Japan: Policies to grow credible transition finance

The Climate Bonds Initiative evaluates Japan's GX Plan, noting that while it provides a solid foundation for transition finance, certain elements—specifically the reliance on ammonia co-firing and fossil gas—risk undermining its credibility. The report recommends prioritising mature renewable technologies, setting a clear phase-out date for unabated coal by 2035, and implementing a mandatory emissions trading system with a strong carbon price to ensure alignment with global 1.5°C goals.

• Japan's Green Transformation (GX) Plan is viewed as a strong foundation for transition, but some components involving emission-heavy fuels are inconsistent with 1.5°C global models and risk being perceived as greenwashing.
• The report argues that Japan should prioritise mature, low-cost technologies such as energy efficiency, grid flexibility, and renewable energy, noting that Japan could generate 70% of its power needs by 2035 using these methods.
• Current plans for ammonia co-firing and coal phase-out are deemed insufficient for 1.5°C alignment; the report recommends a complete decarbonisation of the power sector by 2035.
• Japan's hydrogen strategy faces challenges regarding emissions thresholds and timing, as the current 3.4kg-CO2/kg-H2 threshold is higher than the 1.5kg-CO2/kg-H2 threshold applied by Climate Bonds.
• Investments in liquefied natural gas (LNG) are cautioned against unless they specifically address emissions from existing assets, due to methane leakage making gas emissions comparable to coal.
• To drive decarbonisation, the report recommends a mandatory emissions trading system (ETS) with a carbon price of at least USD 75 per ton and the elimination of free allowances.
• Japan intends to issue a sovereign GX Economic Transition Bond of JPY 20tn (USD 144bn) to signal private capital, but the report emphasizes that this bond must be strictly 1.5°C aligned to build investor confidence.

APA

Morishita, M., Bonelli, R., & Hemingway, R. (2023). Japan: Policies to grow credible transition finance. Climate Bonds Initiative. https://www.climatebonds.net/files/documents/publications/japantransitionpaper_english_final.pdf

Chicago

Morishita, Maiko, Raquel Bonelli, and Rachel Hemingway. Japan: Policies to grow credible transition finance. Climate Bonds Initiative, 2023. https://www.climatebonds.net/files/documents/publications/japantransitionpaper_english_final.pdf.

Wikipedia

{{cite report |last1=Morishita |first1=Maiko |last2=Bonelli |first2=Raquel |last3=Hemingway |first3=Rachel |title=Japan: Policies to grow credible transition finance |publisher=Climate Bonds Initiative |date=October 2023 |url=https://www.climatebonds.net/files/documents/publications/japantransitionpaper_english_final.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{morishita2023japan, author = {Morishita, Maiko and Bonelli, Raquel and Hemingway, Rachel}, title = {{Japan: Policies to grow credible transition finance}}, institution = {Climate Bonds Initiative}, year = {2023}, month = oct, url = {https://www.climatebonds.net/files/documents/publications/japantransitionpaper_english_final.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }