Japan’s green transformation (GX): Promise, paradox, and the path forward

An author, Suzy Ross, once said: “Transformation is an ongoing process that tends to appear ordinary, when in fact, something extraordinary is taking place” (GoodReads, 2025). Japan is indeed in the midst of something major, something truly extraordinary... The country has embarked on the Green Transformation (GX), which refers to transforming “entire industrial and social structures centering around fossil energy sources, long established since the Industrial Revolution, into ones based on clean energy” (Climate Integrate, 2024). The goal of the initiative is to drive Japan’s economic growth and development through emissions mitigation (GR Japan, 2024).

Brief background

The term “GX” began to attract attention as the Ministry of Economy, Trade, and Industry  (METI) released the “GX League Basic Concept” in February 2022. The GX League was established by the government to drive the transformation of social and economic systems and the creation of new markets, aiming to achieve carbon neutrality by 2050 (Climate Integrate, 2024).  To promote GX, Prime Minister Fumio Kishida announced plans to marshal more than 150 trillion yen in public and private investment, including 20 trillion yen in government investment over the next 10 years. Many steps have been taken, including the adoption of the GX Basic Policy, the enactment of the GX Promotion Act, the adoption of the GX Promotion Strategy, and the adoption of frameworks for sector-specific investment strategies and GX Economy Transition  Bonds. Additionally, the Japanese government’s policies related to the creation of a market for green products include the “GX 2040 Vision,” published in February 2025, and the carbon pricing mechanism introduced from FY2026 (GR Group; Climate Integrate, 2024).

The “GX Acceleration Declaration” encourages businesses to commit to purchasing and using green products to drive stable demand, with an initial focus on green steel, sustainable aviation fuel, electric vehicles, bio-based chemicals, hydrogen, and ammonia (METI, 2024). Difficulties remain in scaling adoption, ensuring affordability, and aligning incentives across industries (JESE, 2025). 

Challenges and concerns

The Japan GX narrative has attracted growing global attention; however, a credibility dilemma persists regarding the truthfulness of the country’s green transformation, given its continued reliance on fossil fuels and its slow pace of climate policy measures. For example, Japan declined to support a just transition from fossil fuels at COP 30, whereas nearly 80 countries (including the UK, Germany, Colombia, and many others) agreed to a shift away from these fuels (Yahoo Japan, 2025). The Institute for Energy Economics and Financial Analysis (IEEFA) warns that major Japanese utilities, such as JERA and Tokyo Gas, are backsliding on clean energy targets while increasing overseas investments in LNG and other fossil fuel technologies (Reynolds and  Myamoto, 2025). Furthermore, Market Forces' (2025) recent report revealed that Japan's five biggest institutional investors hold $US40.6 billion in companies with the world's largest fossil fuel expansion plans, as measured by exposure to the Fossil Fuel Expansion Index (FFEI). Such an investment would undermine the US$43.2 billion that they have invested in renewable energy companies. With this said, this clean energy-to-fossil fuel investment ratio of 1.07:1 is below the  4:1 ratio by 2030 to meet the Paris Agreement goal of limiting warming to 1.5°C.

Lastly, in December 2025, nearly 450 plaintiffs filed Japan's first climate lawsuit, seeking damages from the government, claiming its inaction was unconstitutional. This suit argues that Japan’s 2035 targets fall short of the IPCC’s recommendations and lack legal force (Osaki, 2025). 

Such a strong citizens’ action indicates that climate change is accelerating faster than Japan’s GX  and affecting its population. For example, the Japan Meteorological Agency warned that the average temperature in the country in 2025 was the third-highest on record after 2024 and 2023.  Isekaki’s Gunma Prefecture’s temperature on August 5 marked a national record of 41.8°C. Moreover, the recent Nature scientific report (Nayak & Takemi, 2025) indicates that extreme precipitation events may become more intense in the future warming climate throughout all  Japanese regions. The Clausius-Clapeyron equation predicts that the intensity of extreme precipitation events may scale with temperature at about 7% per degree Celsius. In sum, the presented challenges and concerns raise valid questions about the integrity, strength, and enforceability of Japan’s GX. 

