The Japanese government has committed JPY450bn (USD3.04bn) in subsidies for the development of a new process of hydrogen reduction steelmaking, marking a significant increase from the initial allocation, as reported by Nikkei Asia on September 16. The government had previously decided to allocate up to JPY193.5bn (USD1.31bn) to commercialize hydrogen reduction steelmaking by around 2045. By expanding the financial support, the government aims to accelerate this target to 2040. The subsidies will be sourced from the JPY2.7tr (USD18.29bn) Green Innovation Fund dedicated to decarbonization technology. A consortium formed by Nippon Steel [5401:JP], JFE Steel [5411:JP], and Kobe Steel [5406:JP] will receive the subsidies.

Steel production accounted for 46% of all carbon emissions generated from Japan’s domestic industrial sectors in 2021. Therefore, the lower-carbon transition for the steelmaking industry is the top priority in achieving Japan’s net-zero emissions target by 2050. Hydrogen reduction steelmaking is viewed as a crucial approach in this transition, as it reduces carbon emissions by replacing coke with hydrogen as the reducing agent. However, the higher cost of hydrogen compared to coking coal has been a major obstacle to the adoption of this innovative approach. To address this challenge, the Japanese government unveiled a plan in June to invest USD107.5bn over the next 15 years to boost supply of hydrogen and bring down the manufacturing cost.

Sources：

https://asia.nikkei.com/Spotlight/Environment/Climate-Change/Japan-doubles-subsidy-for-carbon-cutting-steelmaking-tech

https://www.reuters.com/business/energy/japan-invest-107-bln-hydrogen-supply-over-15-years-2023-06-06/