Japan shifts GX policy toward energy security and resilience

Japan is shifting its Green Transformation (GX) policy focus toward energy security and resilience, a move termed ‘Power GX.’ This strategic adjustment, prompted by geopolitical instability in the Middle East, prioritizes the stable procurement of fossil fuels and petroleum products alongside decarbonization goals.

The new framework emphasizes diversifying crude oil sources and expanding the supply of alternative fuels like hydrogen and ammonia. However, technical and economic challenges remain significant. Achieving the cost-effective hydrogen production required for industries like steelmaking depends heavily on securing extremely low-cost electricity rather than just technological advancements in electrolysis.

Concurrently, Japan’s emissions trading scheme (GX-ETS) has entered a full operational phase. Major companies across various sectors, including Nippon Steel, JERA, Toyota Motor Corporation, and Yamazaki Baking, are expected to be among those subject to emission reduction obligations by November 2027. The transition highlights a growing intersection between environmental mandates and the practicalities of industrial energy supply.