This is an expanded version of my latest article in the East Asia Forum.
Tokyo welcomed the heads of ten ASEAN countries earlier this year to host the first ministerial meeting of the Asian Zero Emission Community (AZEC). Among the many items on the agenda was the possibility of crafting a plan for hydrogen. Specifically, it was to build supply chains that ultimately supply hydrogen to energy-hungry Japan.
The AZEC meeting, although significant in its own right, is only one of the many globe-trotting forays that Japan has made over the last five years to secure the carbon-free molecule. Much has been reported about the ambitious targets in Japan’s recently-revised hydrogen strategy.
Much less is spoken of, however, about the sheer scale of its overseas engagements to actually reach those targets. Tokyo is moving full-steam ahead to craft a web of hydrogen supply chains, and Japan will be at the center of it.
Unfortunately, while Japan waxes poetic about a carbon-neutral “Hydrogen Society,” attaining that society would dramatically increase global greenhouse gas emissions. This is because the vast majority of hydrogen partnerships that Japan promotes abroad will be based on fossil fuels.
Japan may enjoy the reputational benefits of using hydrogen throughout its economy. Japan’s suppliers will certainly enjoy the economic returns of becoming hydrogen producers and exporters. Emissions, however, will be treated as an externality, just as they always have since the dawn of industrialization.
Unless that is, Japan and its partner countries ensure that hydrogen is used only in those sectors where it makes the most economic and climate sense, and take the necessary steps to ensure that it is produced in the cleanest way possible. Rather than a “hydrogen society,” Japan should aim to become a “prudent low-carbon hydrogen society.”
Japan’s Hydrogen Strategy
Japanese firms have a long track record of developing hydrogen-related technologies, especially fuel cells. Building on this expertise, the government designated hydrogen as one of the main pillars of Japan’s energy security with its Hydrogen and Fuel Cell Strategy Roadmap in 2014. This was formalized in 2017 with the Basic Hydrogen Strategy, making Japan the first country with a comprehensive national-level hydrogen strategy. In the intervening years, over 40 countries have followed suit, prompting Japan to revise its strategy in June this year.
The targets set forth in this strategy are lofty. The government plans to pour ¥15 trillion ($107.5 billion) of public-private money over the next 15 years to supply 3 million tonnes of hydrogen annually by 2030, 12 million tonnes by 2040, and 20 million tonnes by 2050. This growth in supply would, the government hopes, push hydrogen’s price down from today’s ¥100 per normal cubic meter (Nm3) to ¥30/Nm3 by 2030 and to ¥20/Nm3 by 2050.
(See my previous posts for more on Japan’s hydrogen strategy)
Among the dozens of countries with hydrogen strategies, only a handful have proposed such quantitatively precise targets. Even among this small group, Japan is next to none in the ambitiousness of hydrogen’s use and price targets.
Many critical questions could – and should – be asked about Japan’s hydrogen goals. One of them is: How will all of that hydrogen be produced and supplied to Japan?
That’s where diplomacy has done much of the legwork.
An Emerging Web of Hydrogen Supply Chains
The scale of diplomatic and corporate endeavors to bring hydrogen to Japan has been breathtaking, spanning at least 17 jurisdictions by my counting, with new projects seemingly popping up every week.
Take the Middle East. Engaging Saudi Arabia in 2017, Japan’s energy think tank IEEJ initiated a joint feasibility study of a hydrogen and ammonia supply chain with Saudi Aramco. Japan also courted the UAE as another potential supplier of hydrogen, concluding memoranda of cooperation with the kingdom’s energy ministry and state-owned oil giant ADNOC in 2021. In Oman, Sumitomo Corp. partnered with ARA Petroleum to study a potential hydrogen project.
The Asia-Pacific is also a hotspot on Japan’s radar for developing hydrogen production facilities. Most prominent are the series of deals between Japanese and Australian firms, one of which culminated in a pilot project that shipped liquefied hydrogen from Victoria to Kobe via the Suiso Frontier early last year. Other countries across the Asia-Pacific – Brunei, Indonesia, Malaysia, New Zealand, Thailand, Singapore, Vietnam, as well as ASEAN - each have struck agreements with Japan over the last several years.
The web is expanding to Europe and North America, too. Japan-EU cooperation on hydrogen dates back to 2019, when METI and the European Commission agreed to develop, share knowledge, and craft regulatory frameworks for hydrogen. More recently, Japanese oil and gas company INPEX partnered with US and French firms to build one of the largest hydrogen production facilities in the world in Texas, expected to start operating in 2027. And although details are still unclear, Canadian energy company ATCO is considering supplying hydrogen to the Japanese utility Kansai Electric Power.
Virtually all of these corporate deals were brokered and supported by the Japanese government to ensure they’re in line with its hydrogen goals.
Reliance on “blue” hydrogen raises grave concerns
Most of the partnerships that clarify the hydrogen production method will use either natural gas or coal and capture the carbon emissions from these processes (so-called “blue” hydrogen). Many projects still haven’t specified the production method, but one glance at the players involved suggests that most won’t be based on massive renewable energy facilities. A small handful of projects promise to use renewable electricity, but these won’t be operational until later in the decade.
Rosy-eyed policymakers refer to blue hydrogen as a low-carbon solution. But in fact, a large-scale reliance on blue hydrogen has an enormous climate impact. There are three main reasons for this.
