Abstract
Japan’s mid-century strategy to reduce greenhouse gas (GHG) emissions by 80% by 2050 requires rapid energy system changes, which may lead to stranded assets in fossil fuel-related infrastructure. Existing studies have shown that massive stranding of assets in the energy supply side is possible; few studies have involved economy-wide stranded asset analysis. In this study, we estimated stranded investments in both the energy supply and demand sectors in Japan in the context of near-term goals for 2030 and the mid-century strategy. To this end, multiple emission scenarios for Japan were assessed based on various emission reduction targets for 2030 and 2050. The results show that stranded investments in the energy supply sectors occur mainly in coal power plants without carbon capture and storage (CCS), especially in scenarios without enhanced near-term mitigation targets. Increases of stranded investment in demand sectors were observed primarily under stringent mitigation scenarios, which exceed the 80% reduction target. In particular, investment for oil and gas heating systems in the buildings sector may be stranded at levels up to $20 billion US between 2021 and 2050. We further simulated a scenario incorporating a subsidy for devices that do not use fossil fuels as a sector-specific policy; this reduced the amount of stranded investment in the buildings sector. We confirmed the benefit of enhancing near-term mitigation targets to avoid generating stranded investments. These findings support the importance of inclusive energy and climate policy design involving not only pricing of carbon emissions but also complementary cross-sector economy-wide policies.
Highlights
The Paris Agreement requires that parties submit Nationally Determined Contributions (NDCs), which include mitigation targets for reducing emissions of greenhouse gases (GHGs) by 2030, and encourages each party to formulate a long-term low-emission development strategy, known as the mid-century strategy (MCS), which focuses mainly on emission reduction targets in 2050 and later
Several studies have assessed the energy and economic implications of Japan’s near- to mid-term emission pathways using energy system models and integrated assessment models (IAMs), that integrate relevant disciplines such as energy, economy, agriculture, and land use into single modeling framework (Fujimori et al 2019; Kato and Kurosawa 2019; Oshiro et al 2019; Silva Herran et al 2019; Sugiyama et al 2019). These national scenario analyses have suggested that attainment of both the NDC and MCS targets without strengthening the near-term target would require rapid emission reductions between 2030 and 2050, which would involve non-linear energy system transformation during this period (Oshiro et al 2017)
Based on the scenario analysis presented in the previous sections, we explored two processes driving increases in stranded investment
Summary
The Paris Agreement requires that parties submit Nationally Determined Contributions (NDCs), which include mitigation targets for reducing emissions of greenhouse gases (GHGs) by 2030, and encourages each party to formulate a long-term low-emission development strategy, known as the mid-century strategy (MCS), which focuses mainly on emission reduction targets in 2050 and later. Oshiro et al (2019) have suggested that the 80% reduction goal by 2050 would be on track to the global 2 °C goal in terms of the carbon budget based on the cost effectiveness allocation whereas additional efforts would be required for 1.5 °C goal, the national emission ranges implied by the global pathways are largely depending on the effort sharing scheme (van den Berg et al 2019) In this regard, several studies have assessed the energy and economic implications of Japan’s near- to mid-term emission pathways using energy system models and integrated assessment models (IAMs), that integrate relevant disciplines such as energy, economy, agriculture, and land use into single modeling framework (Fujimori et al 2019; Kato and Kurosawa 2019; Oshiro et al 2019; Silva Herran et al 2019; Sugiyama et al 2019). Technological, economic and political feasibility is a critical challenge for reaching the mid-century goals
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