U.S.-Japan Collaboration on Industrial Decarbonization in the Indo-Pacific

Global appreciation of the catastrophic challenge of anthropogenic climate change has led to coordinated action to reduce carbon emissions. Governments across the Indo-Pacific are engaging in national, regional, and global efforts to respond to the climate and environmental impacts associated with greenhouse gas emissions. International agreements, ranging from the United Nations Framework Convention on Climate Change (UNFCCC) to the recent COP26 Glasgow Breakthroughs, aim to address the need for a global reduction in emissions. This includes not only higher shares of renewables in a country’s energy mix, a commitment to less new coal-fired power generation, and daily changes in waste management and transportation, but also larger structural changes in traditional industry and economic practices.

While these multilateral initiatives are beneficial to the global energy transition, bilateral relationships are also converging around a need to address shared climate and environmental challenges. Two geopolitical leaders in the Indo-Pacific, the United States and Japan, offer an interesting example of climate and energy cooperation, with lessons that are applicable on both sides of the Pacific. The impetus for their collaboration goes beyond just climate change, however. It begins with the economic development paths these two countries have taken, driven by industrialization, export-oriented growth, and bilateral free-market diplomacy. This commentary analyzes industrial decarbonization, within and between the United States and Japan, describing existing collaboration and exploring opportunities for new policies to help achieve both countries’ net-zero ambitions.

CLIMATE AND ECONOMIC IMPERATIVES

The development of both the U.S. and Japanese economies has coincided with somewhat similar industrial paths. The unprecedented economic growth and integration of East Asian economies—led by Japan—was viewed with awe from the 1970s onward but has come with significant costs. The United States’ own industrial revolution and growth in manufacturing similarly contributed to a rise in national emissions. Although the United States’ move away from manufacturing toward the service industry has led to lower emissions since the mid-1990s, the national economy is still closely tied to hydrocarbons (e.g., through continued focus on chemical processes with high emissions). In both economies, industries make up the lion’s share of emissions outside of electricity production. Iron and steel are the heaviest-emitting manufacturing industries in Japan, and industry is the largest contributor to greenhouse gas emissions (including direct and indirect emissions) in the United States.[1] Japan ranks third and the United States fourth in global steel production, which accounts for 8% of total emissions.[2] To accommodate global net-zero targets, global steel emissions will need to be reduced by 30%.[3]

Domestic mass production of steel and iron thus comes with its own share of challenges. The deterioration of air quality and environmental degradation from an overreliance on fossil fuels for electricity and heavy industries, rising CO2 emissions, and energy security fears top the list of energy and environmental concerns in both the United States and Japan. The United States, which accounts for around 25% of the global economy (ranked first), and Japan, which accounts for nearly 6% (ranked third), make up a large portion of emissions in the Indo-Pacific.[4] Globally, both countries are among the top-ten carbon emitters, with the United States ranking second and Japan sixth.[5]

As a result of the economic, environmental, and health pressures posed by high-carbon emissions, policy and research organizations throughout the Indo-Pacific are increasing their focus on synthesizing public policy to address CO2 emissions in a variety of industries and policy areas. The governments in the United States and Japan are responding to such demands by increasing their focus on alternative energy development, encouraging diversification of energy resources for electricity generation, strengthening national electricity markets to account for higher shares of renewable energy integration, funding research and development into indigenous energy sources, circumventing supply disruptions, and tackling further environmental degradation.

At the same time, international trade disputes, a global transition toward more protectionist trade policies, and concerns about international competition are influencing global markets and applying pressure for governments to prioritize economic issues over environmental ones. The United States and Japan are no exception. It is here that the role of industry becomes particularly important, as responses to the dual challenges of development and environmental protection must include short- and long-term solutions to both countries’ heaviest-emitting industries.

INDUSTRIAL DECARBONIZATION SOLUTIONS

Heavy industries remain one of the most important frontiers for decarbonization in the global energy transitions. They are traditionally the hardest sectors to abate because of a variety of factors, including the energy-intensive nature of producing materials such as cement, iron, and steel; demand for these products; the lifetime of industrial facilities; and the time necessary to update this infrastructure. Industrial sectors, including iron and steel, account for the largest gap between policy ambitions and actually achieving net-zero targets globally.

A few innovative approaches have been deployed widely to develop low-carbon solutions for heavy industry. One approach involves circumventing emissions via increased renewable electricity use for facility operation, including in electricity generation, production, and manufacturing. Other approaches are reducing emissions via the combination of fossil fuels and carbon capture, utilization, and storage (CCUS) and improving management and utilization of industrial by-products across several industrial activities, including digitization advancements for circularity improvements related to sorting and waste utilization. Additional innovations in heavy industry include green steelmaking via hydrogen direct reduction (H-DR), trials of CCUS in cement industries, renewable energy applications to chemical production, and increased circularity and industrial symbiosis. All these solutions, however, require high rates of investment and political will. Many are also only in the early stages of deployment and rely on additional R&D for widespread utilization.

