Steven Jacobson is a rising junior at the University of Pennsylvania studying business and history.
China, with its famously smog-choked cities, jumps to mind as among the world's top coal consumers. Indeed, even with the steps the government has taken in recent years to cut consumption, nearly half of the world’s coal is burned in China. As China decreases its dependence on coal, however, its eastern neighbor continues to heavily rely on the polluting substance. Japan is the world’s fourth-largest consumer of coal, behind only China, the United States, and India, according to mining-technology.com. Despite agreeing to plans drawn up by the UN and the OECD to scale back coal consumption and investment, Japan has 27 gigawatts of new coal capacity planned and continues to be a leading financier of coal projects around the world.
Resource-starved began to rely more on imported fossil fuels after it closed down most of its nuclear reactors following the 2011 Fukushima Daiichi disaster. Before the accident, the reactors had supplied about a fifth of the nations energy, according to McKinsey, a consultancy. Japan had already diversified from oil and gas in the 1970s to keep itself insulated from price fluctuations and geopolitical risks. This caused it to turn, in part, to coal, which is cheaper and less politically fraught. To save money, Japanese utilities have continued to increase their dependence on coal after the reactors switched off in the wake of the world’s worst nuclear accident since the 1986 Chernobyl disaster. Thus, Japan recently gave approval to build three more coal fired plants and has forty-two more planned. Japan, unsurprisingly, scored the lowest in environmental group E3G’s May 2016 scorecard that rated G7 members on their efforts to phase out domestic consumption of coal.
Tokyo signed agreements last fall in the midst of all this to limit its coal consumption and funding. Last November, members of the OECD agreed to halt coal financing through export banks such as the JBIC. Then, in December’s Paris Agreement under the UN Framework on Climate Change, Japan agreed to cut greenhouse gas emissions by 26 percent by 2030 from 2013 levels. Yet, Japan still views coal as an important power source going forward, as the government’s most recent Basic Energy Plan indicated. The plan estimated that the material would account for over a quarter of the country’s energy by 2030. The JBIC has also used a loophole in the OECD agreement to continue lending to coal plants, as the bank approved a $3.4 billion loan to Batang in June, eight months after the accord was signed. Provisions in the agreement allow for funding to continue if the plant is considered “highly efficient,” or if the plant is located in a poor country with no other apparent sources of energy.
These two provisions form the crux of Japan’s case for its continued investment in coal projects. As poorer countries begin to grow richer, the argument goes, their people will demand electricity, and will most likely turn to coal due to its inexpensiveness. Therefore, Japan’s role is to help fund cleaner coal technologies to prevent poor countries’ use of even cheaper and therefore dirtier coal technology. However environmentalists have disagreed with this premise, stating that Japan’s coal technology is no more efficient than anywhere else’s. They also point to the falling price of renewables as evidence for its increasing viability as a power source.
Japan’s increasing reliance on coal at home could prove to be not only environmentally harmful but also economically unjustifiable. According to a report released in May by Oxford University’s Smith School of Enterprise and the Environment, the planned construction of new plants threatens to create $57 billion in stranded assets due to the resulting overcapacity combined with the plummeting costs of renewables and global policy shifts away from fossil fuels. Private investors have taken heed of the warning, as Mitsui recently announced that it plans to cut its coal exposure by a third within three years in light of the Paris climate agreement. While it is uncertain when these assets will lose their value—be it years, decades, or even a century—it is undeniable that Japan is swimming against the tide of its fellow G7 members on its use of coal.
Photo Credit: Martin Krovacek
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