The G7 ministerial meeting on climate, energy and environment in April, and the G7 summit in Hiroshima in May garnered much attention in the media. In Japan, much of the reporting focused on the gap between Japan and the rest of the G7 regarding decarbonization.
Diplomatic differences are nothing new in international negotiations. Whatever the idealists may say, it’s simply a statement of fact that each government puts its own interests first. In this respect, this year’s G7 meetings were no different. But the context of the tug of war we saw in Sapporo and Hiroshima was different. For much of the world, the double-bind of the imperative to decarbonize and Russia’s invasion of Ukraine threatened energy security. Japan, for its part, is beginning to implement its own energy transition. With the global energy system on shaky footing, we can’t help but feel that this year’s G7 meetings represented something of historical significance.
Part I of this post covered some of the salient agreements from the G7 environment ministers’ meeting in April. In Part II, we take a look at the divergences – the fault lines – between the G7 governments on those notable issue areas in energy.
Four high-level takeaways emerge from this exercise:
Almost never are the seven governments in perfect harmony. As Robert Keohane explained long ago, “harmony” is when states’ policies automatically facilitate the attainment of other states’ goals. Unfortunately, from putting a timeline on coal phase-out, the use of nuclear power, to the use of hydrogen and ammonia in the power sector, diplomats wrestled.
The only exception to that rule is in the area of new investments in natural gas and liquefied natural gas (LNG). In this, we can’t glean any notable opposition to the idea that such investments are appropriate, at least in the short term. This clearly reflects the need for measures to stabilize the global gas market and strengthen energy security against the backdrop of the war in Ukraine.
Japan, this year’s G7 chair, was a laggard. In virtually all areas of the negotiation, we see that Japan resisted proposals by western leaders to set more aggressive decarbonization goals.
Why is Japan dragging its feet? It’s not because of its heavy dependence on fossil fuels in its power sector, a burden that other G7 countries share. It’s because of what I call a “pseudo-decarbonization paradigm.” More on this in Part III.
Summarizing Member Countries’ Preferences
Before diving into the details, we should summarize the positions of the G7 countries item by item. Again, the communiqué is extensive, covering topics ranging from climate change, biodiversity loss, to pollution. Here, we focus solely on energy as it relates to climate change.
The table below and the analysis below draw entirely from news reports and other readily accessible sources. If you have any more information on country preferences not discussed here, leave a comment below.
Coal-Fired Power Plants
The ministers reaffirmed their commitment to “prioritizing concrete and timely steps towards the goal of accelerating the phase-out of domestic unabated coal power generation in a manner consistent with keeping a limit of 1.5C° temperature rise within reach and urge others to join us” (that’s page 25 on the communiqué, if you’re following along). A welcome reaffirmation, no doubt, but they fell short of setting an explicit timeline for the phase-out. A divergence between countries was at the root of this.
The UK and Canada were the two countries that seemed to most forcefully call for the phase-out of all coal-fired power plants by 2030. Canada’s Minister of the Environment and Climate Change Steven Guilbeault tweeted after the meeting, “For Canada, phasing out coal-fired electricity generation by 2030 has never been more urgent. Canada welcomes G7’s commitment to accelerate coal phase out in a manner consistent with 1.5C° scenario.” And according to Mainichi Shimbun, the UK also wanted to make not only coal phase-out but fossil fuel phase-out the centerpiece of this G7 meeting.
Along with Canada and the UK, France and Germany also pressed Japan to propose an explicit timeline. Even Germany, a country that increased the proportion of coal power in its energy mix in response to the shortage of natural gas triggered by Russia’s invasion, has drawn a clear roadmap for the phase-out of coal-fired power generation domestically. “Germany increased its use of coal for one winter only because of Russia’s war of aggression against Ukraine, but only while the war continues,” Patrick Graichen, a top official in the German Ministry for Economic Affairs and Climate Action told Yahoo Japan. “We are aiming to withdraw from all coal energy by 2030…We are aiming to increase renewables to supply 80% of our energy needs by 2030.”