The U.S. and Japanese contributions to industrial decarbonization play an important role in global climate change abatement. Alongside their G-7 partners in 2021, both countries committed to end international financing of unabated coal-fired power plants and increase efforts to decarbonize power systems, with the specific pledge to achieve low-emissions technologies in 90% of heavy industry production by 2050.[6]

Individually, both countries have set net-zero emissions targets as well as industry-specific benchmarks. Japan has set the ambitious target to reduce emissions below 2013 levels by 46%–50% by 2030.[7] The United States set a comparable target of reducing emissions to 50%–52% of 2005 levels by 2030.[8] Both the United States and Japan set a carbon neutrality goal by 2050 and consulted on net-zero and carbon-neutrality targets in advance of the COP26 meetings in Glasgow.[9] Japan has also adopted the 2020 green growth strategy to fund economic and environmental change via industrial policies and financing aimed at fourteen different sectors spread across the energy, transportation/manufacturing, and home/office categories.[10] Both the United States and Japan are members of the First Movers Coalition, a public-private partnership led by the United States and the World Economic Forum. The coalition has set ambitious targets for steel decarbonization, specifically, aiming for 10% of steel procurement near zero emissions by 2030.[11]

Both countries are taking the economic challenges associated with climate change and industrial decarbonization seriously, with particular focus on the heavy industries that are the backbone of their economic success stories. This includes collaboration on industrial decarbonization, with hopeful spillover effects across the Indo-Pacific that will provide opportunities for the region’s emerging markets.

COLLABORATIVE INITIATIVES

While the United States and Japan, respectively, have their own domestic initiatives aimed at industrial decarbonization and system-wide emissions reductions, regional and global initiatives are as important as national ones. Beyond joint membership in multilateral initiatives such as the UNFCCC, Glasgow Breakthroughs, and First Movers Coalition, there are several bilateral initiatives that the U.S.-Japan relationship is using to address industrial decarbonization in heavy industries.

First and foremost, the 2021 U.S.-Japan Climate Partnership coincided with the announcement of both nations’ 2030 and 2050 targets, providing a model for other major economies in the Indo-Pacific.[12] The partnership aims to enhance collaboration on achieving net-zero and climate change mitigation targets, support decarbonization in the Indo-Pacific’s emerging markets, and end government support for new coal-fired power projects, aligning with COP26 goals and regional targets for climate change abatement. As part of the initiative, both countries have committed $100 billion in support to run parallel with other global financial flows for climate compatible development.[13]

Similarly, the U.S.-Japan Competitiveness and Resilience (CoRe) Partnership is focused on promoting industrial decarbonization in both countries. The United States and Japan will collaborate on the innovation, development, and deployment of primary technologies aimed at heavy industry decarbonization in the cement, iron, and steel sectors. These include increasing renewable energy utilization and the required efficiency, storage, and grid modernization technologies and updates, along with CCUS, H-DR, and increased industrial circularity and symbiosis.[14] Because of the cost and time required, the scaling up of these technologies will benefit not only from the shared R&D but also from the political will behind testing and eventual implementation. The importance cannot be overemphasized given the scale of the industrial decarbonization problem.

Additionally, the two countries have established the Japan-U.S. Clean Energy Partnership (JUCEP), aimed at increasing renewable energy technology development and deployment throughout the Indo-Pacific. This partnership is already providing avenues for collaboration with emerging markets in the region. One example is the 2021 Japan- and U.S.-led collaboration with Indonesia on a regional “toolkit” for clean energy investment in the Indo-Pacific.[15] While promoting the technologies needed to achieve net zero in the Indo-Pacific, JUCEP also aims to develop competitive energy markets; facilitate affordable, reliable, and just clean energy access; develop partnerships across the region; and encourage private-sector coordination and funding to identify and support commercial opportunities in the clean energy space. Plans for a high-level, public-private forum in 2022 are underway.[16]

Future collaboration can be augmented by using these already existing initiatives. Enhancing JUCEP to incorporate a focus on industrial collaboration for decarbonization and deployment of advanced decarbonizing technologies would further strengthen bilateral efforts between the two countries as well as support their shared net-zero goals. Currently, the low-carbon technologies that are needed to decarbonize industry (such as H-DR and CCUS) are at various stages of development, and additional investment is required to reduce cost and bring them to wider markets and applications. The private sector in both countries will play a significant role in this process, but the uncertainties associated with novel technologies can be a barrier that governments need to help overcome. Utilizing the JUCEP relationship to enhance R&D, technology sharing, and financing is one available mechanism. Another avenue for bilateral collaboration, particularly on hydrogen technology, is the CoRe partnership.

Opportunities for further collaboration also exist through shared multilateral relationships. For example, in 2019 both countries signed a joint agreement with the European Commission Directorate-General for Energy (ENER) to collaborate on hydrogen and fuel-cell technologies.[17] Further JUCEP collaboration on hydrogen development for industrial decarbonization could be an extension of this already existing multilateral relationship and combine funding and technology development to find stronger, more cohesive solutions.

