These goals are particularly impressive considering Japan relied on fossil fuels for 73 percent of its electricity supply in 2022. Interestingly, Japan's decarbonization strategy depends on natural gas both as a transition fuel, and in decarbonized forms, as a future clean energy source. Japan's approach is sure to provide valuable lessons for the United States and other markets that rely heavily on natural gas and shed light on the future role of natural gas through the energy transition.
Japan's energy market is comparable to the U.S. According to the Bank of Japan, Japan's CO2 emissions per real GDP is on par with the U.S. (0.20 kg/dollar in Japan; 0.22 kg/dollar in the U.S.), and higher than western Europe. The power sector accounts for 37 percent of Japan's GHG emissions, comparable to 30 percent in the U.S. Natural gas accounts for a comparable percentage of electricity generation in Japan and the U.S. (40 percent; 42 percent).
The U.S. and Japan share similar perspectives on diversifying climate change abatement strategies beyond renewables—including boosting investment in nuclear, and the potential of hydrogen and synthetic fuels like e-methane to decarbonize hard-to-abate sectors. Both countries have passed legislation to support climate investment—notably, the Inflation Reduction Act of 2022 in the U.S., and Japan's establishment of the Green Innovation Fund in 2021 and the 2023 GX Promotion Act.
Natural gas will play an important role in Japan's 2030 energy transition, according to the Ministry of Economy, Trade and Industry (METI). Shifting current oil and coal production to natural gas will account for 3 percent of Japan's 2030 CO2 reduction goals. Switching to natural gas in the industrial sector could account for another 5 percent reduction. Japan is also investing in a smart, distributed energy network that can switch from renewables to gas leveraging digital technologies, and in energy recovery technology known as turboexpanders.
"While the gas industry has plans to meet Japan's ambitious goals for 2050, solutions that are readily available and scalable are needed today to start curbing emissions while we work to reduce cost and expand the scale of future fuels like hydrogen and [electric natural gas] eNG. TB Global Technologies Ltd. (TBG) is committed to deploying existing technology to decarbonize natural gas today while investing in future energy solutions," a representative from TBG, a solution provider for companies in the global energy industry based in Japan, told Newsweek.
By 2050, Japan's goal is for all city gas consumption to be no and low-carbon gases. The anticipated breakdown is 5 percent hydrogen (directly), 5 percent biogas/low-carbon fuels combined with carbon capture, and 90 percent synthetic methane or eNG. eNG is produced from hydrogen and CO2 through methanation. While burning eNG releases CO2, it is considered a carbon neutral fuel because the CO2 emitted can be captured and reused to produce more eNG in a closed loop system. eNG is an interesting potential fuel because it can be transported through existing natural gas infrastructure, handled with existing equipment, and may offer a lower cost alternative to renewable energy sources like solar and wind. Furthermore, eNG offers a solution to decarbonize hard to abate sectors like transportation and industry because it can be efficiently stored and transported.
However, to scale, the production cost of clean hydrogen and the cost of technology required for methanation must be reduced. Japan's energy suppliers are playing an instrumental role in advancing research into producing eNG at scale. Tokyo Gas is working on technology for electrolysis to lower the cost of clean hydrogen production. Japanese petroleum company Eneos announced plans to study the feasibility of a large-scale e-methane facility. A Japanese energy company consortium announced plans to explore a hydrogen and ammonia supply chain within the Osaka industrial zone. In this way, e-fuels like e-methane and ammonia, green hydrogen, and technology like carbon capture, utilization, and storage (CCUS) offer interesting opportunities to invest in a cluster of technologies that will fortify energy companies through the energy transition.
As Japan's natural gas industry continues to play a critical role in helping Japan achieve its climate goals, natural gas companies in the U.S. should look for opportunities to partner with their Japanese counterparts to maximize the impact of investment in natural gas research and development that can fuel the future of a cleaner natural gas industry.
Freddie Sarhan is CEO of Sapphire Technologies.
