JAPAN Law and Practice Contributed by: Rintaro Hirano, Yutaro Fujimoto, Yurika Masakane and Yutaro Kato, Nagashima Ohno & Tsunematsu
against construction price fluctuation is under discussion so that the successful bidder will not shoulder such risks entirely by itself. 1.7 Announcements Regarding New Policies Carbon-Neutral Target in 2050 In response to the increased global interest in sustainability and the potential for economic growth, the Japanese prime minister declared in October 2020 that Japan would aim for net- zero greenhouse gas (GHG) emissions and seek to become a carbon-neutral society by 2050. In order to achieve these goals, the government is discussing a variety of measures, including promotion of renewable energy power plants as well as investment and innovation in the power industry. As part of these measures, on 26 May 2021 the Japanese Diet passed a Bill to amend the Act on Promotion of Global Warming Coun- termeasures, which includes a guiding princi- ple of achieving carbon neutrality in 2050. The amendment became law on 1 April 2022. In addition, the 2023 Amendment also includes decarbonisation programmes such as new regu- lation of grid-scale batteries and the promotion of non-fossil fuels. Further, the amended Act on Rationalising Energy Use and Conversion to Non-Fossil Fuel Energy (Act No 49 of 1979, as amended, the “Rationalisation Act”) encour- ages energy users to shift towards non-fossil fuel energy. For example, the Rationalisation Act imposes an obligation on certain energy users to report on their fossil fuel energy use and non-fossil fuel energy use, and to prepare for conversion to non-fossil fuel energy. Yet anoth- er act, the amended Act on the Promotion of Environmentally Compatible Utilization of Energy Sources and Effective Utilization of Raw Fos- sil Fuel Materials by Energy Companies (Act No
72 of 2009, as amended, the “Promotion Act”) encourages thermal power plant operators to use decarbonised fuels such as hydrogen and ammonia, and to install a carbon dioxide cap- ture and storage system (CCS) in their thermal power plants. In the context of this movement towards the carbon neutral target, (i) the Act on Promotion of Supply and Use of Low Carbon Hydrogen, etc, for a Smooth Transition to the Decarbon- ised Growth Economy (the “Hydrogen Society Promotion Act”); and (ii) the Act on Business of Carbon Dioxide Capture and Storage System (the “CCS Act”) were passed in May 2024. The Hydrogen Society Promotion Act was enacted on 23 October 2024, while the CCS Act was partially enacted on 5 August and 18 Novem- ber 2024. These are the first pieces of legisla- tion in Japan which focus on business regarding hydrogen and CCS, respectively. The Hydrogen Society Promotion Act aims to support certified operators who intend to supply or use low-car- bon hydrogen (meaning, hydrogen and its com- pounds, which contribute to the reduction of carbon dioxide, and which are to be designated by legislation) by providing subsidies and certain preferential treatment for permits necessary to conduct such business. The CCS Act estab- lishes the legal framework and regulations for CCS business, especially regarding exploratory drilling, and the storage and transport of carbon dioxide. The CCS Act further provides that an operator can conduct carbon dioxide storage and exploratory drilling only when the opera- tor is selected through a public tender process for each area where a stratum suitable for the storage of carbon dioxide exists or may exist. The government is also discussing subsidies to support the introduction of CCS business into Japan.
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