OECD Environmental Performance Reviews: Japan 2025

Japan ranks among the largest economies and merchandise exporters globally, while importing much of its natural resources, including fossil fuels. The country is one of the most densely populated in the OECD, combining several bustling metropolitan centres and some rural areas facing depopulation and economic decline. A shrinking and ageing population is a major challenge for Japan’s long-term economic sustainability. The economy has grown moderately for several decades and is projected to expand by 1.5% in 2025, primarily driven by domestic demand. Government subsidies, especially for the green and digital agendas, will boost business investment (OECD, 2024_[1]).

The 2011 Great East Japan Earthquake and the ensuing accident at the Fukushima Daiichi Nuclear Power Station have had a profound impact on the country’s environmental policies and performance in the last decade.1 The suspended operation of all nuclear reactors for safety checks led to greater reliance on fossil fuels for electricity generation, heightening energy security concerns and driving greenhouse gas (GHG) emissions up to an all-time high in 2013. Since then, dependence on fossil fuels has declined slightly. Emissions started to decouple from economic growth (Figure 1), although the country’s energy mix remains carbon intensive.

Japan has also made progress in reducing emissions of some air pollutants and generation of municipal waste (Figure 1). However, most of the country’s population remains exposed to harmful levels of particulate pollution, and the circular use of resources could be improved further. Pressures on terrestrial and marine biodiversity persist. Japan is one of the most earthquake-prone countries in the world and highly exposed to natural hazards, including climate-related extreme weather events.

The impact of climate change is being felt in Japan, as elsewhere in the world, affecting human health, natural ecosystems and the built environment. More extreme and variable climatic conditions intensify Japan’s exposure to weather-related hazards such as tropical cyclones, storm surges and floods. The annual average temperature is 0.98°C higher than in the baseline period 1981‑2010 and is set to rise further. Over 60% of the population is exposed to hot summer days with temperatures above 35°C, some of the highest exposure levels in the OECD (OECD, 2024_[2]). The health impact has been evident, with growing numbers of heat-related illnesses and fatalities, especially among the elderly. In response, Japan strengthened its prevention framework in 2023 by adopting the Heat Illness Prevention Action Plan. This plan mandates local authorities to issue special heatstroke alerts and enables the opening of designated heat shelters during such alerts. The plan aims to halve the number of annual heat-related fatalities – which exceeded 1 000 per year in the last decade – by 2030.

Japan has strong capacity to cope with extreme weather-related disasters and a well-developed framework for climate change adaptation (IMF, 2022_[3]). It has leveraged its longstanding experience in managing earthquake and climate-related disaster risks to assist other countries. Japan employs an advanced, satellite-based early warning system (J-Alert) and prioritises preventive maintenance of infrastructures to enhance their quality and resilience. Japan insures a larger share of damages from weather-related events than many other countries (CRED, 2024_[4]). This helps alleviate the financial burden on the public budget for disaster relief and reconstruction. The Climate Change Adaptation Act mandates the adoption of a national adaptation plan, requires developing information systems and promotes subnational adaptation initiatives. A comprehensive assessment of climate change impacts is expected to be conducted about every five years. The 2021 revision of the adaptation plan identifies key performance indicators for adaptation measures and introduces a system for monitoring progress, in line with best international practice (OECD, 2024_[5]).

As in all countries, Japan’s local authorities play a crucial role in building climate resilience through their responsibility for territorial development. The national adaptation legislation encourages local governments to formulate their plans and set up adaptation centres for collecting and sharing local climate risk data and adaptation information. As of July 2024, all prefectures had formulated their adaptation plans, while 17.6% of municipalities had done so. Many smaller municipalities lack the technical and financial capacity to develop the plans and invest in climate resilience. To address these challenges, the Ministry of the Environment (MOE) provides guidance to municipalities. In addition, the Climate Change Adaptation Information Platform (A-PLAT) serves as a hub to support national and local governments, businesses and individuals. This is a welcome initiative, as sharing information among all policy-making levels is key to scale up preventive adaptation. However, as in many other countries, local authorities may have insufficient incentives to invest in resilience as post-disaster recovery is largely covered by the national government. Delegating specific adaptation responsibilities to local governments, along with enhancing their revenue-raising capacity, could help mobilise local resources (OECD, 2023_[6]).

Nature-based solutions (NbS) are gaining traction in Japan. Among key initiatives, Japan is restoring and protecting coastal wetlands and mangrove forests to mitigate storm surges and coastal erosion. It is also expanding urban green spaces to reduce the urban heat island effect and mitigate urban flooding risks. In addition, it is managing forests and researching blue carbon ecosystems to improve absorption of carbon dioxide (CO₂). Ecosystem-based Disaster Risk Reduction (Eco-DRR) has been increasingly incorporated into national policies. The government supports local governments in integrating NbS into their adaptation plans and biodiversity strategies. The “Potential Map of Ecosystem Conservation/Restoration”, for example, helps identify suitable areas for Eco-DRR. Meanwhile, the Green Infrastructure Public-Private Partnership Platform is a vehicle to share information and raise awareness. These efforts are welcome and should be continued to foster wider adoption and integration of NbS.