Winds of green optimism: Recent developments and discussions 

And yet, although the road to GX has had its contradictions, other ongoing developments and my recent discussions with global carbon and energy experts indicate that Japan has a real opportunity to truly green up its transformation and restore confidence in its mission, especially amid the current geopolitical realities affecting the energy sector. According to Japan NRG  (2025a), the return of President Trump to the White House in the United States transformed the tone and trajectory of global energy markets. His return brought the comeback of fossil fuels, along with budget and supply chain challenges to the climate-friendly energy sources. Rystad (21Jingji,  2025) indicates that reaching global net-zero goals would be more likely by 2070. Regardless,  Japan is still on course to decarbonize its economic and social system by 2050 (Japan, NRG,  2025a). For Japan, decarbonization represents a pathway to strengthen its energy and environmental security, resilience, and reliability situations (Anderson, 2023).

Keep on walking, GX walker

Regarding ongoing developments, first, the GX Emissions Trading Scheme (GX-ETX)  will become a mandatory national carbon market in fiscal 2026. With this development, Japanese large emitters will encounter binding limits on their carbon emissions. “The aim is not only to help  Japan to meet its climate targets, but to hard-wire carbon costs into the energy system and investment calculus” (Japan NRG, 2025b). During COP30, Japan hosted the Article 6  Implementation Partnership meeting at its COP30 Pavilion. Such an event emphasized Japan’s position as a powerful Asian-Pacific architect of a valid carbon-market infrastructure (Japan NRG, 2025). Japan’s Ministry of Economy, Trade and Infrastructure (METI) also completed discussions on the core pillars of the GX-ETS, introducing a price corridor (a 4300-yen ceiling, a 1700-yen floor per ton), with prices rising annually at inflation plus 3% (Nikkei, 2025a). This price visibility enables companies to calculate the ROI of decarbonization investments with greater certainty. At the same time, Japan’s hybrid model, which combines mandatory coverage along with price stabilization, may become a regional reference framework (Ichikawa, 2025). 

Second, as the pace for marine decarbonization is accelerating, Japan decided to lead with a “All – Japan” alliance between major shipping companies (NYK, Mitsui O.S.K. Lines and Kawasaki Kisen Kaisha) and shipbuilders (MILES, a ship design firm jointly owned by Imabari  Shipbuilding and Mitsubishi Heavy Industries) to revitalize the domestic industry and counter competition from China and South Korea. Furthermore, this vertical integration strives to standardize the next-gen designs, such as LCO2 carriers, to improve efficiency (Nikkei, 2025b). On a global level, on October 17, 2025, the International Maritime Organization (IMO) voted to delay its decision on adopting rules for international maritime decarbonization until  October 2026 (IMO, 2025). Despite this uncertainty, Japan’s shipping lines are still pushing ahead, such as Mitsui O.S.K. (MOL), which is pursuing Scope 3 reduction through the “Blue Action Net-Zero Alliance”, an innovative biofuel carbon insetting program (ReutersPlus, 2025,  MOL, 2025a). In December 2025, MOL secured a place on CDP (global environmental non-profit organization)’s annual “A List” for leadership in corporate transparency and performance on climate change for the third consecutive year (MOL, 2025b). 

Third, in December, METI indicated adding 4.5 trillion yen in state-backed debt guarantees through the GX Promotion Organization from FY2026, providing support to new large-scale hydropower refurbishment and nuclear power plants. This program, previously limited to offshore wind, hydrogen, ammonia, and various early-stage decarbonization technologies, will now include more mature energy infrastructure assets (Japan NRG, 2025b). Lastly, Japan plans to offer 210 billion yen ($1.34 billion) in investment subsidies. Companies relying entirely on decarbonized  electricity and contributing to power-generating regions, starting FY2026 and over the next five  years, can receive up to 50% of capital expenditure. Data centers can also qualify. This initiative,  part of the “GX 2040 Vision,” aims to increase the use of renewable energy. A novel “GX Strategy Region” system will also produce industrial hubs in regions with decarbonized power sources  (Reuters, 2025). This development is significant because it signals a shift from supply-side to demand-side incentives, enabling businesses that achieve full adoption of decarbonized electricity to gain a competitive advantage through large government subsidies. The regional emphasis also stimulates relocation to renewable-rich areas, such as Kyushu and Hokkaido. 

