Japan’s $1 Tn GX (Green Transformation) Policy

Japan's GX Policy: As part of its Nationally Determined Contribution (NDC) to implement the Paris Agreement on climate change, Japan introduced its GX Policy in February 2023, signifying a significant shift towards clean energy and decarbonization. The GX policy is a mix of fiscal and policy measures with a potential budget of roughly $1Tn (150 trillion yen) that outlines a roadmap for the next decade while fostering economic growth.

Misaligned with Science Based Policy (SBP): InfluenceMap's research shows Japan's GX Policy is significantly misaligned with the Intergovernmental Panel on Climate Change (IPCC)’s guidance on pathways that can deliver the Paris Agreement’s goal of limiting global temperature rise to 1.5°C above pre-industrial levels (known as Science Based Policy). While the GX Policy partially aligns with Science Based Policy in some areas, such as Japan's 2030 and 2050 greenhouse gas (GHG) reduction targets and renewable energy, financing under the policy does not seem to be tied to any emission reduction outcomes for companies or sectors.

Carbon Pricing and Fossil Fuel Policy: This report looked at the GX Policy’s top-line climate goals and policy measures (such as carbon pricing), as well as its sector-level fiscal and policy plans around the electric power industry (renewables, gas, coal, ammonia/hydrogen) and heavy industry (steel and transport/automotives). The GX policy is particularly inconsistent with Science Based Policy in its carbon pricing and fossil fuel measures. With its delayed and uncertain carbon pricing system, the policy may struggle to meet the price levels recommended by the IPCC, putting emission reduction targets at risk. The policy's reliance on coal, LNG, and hydrogen/ammonia co-fired power generation contradicts IPCC 1.5°C recommended pathways and poses risks to long-term global emissions goals. Furthermore, the GX Policy supports the continued sale of hybrid and plug-in hybrid vehicles, counter to the IPCC's guidance that these represent a “temporary solution” and that electric vehicles powered by low-emissions electricity must play a dominant role instead.

Influencing by Heavy Industry: InfluenceMap's system has recorded thousands of pieces of evidence around corporate influencing of climate and energy policy over the last few years, which provide an indication of influencing patterns over Japanese policy. The research found that the overwhelming majority of policy engagement by Japanese industry (81% of about 900 data points specifically around GX Policy) originates from a small minority of nine industry associations and eight companies. These include industry associations and sectors representing electric power, steel, fossil fuel production, and automotive production. Other sectors (such as finance, retail, construction, consumer goods, and healthcare), which collectively constitute over 70% of Japan's economy and employment, have been largely silent on the details of Japan's GX Policy leading up to its introduction and continuing evolution. Misaligned positions from the active industrial sectors may explain the negative impact on the current GX Policy.

The Role of Keidanren: Among the nine industry associations the research examined, the Japan Business Federation (Keidanren) is of particular note. Keidanren alone accounted for 15% of the nearly 900 corporate engagement data points analyzed in this report. The group claims to “establish a consensus" of the Japanese business community. Its positions on various aspects of the top-line and sector-specific elements of the GX Policy are largely misaligned with Science Based Policy, particularly its opposition to a meaningful carbon tax and strong advocacy for the role of ammonia in extended thermal coal use. The current Chair of Keidanren, Masakazu Tokura of Sumitomo Chemical, has stated that Keidanren’s positions were almost fully adopted in the current GX Basic Policy.

Positive Corporate Climate Voices: While heavy industry appears to dominate the GX Policy debate in Japan, positive corporate climate voices are growing. The Japan Climate Leaders' Partnership (JCLP) is a climate advocacy group with 246 members from a range of corporate sectors, including Ricoh, Takeda Pharmaceutical, and Aeon, as well as the Japanese affiliates of Apple, IKEA, and Amazon. Another network with corporate members (including Sony and Softbank), the Japan Climate Initiative (JCI) is similarly advocating for more ambition in Japan's climate policy, including stronger renewable targets and carbon pricing. Both JCLP and JCI indicate the existence of a more diverse and climate-ambitious voice from corporate Japan aside from the Japan Business Federation (Keidanren). Growing positive engagement by groups like the JCLP and JCI, and individual member companies (representing an overwhelming majority of Japan's economy and employment) suggests that Keidanren’s claim to represent Japanese business may not be valid.