Expert Blog

Japan: Second Worst in G7 at Reforming Fossil Fuel Subsidies

Japan ranks very poorly because of its continued subsidies for fossil fuel exploration and production, and because it provides billions in taxpayer dollars for building highly polluting coal plants in some of the most climate-vulnerable countries overseas.
Han Chen (Alum)

Despite Japan’s commitments to phase out fossil fuel subsidies and tackle climate change under the Paris Agreement, the government—like all G7 governments—continues to provide billions in support to oil, gas and coal, both domestically and internationally, through fiscal support and public financing mechanisms.

Japan’s track record indicates an unwillingness to end fiscal support and public finance to fossil fuels. While it has joined several commitments to phase out fossil fuel subsidies—such as the G7 declaration to phase out fossil fuel subsidies by 2025—the government is not very transparent about the extent of support for fossil fuels or plans for reforms of support for fossil fuels. Japan has lower levels of fiscal support for fossil fuel consumption when compared to other G7 countries, but higher support for oil and gas exploration and production. Efforts to compensate for the drop in nuclear power generation after the Fukushima nuclear crisis in 2011 resulted in far more support for fossil fuels as compared to renewable energy

The Natural Resources Defense Council (NRDC), Overseas Development Institute (ODI), Oil Change International (OCI), and the International Institute for Sustainable Development (IISD) just published our G7 Fossil Fuel Subsidy Scorecard, ahead of the G7 Summit in Canada, where we ranked for the first time each G7 country on their transparency, commitments and progress made on ending support for the production and use of oil, gas and coal. Japan was the second worst performer when it came to reforming fossil fuel subsidies, with only the United States doing a worse job. Japan ranks very poorly because of its continued subsidies for fossil fuel exploration and production, and because it provides billions in taxpayer dollars for building highly polluting coal plants in some of the most climate-vulnerable countries overseas.(The briefing paper on Japan's fossil fuel subsidies and scorecard are available in Japanese here.)

Here are a few other notable parts of our analysis of Japan's fossil fuel subsidies:

Lack of Transparency:

  • Japan does not provide national reports on its fiscal support for fossil fuel production and consumption.
  • Japan has not yet participated in a fossil fuel subsidy peer review process as part of the G20 countries’ longstanding commitment to phase out subsidies, nor has it committed to do so.
  • Japan’s public finance institutions such as the Development Bank of Japan, Japan Oil, Gas and Metals National Corporation (JOGMEC), Japan Bank for International Cooperation (JBIC), Nippon Export and Investment Insurance provide limited data about financed fossil fuel projects; the Japan International Cooperation Agency is the only institution that provides a greater level of detail

Ignoring Pledges and Commitments

  • Despite its G7 commitment to phase out fossil fuel subsidies, Japan has announced in the Growth Strategy 2017 continued support for coal-fired power plants both at home and abroad—committing to finance trips of foreign government officials to visit Japan to promote coal, and to fund many more coal projects globally.

Continued Fossil Fuel Exploration

  • International public finance for oil, gas and coal exploration by Japan included several billion dollars for projects in Australia, Brazil, Canada, Indonesia, Russia, the United Arab Emirates, the US and Viet Nam (2015 and 2016).
  • In 2015 and 2016, Japan continued to provide fiscal support for fossil fuel exploration, such as geological surveys in risky areas and development of methane hydrate.
  • Japan has provided extensive international public finance and fiscal support for fossil fuel exploration, and in 2017 and 2018 plans to continue providing support for fossil fuels globally included exploration in the North Sea, Mozambique, Australia and Canada.

Continued support for coal mining

  • During 2015 and 2016, Japan continued to provide fiscal support and public finance for coal mining, including public financing abroad from JBIC and JOGMEC for coal mining and exploration in Indonesia.

Support for oil and gas production

  • Japan’s public finance for oil and gas production included billions of dollars for oil and liquid natural gas projects in the Bahamas, Brazil, Indonesia, Kuwait, Russia, Singapore, Trinidad and Tobago, and the United Arab Emirates (2015 and 2016). The funding supported the transport, extraction, and refining of fossil fuels.
  • Japan also provided billions in domestic fiscal support for oil and gas production (2015 and 2016)

Support for fossil fuel-based power

  • Japan continues to finance coal-fired power plants abroad. It provided several billion dollars in public finance internationally for coal-fired power plants in Bangladesh, Indonesia and Viet Nam (2015 and 2016), with government documents indicating Japan will finance more coal plants abroad in the future. Japan’s continuing support for coal-fired power plants abroad faces strong international criticism and opposition from local communities. Currently, several projects in Bangladesh, Botswana, Indonesia, Myanmar and Viet Nam are still under consideration for provision of public finance by the government.
  • Japan is also provided financing for natural gas-fired power plants in Bangladesh, Indonesia, Qatar, Sri Lanka, the US and Uzbekistan (2015 and 2016). 

Recommendations

Rather than providing the most public finance out of all G7 countries for fossil fuels, and rather than providing fiscal support for fossil fuels, Japan could benefit from shifting the $12 billion a year it wastes on fossil fuels to better investments in renewable energy, energy efficiency, storage or other public goods. Rather than continuing to subsidize fossil fuels, Japan can move ahead with it's pledge to phase out fossil fuel subsidies by 2025 by doing the following:

  • Complete and publish comprehensive a fossil fuel subsidy peer review no later than 2019.
  • Establish a national plan for fossil fuel subsidy phase-out starting with key subsidies with negative social and environmental impacts.
  • Follow the example set by EU governments and develop a plan with the aim of meeting an earlier 2020 deadline.
  • Ensure subsidies for energy transition do not support fossil fuels, and that any remaining support goes to facilitating a ‘just transition’ and to vulnerable communities and households.
  • Lead by example within other fossil fuel subsidy phase-out processes such as the G20 and Asia-Pacific Economic Cooperation, UN Sustainable Development Goals (SDGs), and United Nations Framework Convention on Climate Change.
  • Establish a standing agenda item at the G7 Energy Ministerial meetings to track progress towards the 2025 deadline, with support from the Organisation for Economic Co-operation and Development, International Energy Agency and the International Monetary Fund.