Japan’s second NDC: An opportunity to boost economic growth, improve energy security, and strengthen industrial competitiveness
We Mean Business Coalition and Japan Climate Initiative
We are proud to partner with the Japan Climate Initiative on a new report, highlighting how an ambitious and investible NDC can strengthen Japan’s global competitiveness and help shape a cleaner, more prosperous future for Japanese businesses and people.
Japan’s second Nationally Determined Contribution (NDC), submitted in February 2025, sets new targets to reduce greenhouse gas (GHG) emissions by 60% in 2035 and 73% in 2040 from 2013 levels, while reaffirming its goal to reach net zero emissions by 2050. These targets are less ambitious than the global average reductions required to keep the 1.5 °C goal within reach, and are insufficient given Japan’s developed country status. Moreover, by setting weak targets, Japan risks missing out on the economic benefits of shifting to cleaner energy sources and losing market share in global markets that are increasingly rewarding low-carbon products and services.
Nevertheless, the NDC provides an opportunity not only to cut emissions but also to stimulate economic growth, enhance energy security, and strengthen Japan’s industrial competitiveness as global markets shift towards clean technologies and products. Download the report (pdf).
Japan’s emissions fell by 23% between 2013 and 2022. However, it is off track to meet its 2030 goal, and its current targets fall short of a 1.5 °C-aligned pathway. To contribute meaningfully to the achievement of globally agreed targets, Japan must significantly accelerate both the phase-out of fossil fuels and the deployment of renewable energy and energy efficiency. This requires a clear roadmap with quantitative targets and timelines, as well as policy measures that reflect the urgency and scale of the global climate challenge. Japan risks losing economic advantage if it does not accelerate the shift from fossil fuels to renewable energy. Business leaders overwhelmingly support stronger action: 96% want Japan to transition to a renewables-based electricity system, with two-thirds wanting this to happen within the next decade. Japanese companies lead the world in terms of numbers setting emissions reduction targets under the Science-Based Targets Initiative (SBTi).
The Government’s 7th Strategic Energy Plan projects that renewables will reach 40-50% of the electricity generation mix by 2040, while fossil fuels would still supply 30-40%. In the outcome of the first Global Stocktake, all countries agreed to triple global renewable capacity by 2030 and to accelerate efforts towards the phase-down of unabated coal power. Yet Japan lacks clear domestic targets for renewable energy supply or phasing out coal power. Stronger policies and a clear roadmap are therefore essential.
To maximise investment from the private sector, the second NDC needs to be backed up by clear and predictable policies for implementation. Key priorities include:
- Accelerating renewable energy deployment through the Green Transformation (GX) Promotion Act, supported by transition bonds for next-generation technologies such as novel solar cells, floating offshore wind, and advanced geothermal, as well as expanded investment in conventional renewables such as rooftop solar, hybrid solar systems (e.g., agrivoltaics) and onshore wind.
- Scaling up electrification of transport, buildings, and industry using clean electricity.
- Implementing effective carbon pricing through the forthcoming GX Emissions Trading Scheme (GX-ETS), including a binding emissions cap, adequate carbon price levels, and limits on carbon credit use to incentivize real emissions reductions.
- Strengthening collaboration between government and business to co-design solutions and unlock private investment.
Japan’s second NDC marks a vital step forward, but to seize the full economic and industrial benefits of the clean energy transition, it must be backed by stronger sectoral targets, clear and predictable policies, and enhanced business-government collaboration. By doing so, Japan can position itself as a leader in the new global economy that is rising.