“Japan’s combination of legal certainty, financing mechanisms and international collaboration sets a transferable model for CCUS deployment across Asia.”
Japan’s commitment to achieve carbon neutrality by 2050 is ambitious, given its industrial base and reliance on imported fossil fuels. Recognising that renewable energy and efficiency measures alone cannot close the gap, the government has placed CCUS at the heart of its Green Transformation (“GX”) Strategy.
The Ministry of Economy, Trade and Industry (“METI”) has set a target of storing 120–240 million tonnes of CO₂ storage per year by 2050, by some estimates equivalent to roughly 10–20% of Japan’s current emissions. Commercialisation is targeted for 2030, with interim milestones of 6–12 million tonnes annually through early deployment projects.
Early Demonstration and Learning Curve
Japan began developing CCUS technology in the early 2000s. The Nagaoka pilot project in Niigata Prefecture injected CO₂ into a depleted gas field between 2003 and 2005. This project laid the groundwork for more ambitious efforts, most notably the Tomakomai project in Hokkaido (2016–2019) captured and injected around 300,000 tonnes of CO₂ from a coastal oil refinery into offshore geological formations.
The Tomakomai project was Japan’s first “full-chain” CCS demonstration, covering separation, capture, transportation, injection, monitoring and storage. Its success provided crucial evidence that CCUS could be safely implemented in Japanese conditions.
Legislative Milestone: The CCS Business Act
A turning point came in May 2024 with the passage of the Act on Carbon Dioxide Storage Business (the “CCS Business Act”). Phased into effect in August 2024, the CCS Business Act provides the legal foundation for private sector CCUS businesses to operate securely and at scale.
Key features include:
licensing regime: exploratory drilling (“prospecting”) and storage operations require approval from METI, with licences conferring exclusive rights over designated reservoirs;
property rights: licences are treated as property rights, providing investors with security of tenure. Prospecting licences run for four years (extendable by two), while storage licences continue until conditions expire or are rescinded;
safety and environmental safeguards: operators must comply with stringent standards to protect public safety and the marine environment, including oversight by the Ministry of the Environment for offshore reservoirs; and
CO₂ transport regulation: pipeline transportation of CO₂ is regulated, including export to foreign reservoirs. Even transport by pipeline to shipping terminals falls under the regime.
This legal framework is widely redegarded as one of the most advanced in Asia and addresses investor concerns around liability, tenure and cross-border operations.
Advanced CCS Projects and Financial Support
Japan is pairing legal reform with financial and technical support. Under the Advanced CCS Projects initiative, the government is backing a portfolio of domestic and international projects. METI’s budget has allocated significant funds, administered by the Japan Organization for Metals and Energy Security (“JOGMEC”), to provide:
direct investment and guarantees for project finance;
geological surveys and R&D support; and
prioritised backing for large-scale demonstration projects.
The Advanced CCS Projects selected will aim to start operations by 2030 and serve as models for wider CCUS business development. The FY2024 projects are expected to store approximately 20 million tonnes per annum of storage capacity by 2030. Five involve domestic storage and four rely on overseas reservoirs in the Asia-Pacific. The Japanese government is expected to take additional steps to legalise CCUS projects involving CO₂ export from Japan and sub-seabed storage abroad.
JOGMEC has also been empowered through 2022 statute amendments to invest directly in CCUS businesses, reflecting a broader government commitment to scaling the industry.
The International Dimension: Joint Crediting Mechanism
Japan’s Joint Crediting Mechanism (“JCM”) traditionally used to finance renewable energy and energy efficiency projects abroad is being adapted for CCUS. Under the JCM, METI and the Ministry of Environment co-finance up to 50% of project costs in partner countries and in return claims part of the emissions reductions.
While still in early stages, Japan sees the JCM as a way to develop overseas CCUS projects while also meeting its own emissions targets. Countries such as Indonesia and Vietnam are potential partners, linking Japan’s technical and financial expertise with their vast geological storage potential.
Building a Business Environment
Japan’s CCUS policy is not only about demonstration, it is about building a market. METI has emphasised that private-sector leadership is crucial to scaling CCUS. Its role is to create a “bankable business environment” by:
ensuring legal clarity (via the CCS Business Act);
providing initial financial support (via JOGMEC and METI funding);
coordinating international partnerships; and
investing in public outreach to build societal acceptance.
This combination of law, finance and policy provides the certainty developers and investors require to commit capital-intensive projects that often span decades.
Remaining Challenges
Despite progress, Japan faces hurdles:
cost competitiveness: CCUS remains expensive relative to alternatives such as renewables. Japan is working on cost reduction through R&D;
public perception: past projects have raised safety and environmental concerns; transparency and engagement will be critical;
cross-border operations: while the CCS Business Act covers exports, Japan must secure bilateral agreements with host states to ensure alignment on liability and environmental standards; and
scalability: moving from demonstration to commercial scale by 2030 will require significant acceleration in permitting and investment.
Why Japan Matters for Asia
Japan’s approach matters beyond its borders. By establishing legal certainty and financing models, Japan provides a template for other Asian jurisdictions still developing their frameworks. Its willingness to finance and co-invest abroad also makes it a catalyst for regional CCUS ecosystems, particularly in Southeast Asia where geological storage capacity far exceeds domestic demand.
WFW insight: Japan’s combination of legal certainty, financing mechanisms and international collaboration sets a transferable model for CCUS deployment across Asia.
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