But Japan resisted. In Japan, the Ministry of Economy, Trade and Industry (METI) announced that the country will retire inefficient coal plants by 2030, but as of today, there are still 167 coal-fired power plants in operation, and 4 plants are either being planned or in construction. In its domestic energy plan, coal is set to account for 19% of the overall electricity mix. Ultimately, the G7 communiqué reflected the position of the laggard chair country, forgoing an explicit timeline for coal- phase-out.
Japan wasn’t alone in its opposition. The US and the EU also resisted a coal phase-out date because of internal politics. In the US, presidential and congressional elections are coming up next year, and the Biden administration was allegedly concerned that a 2030 coal phase-out date would be used by Republicans to attack Democratic politicians running for re-election for Congress. Unlike Germany and other European countries, the US hasn’t explicitly spelled out plans to abolish coal domestically, but the recent Inflation Reduction Act and the Infrastructure Investment and Jobs Act serve as catalysts for rapid renewable energy deployment, and coal may be abandoned as a consequence by 2030.
The EU, consisting of 27 member states, couldn’t agree to a coal phase-out timeline because of some Eastern European states’ dependence on coal production and consumption. Poland, in particular, is particularly dependent on coal exports and has set a late phase-out date of 2049.
Nuclear Power
On nuclear, the communiqué remains neutral, stating simply that “Those countries that opt to use nuclear energy recognize its potential to provide affordable low-carbon energy that can reduce dependence on fossil fuels, to address the climate crisis and to ensure global energy security as a source of base load energy and grid flexibility” (p. 27). This neutrality is, again, a product of differences between G7 countries.
The most glaring divergence was between Japan and Germany. The Japanese government is aiming to maximize the use of nuclear power domestically, and has set a goal of raising the percentage of nuclear power to 20-22% of the total power supply by 2030. Restarting nuclear reactors that have been paused since the Fukushima disaster in 2011 and extending the operating life of some reactors past its 60 year limit are key steps to achieve that goal. As of mid-May 2023, 10 reactors have been permitted to restart, and 10 are still under inspection.
The US supports Japan in its efforts to revive nuclear power. US Special Presidential Envoy for Climate John Kerry said in an interview with Mainichi Shimbun that “Japan can provide a highly reliable supply of electricity by combining its nuclear power generation capabilities. President Biden and our team support nuclear power as part of the power supply mix.”
Germany, on the other hand, has been planning to shut down nuclear power since 2000, and accelerated its plan after the Fukushima nuclear accident. As this year’s G7 climate meeting drew to a close, the last nuclear power plant was shut down, completing Germany’s exit from nuclear.
Natural Gas and LNG
Against the backdrop of Russia’ invasion of Ukraine, the Sapporo G7 ministers’ meeting agreed that “investments in the gas sector can be appropriate to help address potential market shortfalls provoked by the crisis” (p. 27) and the Hiroshima summit in May corrected this to “publicly supported investment in the gas sector can be appropriate as a temporary response” (p. 17).
The political economy surrounding natural gas and LNG have become particularly complex and challenging in the context of the war in Ukraine. Even the IEA said before the G7 Sapporo meeting that upstream gas investments are necessary. In the midst of geopolitical uncertainties, there was virtually no opposition to the idea of continuing investments in gas among the G7 ministers and leaders. Insiders to the ministerial meetings may have witnessed a more nuanced picture, but the fact is that the G7 presented a unified front on gas investments.
The biggest proponents to renewed gas investments seemed to be Germany, a country that was most dependent on Russian pipeline gas. It was reportedly pushing for the wording of “publicly supported investment” to be included in the communiqué at the Sapporo meeting. The Hiroshima communiqué was evidently revised to reflect Germany’s preference.
The agreement has been the target of criticism by activists, but the German negotiators insist that future gas investments will be made in a way that avoids fossil fuel lock-in. “We also need some new gas power station, but they should be built in a way that they can run on green hydrogen later on as well,” a German government official said of the agreement. “So it is an investment in the clean future as well.”
As for Japan, it sees LNG as a “transition fuel” and gave Germany its support. The US, as one of the world’s largest LNG exporters, did not seem to oppose the idea of deeming new gas investments as appropriate.
