Corporate giants are able to spread renewable energy and shape policies across Asia
By Sachiko Suzuki, Asia climate and energy analyst for Market Forces, a Melbourne-based initiative researching the financing of environmentally destructive projects.
Japan’s largest trading and energy companies have a responsibility to step up and help rather than hinder the transition to clean and renewable energy. Yet the seven biggest Japanese trading houses — also known as sogo shosha — including Mitsubishi Corp., Mitsui & Co. and Sumitomo Corp., along with JERA, the country’s largest power company, are exacerbating Asia’s dependence on gas and fueling harmful climate change with impunity.
While the world bakes in record temperatures and watches Los Angeles neighborhoods burn to a crisp, there must be an accelerated investment in clean energy. But the giant Japanese trading houses plan to build nearly nine times more gas power than solar and wind in South and Southeast Asia, according to a new analysis by Market Forces, a clean energy finance organization.
Amid declining gas demand in Japan, these fossil fuel developers are burdening emerging Asia with polluting and expensive gas that threatens the chance of securing a stable climate and longer-term business viability in favor of the companies’ short-term bottom lines.
Make no mistake, Japan’s top seven trading houses yield significant market influence, with combined revenue larger than the gross domestic product of many Asian countries, including Singapore, Bangladesh and Vietnam.
Most concerning, the companies are throwing their weight behind locking emerging Asian countries such as Bangladesh, Vietnam and Indonesia into dependence on gas rather than facilitating a rapid, secure renewable energy transition.
The trading houses’ commercial interests are interwoven with energy policy. Japan’s new strategic energy plan has just closed for public comment after the government was heavily criticized for proposing a modest new target to cut greenhouse gas emissions by 60% by 2035.
RE100, a global corporate renewable energy initiative, the Japan Climate Initiative and other industry groups have criticized the plan as lacking ambition. Along with the Japan Climate Leaders’ Partnership, these industry groups, representing hundreds of companies, local government and civic organizations, are demanding that Japan commit to a 75% reduction in carbon emissions by 2035.
To meet its commitment to the Paris Agreement of limiting global average temperature increases to 1.5 C, Japan would need to implement cuts of about 81% by 2035, according to an analysis by the Climate Action Tracker.
Japan in 2023 spent $166.9 billion on fossil fuel imports, according to the latest energy plan, which recognizes the need for the country to end its heavy reliance on coal, oil and gas. Yet the government and Japan’s biggest trading companies are failing to accelerate investment in clean energy.
Offshore floating wind farms have the potential to generate 1.7 times more electricity than Japan’s primary energy supply, according to the Japan Climate Leaders’ Partnership. The government must act faster on calls for urgent investment in wind energy, rooftop solar power generation, improved insulation and zero-emission vehicles.
Such investment is in tune with community views. Around two-thirds (65%) of Japanese people believe Japan should quickly replace coal, oil and gas with renewable energy such as wind and solar power, according to a 2024 United Nations survey.
Rapid investment in clean energy makes economic sense and is vital for Japan and other Asian countries to become self-sufficient. Japan could secure at least $6.7 trillion in investment by transitioning to a net-zero economy by 2050, according to a recent Bloomberg NEF report.
Japan needs to flip the switch from importing fossil fuels to becoming a renewable energy powerhouse. Currently, Japan imports around 87% of its total energy needs, according to the International Energy Agency (IEA).
Despite their massive role in Japan’s economy, the biggest trading houses and JERA are falling short of what’s needed to achieve global and domestic renewable energy targets. In Japan, JERA supplies around a third of the nation’s electricity. However the electricity giant has revealed it aims to only develop 20 gigawatts of renewable energy by 2035 globally, when Japan alone needs at least six times more clean energy by 2030.
It’s not all doom and gloom. Japan’s fifth-largest trading house, Marubeni, is the front-runner among the big seven in new solar and wind power, with 4.2GW in development.
Southeast Asia has enormous untapped solar energy potential of more than 15,000GW, more than 50 times the region’s electricity capacity in 2022. Solar needs to be Southeast Asia’s primary electricity source, backed by wind, hydro, battery storage and improved transmission, according to the International Renewable Energy Agency.
But the trading houses and JERA are blasting ahead with plans for massive gas power plants, import terminals and other infrastructure, raising risks of sinking investment into stranded assets. The use of gas power plants are projected to significantly decline after 2030, according to the IEA’s World Energy Outlook.
The IEA says existing gas facilities are sufficient to meet demand until 2040 in a under scenarios, including ones that would see a 1.5C and a 2.4C increase in average global temperatures. Put simply: Either gas meets demand levels consistent with catastrophic global warming or liquefied natural gas assets will become stranded and worthless as adequate clean energy comes online.
By prioritizing investment in new fossil fuel infrastructure, Japanese energy and power developers are missing tremendous green business opportunities worldwide.
The trading houses and JERA are spreading gas dependency across Asia and undermining energy security by locking countries into volatile global gas markets. Recent events such as the war in Ukraine show it is impossible to mitigate the risks of supply disruptions and price shocks. Increasing energy self-sufficiency by reducing dependence on imported fossil fuels is the answer to achieving energy security.
Given the expertise of Japan’s trading giants in all areas necessary to boost penetration of renewable energy, including lobbying power to shape policies across Asia, these companies have a duty to switch off the gas. The sogo shosha have used innovation to navigate multiple crises for more than seven decades. Now it is time to lead and live up to their true potential.
The article first appeared in Nikkei Asia:
Japan’s trading houses have a duty to turn off the gas