Japanese financial institutions and energy companies continue to move away from supporting coal-fired power generation, as the country’s leadership reiterates what it says is an “unwavering resolve to decarbonize.” Several of the country’s investment banks and other financial institutions have signaled their unwillingness to continue support of coal projects, and energy major Mitsubishi in late February said it is pulling out of the $2 billion, 2-GW coal-fired Vinh Tan 3 power plant project in Vietnam, marking its first exit from a coal project. Mitsui & Co. has told Indonesian officials it plans to sell its stake in Paiton Energy, an independent power producer in Indonesia that operates coal-fired plants.
Japan has been criticized for continuing to give state support to export coal-fired power plants in the form of loans from the Japan Bank for International Cooperation (JBIC). Japan in July 2020 tightened its criteria for backing such projects, with government officials saying financial and other support would only be given to countries that are making efforts to reduce carbon emissions, and to those that must have coal-fired generation due to financial reasons. The stricter criteria, which include a numerical requirement for power generation efficacy, are included in a new government strategy regarding infrastructure exports for the five years from 2021. JBIC Gov. Tadashi Maeda in March said the state-run lender has no immediate plans to finance any new coal-fired power projects.
The moves in Japan echo those of other major economies, including the U.S., where at least six major banks in the past two months have adopted net-zero emissions goals, saying they will align their financing activities to the Paris climate accord. Japanese firms have accelerated their withdrawal from coal-related projects after the country’s prime minister, Yoshihide Suga, in October 2020 said Japan had a target to decarbonize its economy by 2050. Shinjiro Koizumi, Japan’s environment minister, earlier this year urged companies to withdraw their support for coal, saying after a late-February meeting of government officials, “I want strong public-private cooperation so that we can demonstrate Japan’s unwavering resolve to decarbonize to the international community.”
The U.S.-based Institute for Energy Economics and Financial Analysis has said more than 130 large banks and insurance companies worldwide have placed restrictions on coal-related investments. Japan’s move is an about-face for the country, whose public and private sectors for years encouraged the construction of new coal-fired power plants outside its borders, with officials saying it showed support for emerging economies.
1. Electric Power Development Co. Ltd., better known as J-Power, brought the new Unit 1 at the Takehara Thermal Power Plant online in June 2020. The new unit, with 600 MW of generation capacity, replaced two older units that combined had the same capacity. Courtesy: J-Power
Japan, though, also has continued to build new coal-fired generation at home; government data showed companies are planning to build 21 new coal-fired units with total capacity of more than 12.5 GW in the next decade, with more than 9 GW of that total scheduled from now through 2023. As an example of the country both closing old plants and building new ones, J-Power last fall said it would close its old coal-fired units by 2030, likely plants that came online prior to 1985. A company official said the closures could affect about 40% of J-Power’s coal-fired generation capacity. However, J-Power brought two new plants, with 1.2 GW of generation capacity, online last summer (Figure 1), and still has plans for more new coal-fired units.
The new decarbonization target, along with the aforementioned criticism of Japan’s previous stance from the international community, has put pressure on the country’s financial and energy sectors to adjust their commitments to coal-fired generation. Japan has canceled nearly 5 GW of new coal-fired units in the past three years.
The Sojitz Group, one of Japan’s leading trading houses, in early March announced it had “established new policies and targets to fulfill its commitment for realizing a decarbonized society” as part of the company’s “Sustainability Challenge,” what it called a “long-term sustainability vision for 2050.” Sojitz in a statement said: “In recent years, global warming has emerged as a new issue of major importance and attention, and the global trend towards carbon neutrality has accelerated. Under these circumstances, it is necessary to transition from the simple use and supply of energy to new ways of using and supplying green energy. In order to achieve these aims, Sojitz will accelerate efforts to reduce CO 2 emissions for the Group’s existing businesses as preparation for the coming age of a decarbonized society by increasing the company’s business resilience.”
Sojitz has said it plans a complete withdrawal from thermal coal, oil, and coking coal projects. It said it has a target to reduce its stakes in thermal coal projects by more than half by 2025, and to zero by 2030, after originally planning to halve its stakes in the thermal coal sector by 2030. The group said it also will exit all oil projects by 2030, and all coking coal projects by 2050. Sojitz already divested its stake in Indonesia’s Bau thermal coal mine, as well as its stake in Australia’s Moolarben coal mine.
Itochu, another Japanese trading house, earlier said it plans to sell all its stakes in thermal coal mining by mid-2024. The group in late February, as part of its energy transition, said it has agreed to a strategic collaboration on the development of a hydrogen value chain with Air Liquide Japan G.K., the Japanese subsidiary of Air Liquide, the world’s largest industrial gas company, and Itochu Enex. Itochu said it “will aim to accelerate the development of sustainable energy systems through these initiatives… as one of the basic policies of [the company’s] next medium-term management plan, and achieve a low-carbon society.”
Though Mitsubishi pulled out of the Vinh Tan 3 project, the company and the Japanese government remain committed to the Vung Ang 2 coal plant project in Vietnam, in spite of investor backlash. However, JBIC Gov. Tadashi Maeda, in early March said the government-owned financial institution will stop financing overseas coal-fired power plant projects. He said Vung Ang 2, for which the bank and other Japanese investors are providing about $1.7 billion, will likely be the last supported by the country’s private banks.
—Darrell Proctor is associate editor for POWER (@POWERmagazine).