According to a new report from Carbon Tracker, ‘Put a Price on It,’ Japan must replace the current carbon price of $2.6/tonCO2 with a minimum price of at least $30/tonCO2 to prevent gas to coal switching and accelerate energy transition.
Amidst an energy crisis and a power supply crunch, Japan’s current policy framework is insufficient to deliver its goal to achieve carbon neutral by 2050 and decarbonize power sector by 2035 due to its heavy reliance on fossil fuels.
‘Put a Price on It’ finds a transition to renewables could help Japan reduce its electricity bills, bring lower prices, increase stability and energy security for Japanese consumers.
Despite an increased renewables share target for 2030, Japan’s current level of ambition still falls short of what it could achieve. The country’s renewables deployment is too slow, while technical and regulatory barriers keep the price of building wind and solar capacity among the highest in the world.
For Japan to achieve its renewable energy target, it must increase carbon pricing to a minimum of $30/tonCO2, while immediately closing existing loopholes that allow green funds to be diverted to unproven and inefficient “clean” fossil fuel technologies such as carbon capture and ammonia co-firing.
Increasing the minimum carbon tax to $60/tonCO2 by 2025 would remove the business case for continued investment in coal generation while significantly reducing the window of opportunity for gas power plants.
An increase in carbon pricing will not only result in higher costs for coal and gas plants, but help government build more than 10 GW of new renewables annually. This would accelerate cost reductions and allow Japan to take advantage of its vast offshore wind resources.
Replacing imported fossil fuels with domestically produced renewable energy could immediately have a positive impact on energy costs, including reduced import bill for fossil fuels and declining electricity costs over time.
In the midst of a global energy crisis, the report shows that solar and wind can provide a secure, reliable and affordable power system free from exposure to global commodity and energy crises. Carbon pricing can be a key tool to deliver this transition in a fast and efficient way.