Japan is entering a rapid scale-up phase for carbon capture, utilization and storage (CCUS), with total capture capacity projected to leap from 0.3 Mtpa today to 12.5 Mtpa by 2035, according to new analysis from Wood Mackenzie.
The growth trajectory positions Japan as one of Asia-Pacific’s fastest-advancing CCUS markets, driven largely by heavy industry.
However, despite strong policy momentum, Wood Mackenzie expects Japan will miss its 2030 CCUS targets by roughly five years, primarily due to the slow formation of cross-border storage partnerships, a critical component of the country’s long-term decarbonization strategy.
Cross-Border Transport Emerges as the Decisive Bottleneck
Among the nine advanced CCS projects shortlisted by Japan’s government, representing over 20 Mtpa of potential capacity, nearly 60% relies on international CO2 storage. Hard-to-abate sectors such as steel and petrochemicals are driving early deployment, but capture alone will not be sufficient without overseas sequestration options.
Wood Mackenzie notes that transporting CO2 from Japan to Australia could cost 7-9 times more than domestic transport. Even so, early-mover partnerships could narrow overall cost increases to 15-20%, making bilateral agreements a pivotal factor in market competitiveness.
Japan is actively exploring storage deals with Australia, Indonesia and Malaysia, supported by a strengthened regulatory foundation. The country ranks second in Asia Pacific for CCUS policy readiness, behind only Australia, thanks to clear national targets, low-cost funding mechanisms, a maturing storage regime, and the transition of the GX ETS to a mandatory system.
Wood Mackenzie estimates Japan will require at least $10 billion in government support for CCUS through 2050, assuming carbon prices reach $69/t by mid-century.
Even with incentives, standalone CCUS projects remain economically challenging. Global analysis of 200 projects shows that viable business cases depend on stacking multiple revenue and support mechanisms: grants, tax credits, ETS revenues, and premiums for low-carbon products.
Japan’s strategy, linking domestic innovation with international storage access, will be essential for bridging cost gaps and establishing CCUS as a competitive industrial decarbonization tool.