Hydrogen and Ammonia
Arguably the most glaring fault line at this year’s G7 ministerial meeting was the role of hydrogen and ammonia in decarbonization policies. Hydrogen produced using renewable energy (green hydrogen) is usually considered a fuel that should be used in “hard-to-abate” sectors like heavy industry and long-distance transportation. But the Japanese government’s GX Basic Policy, released last year, includes the co-firing of hydrogen and ammonia in gas- and coal-fired power plants in the electricity sector as one of its pillars. On top of this, Japan is promoting ammonia co-firing in the energy transition roadmaps in other Asian countries. For these reasons, the negotiation surrounding hydrogen and ammonia turned into a Japan vs. G6 tug of war.
The UK, France, and Canada vehemently opposed Japan’s proposal to position hydrogen and ammonia as low-carbon energy fuels. Ammonia itself is not a greenhouse gas, but current ammonia production requires fossil fuels and the co-firing technology is far from commercially viable. The UK and France demanded that the communiqué include language that the use of hydrogen and ammonia in power generation “should only be pursued where it can be demonstrated to be aligned with” the 1.5C° target for curtailing rising temperatures by 2050. Canada also objected to the positioning of hydrogen and ammonia as “effective” means of emissions reductions, and instead asked for the text to say that they are fuels with “potential” for emission reductions. The UK Secretary of State for Energy Security and Net Zero, Grant Shapps, noted bluntly that coal co-firing of ammonia would “lead to the preservation of coal” and that “co-firing does not sufficiently reduce CO2.”
Germany took the same position, with Graichen arguing pointedly that “clinging to old systems, such as using ammonia to extend coal-fired power generation, is not the way to the future. The future is to use wind and solar power and expand from there to heating, transportation, and industry, replacing gas.” (This interview is recommended reading – he has some interesting things to say about the potential for renewable energy in Japan)
Lastly, the US also voiced its opposition to Japan’s hydrogen and ammonia policy. In an interview with Mainichi Shimbun, John Kerry expressed a lengthy opinion on this topic. It’s worth quoting in full:
We believe there are a number of possibilities for future technologies. But the role of co-firing ammonia and hydrogen with natural gas could pose some serious problems and significant challenges. We are very concerned that natural gas (which supposedly has lower emissions than other fossil fuels) is being touted as the solution to the challenge before our eyes. People are concerned that mixing ammonia or hydrogen with gas will postpone the problem rather than accelerate the transition. Spending more energy to produce hydrogen and ammonia and burning them mixed with gas will increase the costs and fail to reduce emissions.
In the end, the unity of the G6 seems to have triumphed over Japan’s position. The sentence “We also note that some countries are exploring the use of low-carbon and renewable hydrogen and its derivatives [such as ammonia] in the power sector to work toward zero-emission thermal power generation if this can be aligned with a 1.5C° pathway and our collective goal for a fully or predominantly decarbonized power sector by 2035” was included in the communiqué (p. 25).
By simply “noting” the existence of countries that are exploring the use of hydrogen and ammonia in the power sector (Japan is the only G7 country pursuing this strategy), the communiqué makes it clear that the other states lent no sympathy to Japan. What’s more, by making its acknowledgement of these strategies conditional on their alignment with a 1.5C° pathway and power sector decarbonization roadmap, it’s imposing a stringent demand on Japan to stop building new fossil fuel plants, and even to seriously reconsider hydrogen/ammonia co-firing that has little emissions mitigation potential.
As I mentioned earlier, the use of hydrogen and ammonia marked the deepest fault line between Japan and the other G7 countries. On this issue in particular, the starkness of the disagreement suggests that this G7 ministerial meeting was a historically significant moment that revealed just how far Japan has veered from the West in its energy transition.
To Capitalize or Not to Capitalize: “Green Transformation”
Finally, I want to touch on one more piece of disagreement that caught my attention. It’s the way the term “green transformation” is written in the communiqué. The phrase appears twice in the entire text, both times with lower case initial letters. Why is this important?
In Japan, the Kishida cabinet announced the “Green Transformation Basic Policy” last December, which was approved by the cabinet in February this year. Mysteriously, “Green Transformation” is often abbreviated to “GX,” and the official policy document that was put out by METI last December also bore this abbreviation. Green Transformation, in other words, is the branding for Japan’s unique decarbonization strategy.
METI was eager to promote its Green Transformation agenda on the international stage. Before the G7, METI Deputy Director General Shinichi Kihara expressed this sentiment clearly, saying “as the chairng country, Japan would like to be a forum for discussing messages and measures to realize a global GX and disseminate them to the world.”
