, rather than fixed-bottom type systems – and there are many challenges in terms of technology, acceptance of local communities (especially by fishermen) and safety regulations.
3) Nuclear
Currently only 10 nuclear power units have restarted operations and have a capacity of 9.1 GW. The 2030 target of 20-22% by nuclear in total power generation requires 30-35GW, which will require 27 units in total. This is very big political challenge given that the majority of the public is against it. Beyond 2030, we need to extend most of the power plants' lives to 60 years, or maybe longer. Also, we have to hope for next generation reactors, including SMRs. Those are very tough challenge, but I believe we have to tackle it, because in Japan renewable energy alone cannot meet the whole carbon-free energy demand.

Q2. Where do climate and energy policy fit with PM Kishida's other priorities?

A. Of course, it is one of the highest priorities, because carbon neutrality by 2050 was made a binding goal by a unanimous decision in the legislation by the Diet earlier this year. The amount of political resources he will use remains to be seen. Especially, his biggest challenge is what to do on nuclear power. I hope advisors surrounding PM Kishida – especially officials from METI – will give him effective advice and that he will exercise his implementation capability.

Q3. How have the recent energy crisis in Europe, the EU's focus on decarbonization, and the carbon border adjustment mechanism affected Japan?

A. I am working on the Japan-EU relationship, and it is my belief that Japan should learn from, and collaborate with, the EU more. In spite of the recent energy price hike, the EU's basic position in its energy and climate policy looks unchanged. Japan and the EU have recently formed a Green Alliance. The EU's ‘Green Deal’ and its ‘Fit for 55’ package have a lot of implications for Japan. I think it is a good reference book. The proposed CBAM is a very interesting, strategic as well as tactical approach, which aims at avoiding carbon leakage and urging other countries to make sufficient efforts toward decarbonization. I have been encouraging policy makers and industry people in Japan to create such tools and commitments, which Japan could then propose to the world. Another encouraging movement is re-recognizing the role of nuclear energy in decarbonization, typically seen in France and Eastern European countries. There are countries which don't like nuclear power, but the EU, as a whole, with its electricity networks connected, will keep a certain share of nuclear power in its energy mix, which I believe is a wise strategy.

Q4. COP26 has just concluded, where do you see Japan's role in international energy and climate cooperation going from here, especially US-Japan cooperation?

A. Personally, I hope that US-Japan cooperation will cover the following areas:
1) Nuclear
Japan and the US are advanced nuclear countries with a lot of experience and technologies. We should collaborate further on technologies for next generation reactors and also on the back-end technologies. From the Japanese point of view, information on how the states such as New York and Illinois have extended the lives of existing nuclear power plants is very useful.
2) Transition in Asia
Most Asian countries such as India and those in the ASEAN will continue to enjoy economic growth, which needs secure and affordable energy. They are currently heavily dependent on coal. We – Japan and the US – should cooperate with them on practical "energy transitions” by offering planning, technologies and finance. In this context, the role of natural gas as a bridging fuel, should not be denied. Natural gas emits a lower volume of CO2 than coal and will aid in the transition to hydrogen.
3) Grid expansion and modernization
Energy use is set to become more and more electrified and increasingly, intermittent renewable power will be integrated into the power networks around the world. This should be promoted toward decarbonization. Then, the role of the grid will be more and more critical. Both Japan and the US have experience in establishing grid networks and advanced technology including digitalization. I believe there is a lot we can collaborate on for smarter and securer grid installation and operation and we can demonstrate and offer this to the world.
At the same time, trilateral cooperation between Japan, the US and Europe would be valuable and further pursued in these above areas.

Finally, I would like to say that I strongly hope the US government will not change its energy and climate policy especially for decarbonization, regardless of who the President is.

December 28, 2021