Japan ratified the Paris Agreement in 2016. Japan’s INDC towards post-2020 greenhouse gas ("GHG") emission reductions is at the level of a reduction of 26.0% by fiscal year (FY) 2030 compared to FY 2013 (25.4% reduction compared to FY 2005) (approximately 1.042 billion t-CO2 eq. as 2030 emissions).

In addition to the INDC of a reduction of 26.0% by fiscal year (FY) 2030 compared to FY 2013 mentioned above, Japanese Prime Minister Yoshihide Suga declared in 2020 that Japan pledges to, by 2050, reduce GHG emission in Japan to net zero, namely become carbon neutral and achieve a decarbonized society. 

The Fundamental Energy Plan prepared by the Japanese government in 2018 provides that in 2030, 22% to 24% of the total electricity supply will be procured from renewable resources, and 20% to 22% will be from nuclear power. The government started the discussion to further enhance the targeted ratio of electricity generated from renewable resources in 2030. For 2050, a plan procuring 50% to 60% from renewable resources is discussed.

All coal, natural gas and nuclear power are legally usable in Japan.  After the Fukushima nuclear accident, the safety standards on nuclear power plants have been enhanced, and materially fewer nuclear plants are currently operating than before the accident. In March 2021, the Japanese government started the discussion to cease its financial support of the export of coal power plants.

The Act on Promotion of Global Warming Countermeasures, which obligates large business carbon users to submit annual reports on the volume of carbon emissions, was enacted in 1998 and has been updated.

In Japan, it is possible to trade the carbon emission quotas from any third party and use such quotas to reduce the volume of carbon emissions to be reported by certain large energy consumers to the government under the Act on Promotion of Global Warming Countermeasures. The Japanese government allows the procurement of such carbon emission quotas generated from a project outside Japan that has been certified by the Japanese government (JCM: Joint Crediting Mechanism).

In 2012, Japan introduced a tax for the Promotion of Global Warming Countermeasures, imposed on fossil fuel (oil, gas, and coal). In addition, there are taxes on oil and coal and tax on gasoline and light diesel oil.

To enable CCS under offshore areas, the Act on Prevention of Marine Pollution and Maritime Disaster was amended in 2007, and an entity is allowed to conduct CCS by obtaining the prior approval of the Minister of the Environment under the Act.

In 2012, a Feed-in-Tariff ("FIT") was introduced, under which certain renewable power projects (certain solar, wind, biomass, hydro and geothermal projects) are entitled to sell electricity generated from such renewable resources to general electricity transmission utilities at a fixed price for a fixed period (generally, 20 years).

The Act on the Improvement of Energy Consumption Performance of Buildings was enacted in 2015, which requires certain large buildings to comply with certain energy efficiency, and it requires certain large and medium-sized buildings to submit energy efficiency plans.

The Act on Rationalizing Energy Use requires certain large transporters and certain large transport employers to submit mid-and long-term energy efficiency plans and annual reports to the government.

The Act on Rationalizing Energy Use requires certain large industrial factories and offices to nominate an energy management supervisor and to submit reports on energy use and efficiency to the government.

The Act on Promotion of Global Warming Countermeasures requires certain large industrial energy consumers to submit reports on carbon emissions volume to the government.

There have been certain subsidies (provided by the Ministry of Environment) to support the enhancement of energy efficiency in agriculture (such as those on purchasing energy-efficient agricultural machines or constructing agricultural facilities which use heat from renewable resources).

The Act on Rationalizing Energy Use provides a top-runner/bench-mark system on certain thermal power plants that require the operator of such plants to reach energy efficiency at the top-runner level.

The Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electricity Utilities requires retail electricity companies to procure at least 44% of their entire electricity from non-fossil fuel resources by 2030.

The Act on Promotion of Global Warming Countermeasures requires certain large industrial energy consumers to submit reports on the carbon emissions volume/ratio to the government.

A non-fossil-fuel value trade market was introduced in 2018. Such value is generated from renewable power generators and nuclear power plants, and is traded in the market and purchased by retail electricity retail companies. Such electricity retail companies may use such purchased value to satisfy the 44% requirement under the Act on Special Measures Concerning Procurement of Electricity. Also, the electricity consumers that purchase electricity from such an electricity retail company may use such value to reduce the volume of carbon emissions in the reports submitted to the government under the Act on Promotion of Global Warming Countermeasures.

Although Japanese banks have continued financing for the construction of new coal power plants, several Japanese large banks announced or are discussing tightening funding for new coal power plants in 2021.

There are several lawsuits against a power generation company and/or the government by local citizens claiming the cessation of construction and/or operation of coal power plants, and/or cancellation of the governmental decision relevant to the construction or operation of coal power plants. The grounds insisted on by plaintiffs include violation of the environmental assessment process, emissions of CO2 and/or contaminated material. Generally, the plaintiffs have difficulty in succeeding in such lawsuits; however, from a power generators’ perspective, the burden of responding to such lawsuits is substantial.

In 2012, the Act on Special Measures Concerning Procurement of Electricity from Renewable Energy Sources by Electricity Utilities was enacted, and FIT (Feed-in Tariff) was introduced by the Act.  With FIT, renewable projects including solar, wind and biomass have materially increased.

In 2018, the Act on Promoting the Utilization of Sea Areas for the Development of Marine Renewable Energy Power Generation Facilities was enacted, and this act enables the development of offshore wind projects, by entitling certain bid process winners to dominantly use designated ocean areas for offshore wind projects for up to 30 years.

The Japanese government is discussing measures to enable the development of hydrogen supply and projects, and the amendment of regulations relevant to hydrogen supply and use.