The GX Plan has been criticized extensively by those observing Japan’s energy policy closely (myself included) for its continuation of fossil fuel power generation, misguided “zero-emission thermal power” technology (like hydrogen and ammonia co-firing, and carbon capture and storage) with little CO2 emissions reduction potential, unambitious deployment of renewable energy, and insufficient carbon pricing policy.
At the G7 ministerial meeting, not only did the phrase and concept of Green Transformation not stick – it exposed Japan as an outlier. The aforementioned quote by the UK’s Grant Shapps – that coal co-firing of ammonia would “lead to the preservation of coal” – was directed at this plan. Some justifiably complained that the term GX was ambiguous and unclear. The French Minister of Ecological Transition Christophe Béchu said “I think it is innovative, but at first I did not know what exactly it meant.” The inescapable conclusion is that, in terms of substance and public relations, Japan’s Green Transformation agenda is an unmitigated disaster.
The inescapable conclusion is that, in terms of substance and public relations, Japan’s Green Transformation agenda is an unmitigated disaster.
Green Transformation’s chilly reception at the G7 is no trivial matter. Domestically, many of the energy investments earmarked in the GX Basic Plan will be funded through the government’s issuance of what it plans to call the “GX Economic Transition Bonds.” But the ambiguity of all of these terms and precisely how the funds will be used have made international investors wary of greenwashing. In other words, unless the Japanese government clarifies how GX will realistically lead to decarbonization, exactly which projects the funds will be used for, and perhaps change the label to something more internationally intelligible, the entire plan could be in jeopardy.
After the G7 meeting, METI officials were asked about the fact that upper-case letters were not used in the communiqué’s references to “green transformation.” He replied by saying that they had no intention of imposing Japan’s definition of the concept in the first place, essentially contradicting the earlier statement by METI’s Kihara. I must not be the only one sensing the tone of a sore loser.
Why is Japan Going Against the Tide?
If you’ve read this far, it should be clear that Japan is diverging considerably from the energy transition trends followed by other G7 nations. The natural next question is why.
While a rigorous comparative analysis is beyond the scope of a blog like this, I want to preempt at least one folk theory. It’s the explanation that Japan’s heavy reliance on fossil fuels creates status quo bias. To see this, let’s take a look at the electricity mix of the G7 countries (plus the EU).
At first glance, it’s clear that Japan’s ratio of fossil fuels is by far the highest compared to other economies. The high ratio implies a sunk cost, and poses more obstacles to decarbonizing the power sector. This may lead us to think that heavy fossil fuel dependence gives rise to status quo bias, which manifests itself in the refusal to set a deadline on coal phase-out and promotion of technologies that preserve fossil fuels.
But this is wrong. The first bar chart above clearly shows that, although not as much as Japan, the US and Italy also have more than half of their electricity generated from fossil fuels, and the second chart shows that Germany’s ratio of coal-fired power is almost the same as Japan’s. Yet it’s also true that Western economies have also been far more proactive in pushing decarbonization.
The case of the UK shows that its will to phase out fossil fuels hasn’t been all bluff. In 2012, the share of fossil fuels in the UK’s electricity production was 62.6%, with coal-fired power at 38.2%, higher than Japan’s use of coal today. As of 2021, however, fossil fuels accounted for 38.3% and coal 1.8%, an astonishing drop in less than a decade.
What am I trying to say in this admittedly simple analysis? My point is that the share of power source obviously adds a structural constraint on efforts to reduce dependence on fossil fuels, but it’s by no means an unchangeable constraint. When much of a country’s electricity needs are being met by burning coal or gas, it will certainly take more time, politically contentious reforms and persistent building of infrastructure to transition to cleaner energy sources. But if the state and private sector join forces with a shared goal of reducing emissions, as in the UK example, deep decarbonization can happen in a matter of a decade.
Sadly, Japan clings onto the vestiges of the traditional power sector and hesitates to embrace renewable energy. If its fossil fuels dependence is not the true cause of this hesitancy, what is? I advance the hypothesis that the cause lies in Japan’s “pseudo-decarbonization paradigm.” Part III of this post explains what I mean.