Japan plans to invest JPY3tr (USD20.3bn) over the next 15 years to subsidize the production of cleaner hydrogen, aiming to strengthen partnerships with the private sector in developing the domestic supply chain for hydrogen, as reported by Nikkei Asia on January 30. The Japanese government looks to subsidize the cost difference for companies producing cleaner forms of hydrogen, namely “green” or “blue” hydrogen. Japan intends to set an upper limit of 3.4 kg of carbon dioxide (CO2) emissions during production per 1 kg of hydrogen for businesses seeking to qualify for the subsidy. The substantial subsidy will be financed by Tokyo’s green transformation (GX) transition sovereign bonds, with anticipated recipients including both domestic hydrogen producers and businesses importing hydrogen. Recipients are required to begin hydrogen supply by fiscal 2030 and last for ten years.

Manufacturing green hydrogen involves the utilization of massive renewable energy, while the production of blue hydrogen also requires the costly carbon capture and storage (CCS) procedure, leading to much higher manufacturing costs for both compared to grey hydrogen produced using fossil fuels. Japan’s subsidy plan follows similar incentive measures implemented in the EU and the US. In the EU, renewable hydrogen producers can enjoy a fixed premium per kilogram of hydrogen through the EU Hydrogen Bank auction program. Similarly, their US peers benefit from lucrative tax credits offered by the Inflation Reduction Act (IRA). Japan’s subsidy plan aligns with its ambitious goal to ramp up the domestic hydrogen supply by 50% from the current level to 3 million tons annually in 2030, before reaching 20 million tons a year in 2050.

Sources:

https://asia.nikkei.com/Business/Energy/Japan-to-spur-clean-hydrogen-production-with-20bn-in-subsidies#:~:text=TOKYO%20%20Japan%20plans%20to,chain%20for%20the%20energy%20source

https://www.bloomberg.com/news/articles/2024-01-30/japan-may-open-20-billion-hydrogen-plan-applications-in-summer?srnd=premium-asia