JAPAN Trends and Developments Contributed by: Takahiro Kobayashi, Shigeki Okatani, Yusuke Murakami and Hirohiko Tanaka, Mori Hamada & Matsumoto
appealing domestic market for offshore wind power to attract both domestic and cross-bor- der investments in its Vision for Offshore Wind Power Industry (1st), since 15 December 2020. Some hurdles remain for developing offshore wind farms in Japan, and the recent sharp increase in project costs due to cost-push infla- tion and exchange-rate fluctuations is making the development of offshore wind farms chal- lenging. However, the government promises to continue its efforts to promote offshore wind power, and investors and financial institutions have also shown strong interest and willingness to provide funding for these projects. Corporate PPA The number of corporate PPAs, encompass- ing various forms, such as on-site PPAs, off- site PPAs, and virtual PPAs, has been rapidly increasing in Japan. The background of this move is not only the government’s shift from the FIT to the FIP system, but also increased environmental awareness, including movements such as the increase of RE100 members and development of carbon credit markets, and the decreased cost of introducing renewable energy generation facilities. In addition, corporations have recently started to pay more attention to PV power generation in response to the soaring electricity prices influenced by the global situ- ation. The government has fostered corporate PPAs by clarifying and easing relevant regulations, while also providing subsidies. Green Transformation or GX Policy Policy trends The Japanese government is promoting the “Green Transformation” or “GX” policy. The Cab- inet decided on the “Basic Policy for Implement-
ing GX” in December 2023 and the “GX Promo- tion Act” was enacted in May 2024. The Cabinet also established the “GX Promotion Strategy” in July 2024 and revised it as “GX 2040 Vision”, as mentioned above. A pivotal measure in the government’s GX policy is a carbon pricing mechanism. The government aims to formally institute a carbon emission trad- ing mechanism from FY 2026, and later intro- duce an auction scheme where electricity pro- ducers will have to pay for emission allowances. The amendment bill to the GX Promotion Act stipulates the concrete mechanisms of carbon emissions trading. From FY 2026 onwards, cor- porations whose annual direct CO₂ emissions exceed a prescribed threshold will be required to participate in the mechanism. Allowances will be allocated to the participants free of charge in accordance with government guidelines reflect- ing sector-specific characteristics and other fac- tors. In the following fiscal year, the participants must (i) submit verified emissions reports; and (ii) hold allowances equal to their actual emissions. The government will also establish a regulated emissions trading market in which participants may trade surplus or deficit allowances and will introduce a price-collar mechanism – setting both floor and ceiling prices – to maintain allow- ance price stability within a defined range. The GX League, a voluntary forum among cor- porations, the government, universities, etc, for preparation of the carbon-emission trading sys- tem, launched an experimental scheme called “GX-ETS” in FY 2023. GX-ETS adopts a base- line-and-credit system under which the baseline is partly linked with the “nationally determined contribution” (NDC). Participation in this is also voluntary.
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