A new report is showing a pathway for Japan to reach its decarbonization goals by 2035. Carbon Tracker – a London-based independent financial think tank, issued a report called “Put a Price on It” that finds the current carbon price in Japan of $2.6/tonCO2 must be replaced with a minimum price of at least $30/tonCO2.
That price is estimated to prevent gas-to-coal switching and drive the clean energy transition. The analysis finds a transition to renewables could lower historically high electricity bills in the country, increase stability, and provide greater energy security to Japanese consumers.
Apart from increasing carbon pricing to a minimum of $30/tonCO2, the country also needs to close existing loopholes that allow green funds to be diverted to unproven and inefficient “clean” fossil fuel technologies like carbon capture and ammonia co-firing, according to the report.
The “Put a Price on It” piece models three different carbon pricing scenarios ($30, $60 and $80/tonCO2) to follow the impact of different ambition levels. As per the findings, $30/tonCO2 carbon price is a minimum starting point to ensure the effectiveness of the measure.
Increasing to $60/tonCO2 by 2025 would remove the business case for continued investment in coal generation while reducing dramatically the window of opportunity for gas power plants. In addition, in five years’ time, the role of gas plants as baseload and flexibility providers can be replaced at saving by renewables and battery storage.
The results also show the impact of carbon pricing could go far beyond increasing costs for coal and gas plants. Reinvesting the proceeds from a carbon price of $60/tonCO2 could build more than 10 GW of new renewables annually in Japan.
Japan is one of the countries that agreed to a G7 pledge to decarbonize the respective electricity-generating sectors by 2035. The pledge was announced in May 2022, after a meeting of Ministers in Germany.