JAPAN Law and Practice Contributed by: Yutaro Fujimoto, Yurika Masakane, Hirokazu Tanaka and Yutaro Kato, Nagashima Ohno & Tsunematsu
Further, on 18 February 2025, the Cabinet approved the Strategic Energy Plan. This sets forth the funda- mental direction of the national energy policy. Under the revised plan, the phrase “reduce dependence on nuclear power as much as possible”, which had appeared in the previous (6th) Strategic Energy Plan was removed. This suggests a shift towards a more prominent role for nuclear power in Japan’s long-term energy strategy. On the same day, the Cabinet also approved the Glob- al Warming Countermeasures Plan. This plan outlines concrete measures to achieve Japan’s GHG reduction targets for 2030, 2035 and 2040. In this context, the government updated the Nationally Determined Con- tribution (NDC) of Japan under the Paris Agreement, including revising GHG reduction targets to a 60% reduction by 2035 and a 73% reduction by 2040 from 2013 levels. These targets serve as linear milestones towards achieving carbon neutrality in 2050. Green Transformation In addition, on 10 February 2023, the government developed a roadmap that outlines investment pro- motion measures to be taken by the government to achieve the Green Transformation (“GX”) and, as a means to realise some of these measures, the Act on the Promotion of the Smooth Transition to a Decar- bonised Growth Economy (the “GX Act”) was passed on 12 May 2023 and took effect in June 2023. The GX Act provides as follows: • The government can issue “GX Bonds” (scheduled to total approximately JPY20 trillion) from 2023 to 2032 to secure financial resources to invest in businesses and research relating to increas- ing industrial competitiveness and reducing GHG emissions. These GX Bonds are to be redeemed by 2050 from the “Surcharge for Fossil Fuels” and the “Surcharge for Specific Operators” (each as defined below). • The following two systems will be introduced in phases in preparation for the full-scale implemen- tation of an emissions trading system – (a) the “Surcharge for Fossil Fuels” is to be imposed from 2028 on those who mine or import fossil fuels, according to the amount of GHG emissions generated from the fossil fuels
they mine or import, which will be calculated based on the volume of fossil fuels they mine or import; and (b) GHG emission allowances will be allocated from 2033 to electricity generators with higher GHG emissions (the “Specific Operators”) partly for free and partly by auction (the charge incurred by Specific Operators to acquire such emission allowances by auction is called the “Surcharge for Specific Operators”), and the percentage of emission allowances allocated by auction is scheduled to gradually increase. Subsequently, an amendment to the GX Act was passed on 28 May 2025 and took effect on 1 April 2026. The amendment aims to facilitate the smooth transition to a decarbonised growth-oriented eco- nomic structure and introduces measures including the legal codification of the GHG emissions trading system. Under the system, starting in 2027, busi- nesses falling within the scope of the scheme will receive emissions allowances free of charge, based on government-issued guidelines that reflect the specific characteristics of each industry. If the actual emissions of a business exceed the allocated allowances, the business will be required to procure additional allow- ances. Conversely, businesses that achieve emission reductions and generate surplus allowances may sell them or carry them forward to subsequent years. Long-Term Decarbonised Power Source Auction (LTDA) As a special category of auction in the capacity mar- ket, long-term decarbonised power source auctions started from 2023, aimed at promoting investment in decarbonised power sources. Generators who plan to establish new decarbonised power sources (including LNG power plants) may participate in these auctions at a bid price equal to the fixed costs expected to be required for the construction and operation of such power sources, plus certain profit margins to secure approximately 5% of the weighted average cost of capital. If a bid is successful, the generator is entitled to receive an amount equivalent to the bid price annu- ally from OCCTO, on the condition of maintaining its generation capacity for 20 years (or a longer period, if the generator designates a longer period at the time of bidding), commencing from the next fiscal year in
173 CHAMBERS.COM
Powered by FlippingBook