1. The sad state of CCUS
First, the prospect for carbon capture, utilization and storage (CCUS) remains grim. Between 1995 and 2018, 78% of large-scale pilot and demonstration CCUS plants failed or underperformed. More importantly, there are only three commercial-scale hydrogen production facilities with CCUS in the world today. None of them captures even 80% of the emitted carbon, far lower than what project partners claim.
To lay irony on this situation, captured carbon still lacks economic value in the absence of stringent carbon pricing. So the sequestered CO2 from blue hydrogen facilities will likely be used to drill and burn more oil.
2. Blue hydrogen = methane leaks
Second, even if CCUS is improved, it won’t address the upstream methane emissions of blue hydrogen. A number of studies have demonstrated that fossil fuel extraction leaks methane, a main component of natural gas and a GHG far more potent than CO2.
Especially in the case of natural gas, methane can leak from the drilling, processing, storage, transport, and distribution stages of its value chain. A comprehensive review of US gas fields’ emissions estimates that the median upstream methane emission rate is 3.7% of gas production. There is no reason to think that gas production elsewhere in the world would deviate substantially from this. In some cases, there are simply no technological solutions for methane leaks from gas extraction sites.
These methane emissions are largely responsible for another study’s conclusion that emissions from blue hydrogen are likely to be more than 20% higher than burning natural gas or coal for heat.
Because of these methane leaks, GHG emissions from blue hydrogen are likely over 20% higher than simply burning gas or coal for heat generation, and only marginally less than gray hydrogen (fossil-derived hydrogen without CCUS).
3. Hydrogen’s downstream emissions aren’t accounted for
Third, Japan doesn’t account for blue hydrogen’s downstream carbon emissions. The revised hydrogen strategy sets an emissions intensity-based definition for low-carbon hydrogen, but it only covers the value chain up to the hydrogen production facility (“well-to-gate”). But emissions from shipping, trucking, compression, and liquefaction will be tremendous in Japan’s globe-spanning hydrogen web.
Once gray or blue hydrogen is shipped into Japan, that hydrogen itself is zero-emission. By outsourcing hydrogen production to other countries, Japan is also outsourcing the emissions to those countries.
To be sure, though, it’s not that Japan’s partner countries are unwilling to help build Japan’s hydrogen supply chains. To the contrary, Japan’s investments and joint ventures are also a boon to the economies of these countries, many of whom also have formulated hydrogen strategies and want to become producers and exporters of hydrogen.
What’s to be done?
Instead of a “hydrogen society,” Japan should strive to become a “prudent low-carbon hydrogen society.” This means using verifiably low-emission hydrogen for end-uses that makes climate, energy, and economic sense. A three-pronged approach is needed.
1. Narrow down hydrogen end-uses
First, narrow the hydrogen demand targets to the handful of applications for which low-carbon hydrogen is truly needed. Currently, the Japanese strategy envisions that hydrogen will be used in applications for which electrification will be far less energy-intensive, less emission-intensive, and less costly. Attempting to supply hydrogen for so many uses necessitates the use of blue (and even gray) hydrogen.
Instead, Tokyo should rethink the use of hydrogen by narrowing down the end-uses to those for which clean hydrogen is one of the only decarbonization solutions. Hydrogen experts now agree that these include, for example, fertilizer production, chemical feedstock, marine and aviation fuels, heavy industry, and long-distance transport. Perhaps less sexy than cars and power generation, but by focusing on these hard-to-abate sectors, Japan can ensure that the hydrogen supply is clean and impactful.
2. Expand renewables at home and abroad
Second, Japan should do more to deploy renewable energy capacity abroad to accelerate clean hydrogen production.
The revised strategy sets a target of increasing electrolyzer capacity by 15 gigawatts by Japanese companies globally. This is a welcome target, but if these electrolyzers are powered by grid electricity in most parts of the world, it very well may lead to more emissions than producing hydrogen from natural gas. This increase in electrolyzers must also be accompanied by massive upscaling of renewable capacity to generate the power to be used in them.
Japan has been absent in overseas clean energy build-out. Worse, it has historically been and continues to be among the largest fossil fuel funders globally. Using Japan’s considerable funds to massively deploy renewable energy and electrolyzers inside and outside of Japan should be top priority.
3. Define “low-carbon” more stringently
Lastly, the hydrogen that Japan uses must be verifiably low-emission. This means adopting a stringent definition of “low-emission” that applies to the entire hydrogen lifecycle. The definition set out in the revised strategy is 3.4 kg of CO2-equivalent per 1 kg of hydrogen. But as the Renewable Energy Institute of Japan shows, compared to standards used by other governments and private-sector groups, Japan’s definition is modest, excludes transport and storage, and is only tied to a small set of incentives. Given the sheer volume of hydrogen Japan plans to use and the global scale of its hydrogen supply chains, its current definition would fail to account for significant emissions. What’s more, it will deceive investors and off-takers of the hydrogen’s true emissions intensity.
Instead, Tokyo should, at the very least, expand the coverage of its current emissions intensity definition to include all stages of the hydrogen lifecycle (i.e., “well-to-wheel”). It should also tie this standard to all government subsidies and import requirements to ensure private-sector compliance.
With these three policy shifts, Japan can begin to lead the world as a low-emission hydrogen economy in ways that genuinely address the climate crisis.
Thank you for this level-haded and well-linked overview of the topic. I've long been infuriated with Japan's nonsensical hydrogen (and power in general, see also the ammonia burning farce) policy. This doesn't do much to calm me down, but it helps me getting things right while I rant angrily about it. I'd love to read more on these topics :)