Japan's Power Market News 2024/W32

Japan to Provide Incentives for Industry in Regions With Decarbonized Power

The Japanese government will promote industrial clustering in regions with more decarbonized power sources such as #renewable energy and #nuclear power, by offering corporate tax incentives and subsidies. This vision was presented during the GX2040 Leaders Panel, an expert panel to promote Green Transformation (GX) policies held at the Prime Minister’s office on July 23. The government will examine investment plans for high energy consuming data centers and factories, and consider a system in which projects using low carbon power will be eligible for tax incentives and subsidies.

Currently, regions that can supply #decarbonized electricity are unevenly distributed in Japan. Hokkaido, Kansai, and Kyushu are the only regions in Japan with more than 40% of their #power generated from decarbonized sources, including renewable energy sources. Electricity consumption is expected to increase as #EV numbers grow and artificial intelligence (#AI) expands, so the power sector must add capacity as well as fully decarbonize to achieve the government’s net-zero by 2050 target.

Incentives and Legislative Revisions to Encourage Green Power Use

To encourage big consumers to use green power, the government will revise the Green Transformation (GX) Promotion Act, which defines Japan's decarbonization strategy. The revised law will require companies to develop business plans specifying, among other things, the percentage of decarbonized electricity they will use. The law aims to shift corporate location policies towards reducing #environmental impact by requiring companies to apply for certification with local governments that provide a minimum amount of decarbonized electricity.

After certification, companies can receive incentives such as reduced corporate taxes and subsidies for capital investment. The GX Economic Transition Bonds, which the government procures from the market, will be used as a financial resource. The government aims to amend the law in the ordinary parliament session in 2025.

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