On the ground discussions: Japan energy summit and decarbon Tokyo - 2025

Regarding my recent discussions with global carbon and energy experts in the second half of 2025, the consensus was that, despite challenges, there is clear momentum and commitment to Japan’s Green Transformation. For instance, I moderated a leadership panel at Japan Energy Summit and Exhibition (JESE) (June 2025), “Building a Market for Green Products: Japan’s  Pathway to a Sustainable GX Economy,” with Dr. Hitoshi Kagushi (Mitsubishi Heavy Industries), Mr. Hideki Takada (GX Acceleration Agency), Mr. Akira Shigeta (thyssenkrupp nicera), Mr.  Kenji Konno (ACME Group), and Mr. Masami Takenaka (ASAHI KASEI Corporation). During the panel, we first discussed the necessity of a market for green products and the contributions of companies to expanding such a market. Second, we pondered the challenges of creating the green market and the strategies companies use to address and overcome them. Third, we discussed policy actions to create a green market and companies' expectations for incentives and regulations that would help them expand the adoption of green products for GX. Lastly, we deliberated on strategies to expand financing and investment in green products, as well as individual companies’  strategies in support of GX. At the end of our panel discussions, a consistent theme emerged:  collaboration between the government and private sectors throughout Japan’s GX is essential. No single player can overcome all the hurdles alone – partnerships, shared innovation, and integration are critical to GX's success.  

Additionally, at “Decarbon Tokyo 2025,” I got a deep dive into the state of play of various carbon management solutions and markets, and the critical leadership role Japan can play in decarbonization, especially through its rapid development of GX-ETS. Apparently, "Decarbon Tokyo" was a one-day conference in 2024. However, this year, the conference grew to two days of action-packed panels and presentations on many pertinent topics across the whole spectrum of decarbonization. Company leaders, like Aurelie Gonzalez (CEO, Yama), in her post-conference LinkedIn post (Gonzalez, 2025), wrote that “At Decarbon Tokyo, the alignment between government and industry was crystal clear: durable CDR will be integrated  into GX-ETS.” Alex Petre (CEO, Deep Sky) was adamant that Japan was leading the way in decarbonization by supporting durable CDR technologies while proclaiming during her panel, “Let’s not miss the Japanese forest for American trees” (Decarbon Tokyo, 2025). Besides meeting many other carbon experts, it was great to connect with other energy experts, who recognized the need to understand the current state of various solutions to residual emissions from hard-to-abate sectors in Japan and beyond. Similar to my takeaway from the JESE 2025, Decarbon Tokyo - 2025’s core insight stresses collaboration between government and global industry for rapid progress in shared climate goals and Japan’s GX.

The way forward: Credible green transformation 

This opinion article briefly describes the background, headwinds, and bright lights on Japan’s rocky road to its Green Transformation (GX). As Rick Warren once said, “Transformation is a process, and as life happens, there are tons of ups and downs. It’s a journey of discovery – there are moments on mountaintops and moments in deep valleys of despair” (BrainyQuote, 2025).  With that said, no matter how dire and dispiriting challenges may seem, there are more reasons to be optimistic about Japan’s ongoing efforts to change its economic and social systems from the ones dependent on fossil fuels to the ones powered by clean energy.  

The climate crisis may seem intimidating and resistant to small human actions, but the global community has made remarkable progress and continues to do so. This progress should be strengthened, not criticized. GX, a massive strategic pivot in Japan, could very well become a global blueprint for a real green transformation – but only if it continues to merge its remarkable ambition with accountability.

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