Sustainability and Energy
Government Initiatives

In February 2023, the Green Transformation (GX) Promotion Strategy was formulated in response to increased competitiveness of long-term, large-scale investment in green transformation and recognition of challenges in energy security. The strategy consists of two main frameworks: (i) green transformation initiatives based on the basic premise of securing a stable energy supply, such as the use of renewable energy as the main electric power source and energy conservation; (ii) realization and implementation of "growth-oriented carbon pricing concept," etc., including upfront investment in the private sector, etc. ⁶ (Figure 4).

Prime Minister Kishida has announced his intention to achieve over 999.5 billion USD* (150 trillion JPY) of public and private green transformation investment over the next 10 years [including about 133.2 billion USD* (20 trillion JPY) of upfront investment support from the government], and further expansion of green transformation investment is expected in future⁷.

Feed-in Tariff (FIT) is a scheme under which the Japanese government commits to purchase electricity generated from renewable energy sources at a fixed price for a fixed period of time⁸. The high construction costs incurred by the energy companies for energy generation facilities are also expected to be recovered, thereby promoting the spread of renewable energies.

Business operators are required to develop a business plan that meets the national requirements using one of the eligible energy sources (solar, wind, hydro, geothermal, or biomass). All electricity generated (excluding for personal use) is eligible for purchase⁹.

In addition, the Feed-in-Premium (FIP) scheme was introduced in FY-2022. FIP scheme allows electricity producers to independently sell the electricity they generate on the market and add a premium to the selling price¹⁰. The difference with the FIT system is that the purchase is carried out at a variable price, which creates an incentive to increase the supply of renewable energy when the demand or the market price rises. Through this, the use of renewable energy is expected to increase, such as through the storage of electricity in batteries.

The electricity system reform currently being promoted by METI has three main pillars: (i) expansion of transmission line operation over a wide area; (ii) complete liberalization of retailing; and (iii) further securing the neutrality of the electricity transmission and distribution sector through legal separation¹¹. Based on the above-mentioned electricity system reform, four market systems have been established¹² to ensure a fair access environment to energy sources (Figure 5). By transferring energy management, which was previously handled by government organizations, to the market, efforts are being made to achieve more affordable and effective electricity distribution. Through these initiatives, electricity trading and supply-demand adjustment at private sector level are expected to increase.

The Japanese government is promoting the increase of "Zero Carbon Cities," where local governments aim to achieve net zero greenhouse gas or carbon dioxide emissions by 2050¹³. Prefectures and municipalities are committed to formulating and implementing comprehensive and systematic measures to reduce greenhouse gas emissions, etc., in accordance with the natural and social conditions of the region¹⁴. As of December 2023, more than 1,000 municipalities have declared themselves to move towards zero-carbon, with effective and innovative initiatives and ordinances being implemented or enforced.