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Decarbonising Japan – how western firms can play a part

Decarbonising Japan – how western firms can play a part

Japan has set a bold target to be carbon neutral by 2050 – but it can’t achieve this alone and is looking to the west for its expertise in sustainability and greentech. You may well be able to play a valuable role in helping the country to meet its goals, as I'll go on to explain.

Carbon targets

With 2050 in its sights for the big neutrality goal, Japan’s intermediate target was a 46% reduction in greenhouse gas emissions from 2013 levels by 2030. At the COP26 summit in Glasgow in November, however, Japanese prime minister Kishida said it would try to go beyond that and achieve a reduction of more than 50% in nine years’ time. 

But how will the country – which is heavily reliant on fossil fuels and has a geography that’s unconducive to producing renewable energy – achieve these goals?

The alternative power sources most often cited are hydrogen, ammonia, nuclear and geothermal energy; but each has its challenges. Renewables adapted to Japan’s geography – for instance, floating offshore wind farms that can operate in its deep coastal waters – are also touted to play an important role in its future, low-carbon energy mix.

And how will the country manage the big implications that carbon neutrality will have for its manufacturing sector? McKinsey has reported that Japanese industry is unlikely to gain access to low-cost, zero-emission energy, raising the prospect of higher production costs and reduced global competitiveness. Adapting manufacturing sites to emission-free, state-of-the-art infrastructure will also require significant investment.

Green Growth Strategy 

To help bring about the necessary changes to meet the country’s carbon goals while promoting economic growth, the Japanese government formulated its Green Growth Strategy in 2020. Among its policies are a Green Innovation Fund – worth two trillion yen (approximately $170 billion) over 10 years – to support companies committed to transitioning towards green practices.

So, what about the private sector – how will it help achieve Japan’s ambitious goals? 

Some companies, including Asahi, Dai-ichi Life and Rakuten, have joined the ‘RE100’ initiative, a movement committed to using 100% renewable energy and actively supporting the drive towards carbon neutrality. 

Tetsu Kidokoro, a London-based researcher at Dai-ichi Life, one of Japan’s largest life insurers, explained that working in such alliances is important: “Change needs to start on a company level but, by working with other organisations, it’s been possible to set common standards for sustainability targets.

On the other hand, it is widely suspected that some of Japan’s biggest manufacturers had a hand in persuading the Japanese government not to sign the COP26 accord to phase down coal.

Osaka Oil Refinery, Sakai, Japan

Corporate initiatives 

A central theme of Japan’s Green Growth Strategy is the need to increase the supply of clean energy to the country’s manufacturers, thereby reducing their reliance on fossil fuels. 

Among the 14 sectors highlighted as having a ‘high potential’ to help deliver this goal are offshore wind, fuel ammonia, hydrogen, nuclear power, mobility and batteries, semiconductors and ICT, carbon recycling and resource circulation, as well as lifestyle-related industries. And many of Japan’s corporations are sharply focused on developments in these fields.

A good example is IHI Corporation, a large Japanese engineering group. IHI is endeavouring to develop the value chain in ammonia, using renewable energy as its starting point. It’s also working to capture, store and convert carbon dioxide from the atmosphere, as well as that which it produces through its own operations. 

Another example is TEPCO, Japan’s largest electric power company, which is working on consumer lifestyle initiatives such as all-electric homes and charging infrastructure for electric vehicles. 

Izumi Ouchi, General Manager at TEPCO’s London office, explained: “The electrification of society reaches maximum contribution toward carbon neutrality if the electricity is green. We’re working on the grid infrastructure in Japan so it will be possible to accommodate higher quantities of renewable power, as well as offering a decentralized system that can transport energy in two directions. Smart meters are also helping us to understand how much electricity customers use so we can optimize the operation of the grid.” 

And it’s not just Japan’s manufacturers and power generators which are getting in on the act. Takashi Nishida is a Senior Manager at Itochu Europe, one of Japan’s largest trading companies. He thinks it’s essential that businesses throughout the value chain assume responsibility for decarbonising the economy: “That’s why we’re working on all sorts of initiatives, from new energy and energy management to sustainable materials and e-mobility.” 

Like companies in other countries that have pledged carbon-neutrality, those in Japan will have to figure out the best way to make good on their pledges. 

“It’s important to be able to explore pathways based on different variables to find the optimum route to carbon neutrality, but it’s hard for companies to do that on their own,” said Tetsu Kidokoro at Dai-ichi Life. “Creating clear scenarios for each industry or company is essential, and companies which can provide the necessary services and infrastructure will benefit from strong, fast-growing demand.” 

Need for international technologies 

Yet, despite all these activities from Japanese corporations and government, Japan knows it won’t find all the solutions to decarbonise its economy within its own borders. And this recognition is presenting considerable opportunities for specialist companies and research institutions in the west.

Indeed, “international collaboration” is a central component of the Green Growth Strategy. Japanese companies have become increasingly familiar over recent years with the idea of sourcing innovation from overseas, and many have already established western outposts through which to collaborate with – and invest in – pioneering startups.

Itochu, for example, has formed partnerships with Nel, a Norway-based company providing solutions for the production, storage and distribution of green hydrogen, and with Moixa, a UK-based company that has software to manage solar-powered energy storage systems. 

“There are many good businesses and policies outside Japan that Itochu has been inspired to introduce to the Japanese market,” said Takashi Nishida.

Mitsui & Co., another Japanese global trading and investment company, has also been investing – in its case, in Storegga, a Scottish firm focused on carbon reduction and removal.

In fact, in a recent study we produced for JETRO – Japan’s governmental trade and investment agency – sustainability emerged as the area of greatest interest among Japanese companies conducting innovation activities in Europe. 

“With climate change causing a marked increase in extreme weather, the demands on infrastructure are also increasing,” explains Ouchi of TEPCO. “Like other Japanese companies, we can benefit from the knowledge developed in Europe, where new business models and many other essential changes have already been introduced.” 

Dr Toshiyuki Suda, Program Director at the Corporate Strategy Headquarters of IHI Corporation, supported this point: “To enable hydrogen and ammonia production at a reasonable cost, we’re searching for high-efficiency electrolysis. As long as the technology works, it doesn’t matter where it comes from.” 

World of possibilities 

So, the road to carbon neutrality presents many challenges, but it’s also opening up a world of possibilities. 

Japanese corporations and the country’s government increasingly recognise that they need to work with innovators outside Japan, and that’s creating huge opportunities for greentech startups, scaleups and research institutes across the west. 

Of course, like the rest of the world, Japan is only at the beginning of decarbonisation – a process that’s set to last decades. And, on the positive side, this means opportunities not just for the current generation of innovators, but for many yet to come …    


To discuss how your organisation could help Japanese corporations to achieve their sustainability goals, please contact James Francis at or on +44 (0)7740 558503.  

James Francis
About the Author

James Francis

James specialises in bringing together western tech startups and Japanese corporations to help them meet their innovation and sustainability goals. Having lived and worked in Japan for eight years, James is now based in London, is fluent in Japanese and has a keen interest in disruptive technologies.

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