Japan’s newly-elected prime minister, Yoshihide Suga, has committed the country to achieving net-zero emissions by 2050, boosting its existing pledge of an 80% emissions reduction within this timeframe.

“We need to change our mindset that proactively taking measures against global warming will bring about changes to industrial structures, as well as the economy and society, and lead to major growth,” Prime Minister Suga told Japan’s parliament.

The announcement mirrors earlier pledges from countries across Europe to reach net-zero by mid-century, and from China to do so a decade later in 2060. And just as with all these other countries, building a more sustainable future will have wide-reaching implications for Japan’s economy, particularly when decarbonizing sectors like power generation, transport, and heavy industry.

As the world’s third-largest economy and its fifth-biggest CO₂ emitter, the 2050 pledge marks a directional change for Japan, which relies heavily on fossil fuels to meet its energy needs, most of which are imported. With limited fossil-fuel resources, the Asian nation imports more LNG than any other country, and was the fourth-largest oil importer in 2019, according to the U.S. Energy Information Administration.

Switching to cleaner fuel sources has potential to generate new jobs and growth, but is not without its challenges.

Japan’s renewables sector is in its infancy compared to clean energy champions like the European Union, where renewable energy sources generate 30% of electricity needs, with a target in place to increase this to 50% by 2030.

Offshore wind could prove to be the best bet for Japan to substantially expand the share of renewables in its energy mix. In 2020, bidding got underway to construct several large-scale wind farm projects off the coast of Chiba Prefecture, south of Tokyo, and Akita Prefecture further to the north of Honshu island. The government aims to make offshore wind the country’s chief energy source, generating 10 million kilowatts of capacity by 2030, the equivalent of 10 nuclear reactors.

But wind power alone will not be able to replace Japan’s dependence on imported fossil fuels. With its nuclear power sector stalled, hydrogen has been identified by the Japanese government as the strongest alternative fuel to power its net-zero ambitions.

Hydrogen could provide a route to decarbonizing heavy transport sectors, like shipping, aviation, and road haulage, providing a clean alternative to oil-based fuels. Although, this would require investment in new infrastructure, such as hydrogen filling stations and marine and aviation fueling points. The JHyM hydrogen station project aims to see a total of 160 hydrogen filling stations installed by 2021, but many more will be needed for hydrogen to replace traditional vehicle fuels.

Strict emissions targets could drive change in the transport sector: the International Civil Aviation Organization (ICAO) requires aircraft fuel to improve operational efficiency by 2% annually and the use of sustainable aviation fuel (SAF) is expected to expand in Japan’s aviation market, especially for international flights.

Clean hydrogen can also provide an alternative to the fossil fuels traditionally used at power plants, and in heavy industrial sectors, such as steel making and cement manufacturing, as it can achieve the high combustion temperature these hard-to-electrify processes depend on.

But manufacturing hydrogen remains a challenge for Japan, so the country is forging external partnerships to meet its net-zero target.

One solution is to import hydrogen from overseas, reducing reliance on fossil fuel imports. A recently signed agreement with Australia could see a supply of green hydrogen and ammonia − generated through electrolysis powered by renewables, and blue hydrogen, produced using fossil fuels and carbon capture and storage (CCS) − imported to meet Japan’s power needs.

“Wherever you find vast amounts of hydrocarbons and vast amounts of storage, you can build around that. And fortunately, Australia is extremely blessed with both,” says Mark McCallum, Chief Executive Officer at Low Emission Technology Australia.

Switching to hydrogen will require a whole new supply chain, with specially built vessels, new types of pipelines, and specialized hydrogen and ammonia production facilities. MHI has invested in the H2U Group in Australia, a leading developer of green hydrogen and green ammonia projects, which can be exported to Japan.

But as international interest in hydrogen grows, scaling up could bring costs down and create a thriving export market for countries like Australia, making investments in a hydrogen economy − for both exporters and importers − less of a risk.

“Customers want their net-zero emissions ambitions met. But not at any price. Hydrogen has to be affordable, reliable, and clean. So, these are the three criteria we need to look towards,” says McCallum.

As green hydrogen powered by renewables scales up, the cost should fall, much as solar and wind power costs plummeted in the past decade. But in the short term, blue hydrogen may prove more cost-effective and easier to scale up to meet demand from countries like Japan.

A thriving international market for trading hydrogen could help meet the net-zero plans announced by countries and regions around the world.

For hydrogen to succeed, technologies like CCS are seen as essential to produce hydrogen at a price that’s competitive.

Unlike Japan, the U.K. and EU are able to deploy CCS projects, solar, wind, and other renewables at scale to help meet their net-zero targets.

In the U.K., plans are in place to generate blue hydrogen at industrial clusters located across the country. The Zero Carbon Humber project represents the largest of these, and aims to facilitate both power plants and industrial processes to either switch to hydrogen fuel or capture CO₂ using CCS, which will be stored deep beneath the North Sea. The nearby H2H Saltend hydrogen production plant is set to become the world’s largest blue hydrogen plant, and will be powered by Mitsubishi Power’s gas turbines that run on a blend of 70% natural gas and 30% hydrogen − and this could rise to 100% hydrogen in the future.

With the COP26 climate action talks set to take place in Glasgow in 2021, momentum on climate action is growing. Incoming U.S. president Joe Biden has announced plans to set America on course to reach net-zero emissions by 2050, with a list of measures aimed at making the country’s energy sector more sustainable.

And China, the world’s biggest emitter, recently pledged to reach net-zero by 2060, 10 years later than the U.K., the EU and Japan. While China’s vast energy market still relies heavily on fossil fuels, with plans in place to build new coal-fired power plants, it also has a thriving renewables sector: it generates more electricity from wind power than any country in the world, and is the world’s leading manufacturer of solar PV panels.

As the world’s second-largest economy, China’s drive towards net zero could help influence the behavior of other nations across the world. Japan, the third-largest economy, could similarly have a major impact on other nations with its own net-zero emissions ambitions, both in Asia and beyond.