Tokyo, September 30, 2024 – Japan will need investment of about ¥320 trillion ($2.2 trillion) over the next decade if it is to stay on course to reach net-zero by 2050, according to BloombergNEF’s (BNEF’s) New Energy Outlook: Japan, a follow-up to the research provider’s New Energy Outlook 2024 released in May. The new report indicates the country, still heavily reliant on fossil fuels, will need to accelerate the deployment of renewable energy such as solar and wind, and scale investments in emerging technologies such as hydrogen and carbon capture and storage (CCS), rather than relying on high-cost technologies such as ammonia-coal co-firing.
New Energy Outlook: Japan presents two updated climate scenarios, the Net Zero Scenario (NZS) and a base-case Economic Transition Scenario (ETS), designed to inform public policymaking, country climate ambition and low-carbon transition strategies of corporations and financial institutions.
The ETS, a scenario based on existing policies, describes an economics-driven transition and assumes a global temperature increase of 2.6C by 2100. The NZS assumes a net-zero economy by 2050, without relying on unproven technologies.
Demand for oil, gas, and coal in Japan has already peaked. According to BNEF’s NZS, fossil fuel demand will decline sharply post-2025. The energy transition in the power, transport, industry, and buildings sectors will proceed at different rates depending on the technologies available to decarbonize, but all sectors will see rapid declines in emissions.
In addition to the expansion of zero-carbon technologies in the power sector and the electrification of the transport sector with electric vehicles (EVs), the widespread use of carbon capture and storage and emerging technologies such as hydrogen will play an essential role in decarbonizing Japan. Under the NZS, CCS reduces CO2 emissions by 21% compared to the case where no transition occurs and will play an important role in reducing emissions in the power and industrial sectors. Hydrogen will be an essential technology to fully decarbonize the transport and industrial sectors, although its overall contribution will be smaller than that of CCS. It should be noted that the economics-driven path described by the ETS sees limited adoption of emerging technologies such as hydrogen and CCS due to high costs.
Japan’s NDC climate change target calls for a 46% reduction in greenhouse gas emissions by full-year 2030 (compared to FY2013). BNEF’s report shows there is a risk that the 2030 target will not be met if energy transition measures rely solely on the economics, with the ETS leading to only a 30% reduction in emissions by 2030. BNEF’s NZS, on the other hand, leads to a 55% reduction in emissions relative to 2013 levels, exceeding Japan’s NDC target. “Japan is fast running out of time to achieve its climate goals and concerted policy action is urgently required to stay on track for the 1.75C trajectory envisioned in the NZS,” said Shige Ogawa, lead author of the BNEF report.
Under the NZS, fossil-fuel consumption in Japan declines sharply, with CCS used to tackle remaining emissions from fossil fuels. In the power sector, reliance on fossil fueled thermal power plants declines thanks to higher uptake of solar, wind, and batteries. Under the NZS, annual average renewable energy additions peak in the late 2020s at 27 gigawatts per year, almost 3 1/2 times the 8 gigawatts of the previous decade.
“In order for Japan to achieve net zero, investment in all areas of the energy transition needs to be rapidly scaled up, especially over the next decade,” said Kokona Ota, co-author of the BNEF report. “The Japanese government has pledged to invest over 150 trillion yen in decarbonization over the next 10 years to keep the country on track to achieve net zero by 2050. BNEF analysis shows further investment is needed, with 1,100 trillion yen ($7.7 trillion) required from now until 2050 under the NZS.”
The global version of the New Energy Outlook 2024 is publicly available here. The full report is available on bnef.com and the Bloomberg terminal for BloombergNEF subscribers.
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Oktavia Catsaros
BloombergNEF
+1 212 617
ocatsaros@bloomberg.net
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