Japan – the second largest GHG emitter in the OECD – committed to net-zero emissions by 2050 and enshrined this commitment into law. In its Nationally Determined Contribution (NDC), the country pledged to cut GHG emissions by 46% by financial year (FY) 2030 from the FY2013 peak level, with the aspirational goal of halving emissions within the same timeframe (Figure 2).2 This is a considerable increase in ambition compared to previous targets. Nonetheless, Japan could aim to curb emissions further. The FY2030 target represents a 34% reduction in net GHG emissions from 2019 levels. By comparison, the Intergovernmental Panel on Climate Change (IPCC) has called for a global emission reduction of 43% to align with the Paris Agreement’s 1.5°C temperature limit. Japan is expected to lead this global effort, along with other high-income countries (IPCC, 2022_[7]). In its path to net zero, Japan can build on its potential for high energy efficiency and renewables, advanced public transit systems, solid industrial base and renowned innovation capacity.

Japan needs to accelerate its emission abatement efforts to achieve its target by the end of this decade and prepare for a more ambitious goal for 2035. This would help the country contain cumulative emissions and potentially reduce the transition costs in the next decades (UNEP, 2024_[8]). The energy industry is the largest GHG emitter, followed by manufacturing. Since the 2013 peak, emissions have declined by 19%, thanks to energy savings, lower production of energy-intensive industries, the gradual expansion of renewable energy and the restart of some nuclear power plants. Overall, in 2022, net GHG emissions were 11% below their 1990 level. However, if GHG emissions continue to decline at the same average annual rate as in FY2013/22, they would be 39% below the base-year level in FY2030, exceeding the NDC target (Figure 2).

The government foresees to achieve the 2030 target by implementing the existing policy measures and investments outlined in the Plan for Global Warming Countermeasures. The plan focuses on increasing energy efficiency in all sectors through technology improvements, fostering a shift in consumption patterns, and scaling up regional and local decarbonisation initiatives (Chapter 2). In addition, the 2023 Basic Policy for the Realization of the Green Transformation (GX) (hereafter GX Basic Policy) provides financial support for technology development and foresees the introduction of carbon pricing later in the decade (see below). However, there are uncertainties regarding the ability of Japan to meet its NDCs with the current policy suite (UNEP, 2024_[8]).

The Plan for Global Warming Countermeasures is comprehensive and identifies the expected emission reductions from existing policy measures. However, it lacks a projected emission trajectory to the 2030 target, making it more challenging to track progress and adjust policies. The plan neither identifies the additional policy efforts that may be needed to reach the aspirational goal of halving emissions by 2030, nor outlines projections or policies for the next decades. A climate mitigation planning framework based on binding periodic carbon budgets (setting limits on national and/or sectoral emissions) and an independent advisory body would help Japan ensure that its current and planned measures are aligned with the long-term target. Several OECD countries have adopted such an approach, including France, Germany and the United Kingdom.

Progress has been made in reducing energy use and shifting to low-carbon energy sources in the last decade. Energy intensity has declined by 31% since 2010, in line with OECD trends, and remains below the OECD average (Figure 3, panel A). Longstanding policy measures such as the Top Runner Programme for vehicles and appliances, country-wide energy-saving initiatives, voluntary agreements with industry and considerable financial support have contributed to this progress. After a decade of stagnation, the share of renewables in power generation more than doubled between 2010 and 2023, driven by a boom in solar photovoltaics (PV) (Figure 3, panel C). However, the role of renewables remains below the OECD average. Meanwhile, fossil fuels – including coal – still accounted for nearly two-thirds of Japan’s power generation in 2023, compared to about half on average in the OECD (Figure 3, panel B).

The government acknowledges that Japan’s high reliance on fossil fuels, low self-sufficiency and geography make the clean energy transition a must on both decarbonisation and energy security grounds. The Sixth Strategic Energy Plan (SEP, approved in 2021) aims to reduce energy demand and more than double the share of power from nuclear and renewable sources from the 2019 level. However, fossil fuels are projected to account for 41% of electricity generation in FY2030, a larger share than that of most OECD countries in 2023. The government’s strategy envisions carbon capture utilisation and storage (CCUS), as well as hydrogen and ammonia, to reduce emissions from existing and new fossil fuel-based power generation by 2030 and beyond.