CONCLUSION

Climate change and environmental degradation are not limited by state boundaries; they cross borders and affect all people. Worldwide changes in the climate require long-term region-wide and global strategic responses. Renewable energy technologies have a significant and specific role to play in reducing greenhouse gas emissions. However, insufficient investment, regulatory frameworks, market performance, and physical barriers continue to put renewable energy at a disadvantage compared to traditional hydrocarbon resources. As a result, there is a global need for policies that not only support diversification of the traditional energy mix and thus power sector emissions but also target the heaviest industrial emitters and their industries, including many in the United States and Japan.

The tension between embracing clean development and encouraging economic growth continues to pose challenges for national governments and regional governance bodies. Industrialization and global trade development are part of a cycle that has created the need for climate imperatives. Where increasing the share of alternative energies can play a role in responding to these imperatives and accelerating the global energy transition, the economic policies that have created a climate crisis in the first place are also part of the solution. High levels of investment will be needed for industrial decarbonization to be a success. But this will require a policy shift that reconciles the industrialization and economic development goals that led to a global climate crisis and the need for an energy transition. Those same policies that had prioritized economic development over the environment are still prioritizing industrial activity as a tool of continuous economic growth over the renewable energy transition.

This raises the question of whether economic development can continue as is, relying on market reforms and technological advancements to reduce environmental impact while simultaneously contributing to improvements in energy access. The solution, in fact, might not be deeper integration and reform alone but instead a restructuring of priorities, placing the environment, the climate, and energy equity above even economic targets. Where the U.S.-Japan Climate Partnership, JUCEP, and CoRe have elements of justice and equity built into their remits, a human-centered approach to climate change abatement that prioritizes justice and equity, as opposed to an economy-centered approach, may just be the radical change that these two partners can push. To reach global net zero and decarbonize the systems that have led to the world’s current climate crisis, systemic change (encouraged by global collaboration and cooperation) is necessary. The economic, political, and technological options for bringing about such change can only benefit from the global and regional example of stronger U.S.-Japan collaboration.

Clare Richardson-Barlow is an interdisciplinary social scientist whose research and teaching explore energy policy, political economy, and energy governance. Dr. Richardson-Barlow is currently a Research Fellow at the University of Leeds, where she examines the international political economy of industrial decarbonization and energy transitions. She is a nonresident fellow at NBR.

Endnotes

[1] Ministry of Economy, Trade and Industry (METI) (Japan), “Technology Roadmap for ‘Transition Finance’ in Iron and Steel Sector,” October 2021; and Environmental Protection Agency, “Sources of Greenhouse Gas Emissions,” 2021, https://www.epa.gov/ghgemissions/sources-greenhouse-gas-emissions.

[2] World Steel, “December 2021 Crude Steel Production and 2021 Global Crude Steel Production Totals,” January 25, 2022, https://worldsteel.org/media-centre/press-releases/2022/december-2021-crude-steel-production-and-2021-global-totals.

[3] Leadership Group for Industry Transition, “Green Steel Production: How G7 Countries Can Help Change the Global Landscape,” June 10, 2021.

[4] World Bank, World Development Indicators Databank, https://databank.worldbank.org/reports.aspx?source=2&series=NY.GDP.MKTP.CD&country=.

[5] UN Net Zero Coalition, https://www.un.org/en/climatechange/net-zero-coalition.

[6] International Energy Agency, “Achieving Net Zero Electricity Sectors in G7 Members,” 2021.

[7] METI, “Japan’s Roadmap to ‘Beyond-Zero’ Carbon,” 2021, https://www.meti.go.jp/english/policy/energy_environment/global_warming/roadmap.

[8] United Nations Framework Convention on Climate Change, “The United States of America Nationally Determined Contribution,” 2021.

[9] U.S. Department of State and Executive Office of the President, The Long-Term Strategy of the United States: Pathways to Net-Zero Greenhouse Gas Emissions by 2050 (Washington, D.C., 2021); and “Japan-U.S. Climate Partnership on Ambition, Decarbonization, and Clean Energy,” Ministry of Foreign Affairs (Japan), 2021.

[10] METI, “Overview of Japan’s Green Growth Strategy through Achieving Carbon Neutrality in 2050,” March 2021.

[11] Renewable Energy Institute, “Towards Carbon Neutral Steel in Japan: Learning from the Latest Trends in the European Union,” December 2021.

[12] “U.S.-Japan Climate Partnership on Ambition, Decarbonization, and Clean Energy,” White House, 2021.

[13] “U.S.-Japan Joint Statement,” U.S. Department of State; August 31, 2021.

[14] “Fact Sheet: U.S.-Japan Competitiveness and Resilience (CoRe) Partnership,” White House, April 16, 2021.

[15] “Japan-U.S. Clean Energy Partnership (JUCEP) Toolkit Briefing Session Held,” METI, November 22, 2021.

[16] “Second Japan-U.S. Clean Energy Partnership (JUCEP) Plenary Recognizes Achievements and Affirms Indo-Pacific Support Plans,” U.S. Department of State, December 23, 2021.

[17] “Joint Statement of Future Cooperation on Hydrogen and Fuel Cell Technologies among the Ministry of Economy, Trade and Industry of Japan (METI), the European Commission Directorate-General for Energy (ENER) and the Department of Energy of the United States (DOE),” METI, 2019.