Japan reviews hydrogen strategy to spur decarbonisation

Spanish Market: Emissions, Hydrogen
08/03/23

Japan has started reviewing its basic hydrogen strategy to further spur decarbonisation, as the global energy landscape has changed since the current strategy was created in 2017 mainly owing to the Russia-Ukraine conflict.

A council under the trade and industry ministry Meti on 6 March began discussions to reform the country's hydrogen basic strategy, to embody what the country should pursue for its intermediate goals in 2035 and 2040 to achieve net zero emissions by 2050. Any revisions to the strategy could be finalised by the end of March 2024.

The council plans to hold a hearing from private-sector companies during the first three meetings, mainly about individual efforts and their opinions of what the country's strategy should be, including the necessary budget, regulations and policies. It also aims to identify components in the hydrogen strategy that will encourage more private investment by raising involvement,such as demand forecasts and a numerical target of how many domestic water electrolysis facilities the country aims to introduce.

The updated basic strategy will also reflect some elements of more specific hydrogen roadmaps focused on the industrial sector and fuel security. The council will formulate the hydrogen industry strategy by identifying necessary actions for Japanese firms to compete globally in the mid and long term, along with the firms' immediate entry in the market. The hydrogen security strategy is now under discussion in other study groups under Meti.

Japan launched its basic hydrogen strategy in December 2017, ahead of the rest of the world. But the strategy still reflects the country's previous target to cut greenhouse gas (GHG) emissions by 26pc by the April 2030-March 2031 fiscal year, based on 2013-14 levels, although Japan has strengthened its emission reduction goal since then.

Japan pledged in October 2020 to realise a carbon neutral society by 2050, and raised its 2030-31 emissions reduction target to 46pc in October 2021. But Japan has faced disruptions in the global fossil fuel market, following the start of the Russia-Ukraine conflict in February 2022. This has prompted the government to rethink its clean energy policy, pressuring it to ensure stable energy supplies as well as decarbonisation.

Japan is betting on hydrogen and ammonia to pursue its net zero emissions and energy security objectives. The country's hydrogen demand is now expected to hit 3mn t/yr in 2030 before reaching 20mn t/yr by 2050, while its supply costs are projected to fall to ¥20/Nm³ (14.56¢/Nm³) in 2050 from the current ¥100/Nm³.

By Motoko Hasegawa

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26/12/24

Viewpoint: Unified CO2 market remains in distance

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Viewpoint: California dairy fight spills into 2025

24/12/24

Viewpoint: California dairy fight spills into 2025

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South Korea to invest $309bn in green finance by 2030

24/12/24

South Korea to invest $309bn in green finance by 2030

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Viewpoint: Low-carbon fuel battles tumble into 2025

23/12/24

Viewpoint: Low-carbon fuel battles tumble into 2025

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Viewpoint: US tax fight next year crucial for 45Z

23/12/24

Viewpoint: US tax fight next year crucial for 45Z

New York, 23 December (Argus) — A Republican-controlled Congress will decide the fate next year of a federal incentive for low-carbon fuels, setting the stage for a lobbying battle that could make or break existing investment plans. The 45Z tax credit, which offers greater subsidies to fuels that produce fewer emissions, is poised to kick off in January. Biofuel output has boomed during President Joe Biden's term, driven in large part by west coast refiners retrofitting facilities to process lower-carbon fats and oils into renewable diesel. The 45Z tax credit, created by the 2022 Inflation Reduction Act (IRA), was designed to extend that growth. But Republicans will soon control Washington. President-elect Donald Trump has dismissed the IRA as the "Green New Scam", and Republicans on Capitol Hill, who had no role in passing Biden's signature climate legislation, are keen to cut climate spending to offset the steep cost of extending tax cuts from Trump's first term. 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The industry, frustrated by the Biden administration's delays in clarifying 45Z's rules, might welcome legislative changes that limit regulatory discretion regardless of what agency guidance eventually says. And lobbyists have floated various ways to appease agriculture groups without kneecapping biorefineries reliant on imports, including adding domestic content bonuses, imposing stricter requirements for Chinese-origin used cooking oil, and giving preference to close trading partners. Granted, unanimity among lobbyists is hardly a priority for Republican tax-writers. Reaching any consensus in the restive caucus, with just a handful of votes to spare in the House, will be difficult enough. "These types of bills always come to down to what's the most you can do before you start losing enough votes to pass it," said Jeff Navin, cofounder of the clean energy advocacy firm Boundary Stone Partners and a former House and Senate staffer. "Because they can only lose a couple of votes, there's not much more beyond that." And the caucus's goal of cutting spending makes an industry-wide goal — extending the 45Z credit into the 2030s — even more challenging. "It is a hard sell to get the extension right away," said Paul Winters, director of public affairs at Clean Fuels Alliance America. Climate costs Cost concerns also make less likely a simple return to the long-running blenders credit, which offered $1/USG across the board to biomass-based diesel. The US Joint Committee on Taxation in 2022 scored the two-year blenders extension at $5.5bn, while pegging three years of 45Z at less than $3bn. An inconvenient reality for Republicans skeptical of climate change is that 45Z's throttling of subsidies based on carbon intensity makes it more budget-friendly. Lawmakers have other reasons to not ignore emissions. Policies elsewhere, including California's low-carbon fuel standard and Europe's alternative jet fuel mandates, increasingly prioritize sustainability. The US deviating from that focus federally could leave producers with contradictory incentives, making it harder to turn a profit. And companies that have already sunk funds into reducing emissions — such as ethanol producers with heavy investments in carbon capture — want their reward. Incentives with bipartisan buy-in are likely more durable over the long run too. Next time Democrats control Washington, liberals may be more willing to scrap a credit they see as padding the profits of agribusiness — but less so if they see it as helping the US decarbonize. By Cole Martin Tax credit changes 40A Blenders Tax Credit 45Z Producers Tax Credit $1/USG Up to $1/USG for road fuels and up to $1.75/USG for aviation fuels depending on carbon intensity For domestic fuel blenders For domestic fuel producers Imported fuel eligible Imported fuel not eligible Exclusively for biomass-based diesel Fuels that produce no more than 50kg CO2e/mmBTU are eligible Feedstock-agnostic Carbon intensity scoring incentivizes waste over crop feedstocks Co-processed fuels ineligible Co-processed fuels ineligible Administratively simple Requires federal guidance on how to calculate carbon intensities for different feedstocks and fuel pathways Expiring after 2024 Lasts from 2025 through 2027 Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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