Japan’s strategy to decarbonise the energy sector faces several uncertainties. Concerns include the speed of reactivation of mothballed nuclear power facilities, technology development, grid constraints and social acceptance of energy infrastructure. The restart of nuclear power plants depends on stringent safety assurances and thorough consultations with local communities. Compared to mature renewables technology, low-emission hydrogen (and its derived products) and CCUS technologies remain at early stages of deployment and are more expensive (IEA, 2023_[9]; BNEF, 2023_[10]). To accelerate deployment, Japan enacted legislation to regulate and promote the commercial use of these technologies and provides funds for infrastructure and supply chains development. Increasing the use of low-emission hydrogen and CCUS will depend on global market development and ongoing research and innovation efforts (OECD, 2024_[11]). If these technologies cannot be deployed at a large scale and nuclear plants do not restart as planned, the anticipated high reliance on coal and gas will weaken Japan’s ability to reach net zero. In light of these uncertainties and implementation challenges, the SEP recognises the need to develop potential pathways for decarbonising the energy sector to 2050. This is essential for several reasons. First, it would help ensure the targeted 2030 energy mix lays a cost-effective foundation for a decarbonised energy system by mid-century. Second, it would help ensure that policy actions are sufficient to achieve the targeted mix.

Coal is expected to maintain a key role in Japan’s energy mix, due to the government’s energy security concerns. While declining, coal’s share in the power mix would remain at 19% in 2030, higher than the 2023 OECD average (Figure 3, panel B). Coal accounted for 39% of the country’s GHG emissions from energy production and use in 2023 (IEA, 2024_[12]). The SEP outlines a progressive phase-out of inefficient coal power plants, which represent about half of coal installed capacity. It plans to gradually co-fire ammonia with coal in the remaining and new coal power fleets. Co-firing ammonia is effective in reducing CO₂ emissions from coal burning. However, today nearly all hydrogen and ammonia worldwide are produced from unabated fossil fuels. If the hydrogen and ammonia used, whether sourced domestically or imported, are not decarbonised, retrofitting fossil fuel power plants or building new hydrogen- or ammonia-ready coal and gas facilities could lead to carbon lock-in, while displacing GHG emissions to countries producing hydrogen and ammonia using carbon-intensive processes.

In 2023, Japan announced it would end new construction of unabated coal-fired power plants. It would be prudent to implement this commitment by introducing a regulatory requirement for future plants to be built “capture-ready”, in line with an International Energy Agency recommendation to the country (IEA, 2021_[13]). In 2024, alongside the other G7 countries, Japan pledged to phase out unabated coal power generation during the first half of the 2030s, or in a timeline consistent with the Paris Agreement goal and in line with countries’ net-zero pathways. Taking energy security concerns into account, formalising this pledge by formulating a coal phase-out timeline, as done by most OECD countries with coal power capacity, would provide a clear direction for the sector and smooth the transition.

As in most advanced economies, emissions of major air pollutants in Japan have declined over the last decade. The emission intensities of sulphur and nitrogen oxides (SO_x and NO_x) decreased further and are among the lowest in the OECD (OECD, 2024_[14]). Technological improvements in electricity generation, industrial processes and vehicles have reduced emissions of air pollutants, while also helping to curb GHG emissions. This exemplifies the significant synergies between addressing climate change and improving air quality and public health. Dioxin emissions, which mostly originate from waste incineration, declined due to the related facility upgrade (MOE, 2024_[15]).

Emissions and concentrations of fine particulate matter (PM_2.5) decreased over the last decade (MOE, 2024_[16]). Japan complies with its PM_2.5 environmental quality standard (EQS) of 15μg/m³. However, as in nearly all OECD countries, 99% of the population is exposed to levels of PM_2.5 above the World Health Organization (WHO) guideline (5μg/m³) (OECD, 2024_[14]). The OECD estimated that PM-related mortality and welfare impacts are higher in Japan than on average in the OECD (OECD, 2024_[14]). Japan should consider updating its EQS by considering the latest scientific knowledge and the WHO guideline, while continuing to strengthen policies to curb PM_2.5.

While the concentrations of major air pollutants in ambient air have remained within the EQSs, high concentrations of ground-level ozone and other compounds responsible for photochemical smog remain a concern. Measures such as emission standards for stationary sources and more stringent regulation for mobile sources in specific regions have helped reduce emissions of NO_x and non-methane volatile organic compounds, which are precursors of ground-level ozone and other photochemical oxidants (Ox). This has lowered Ox concentration but not enough to meet the related EQS in most locations (MOE, 2024_[16]). Updating comprehensive emission inventories and improving atmospheric model simulation would provide better evidence for informed policy decisions to address both PM_2.5 and Ox.

Promoting resource circularity can help reduce GHG emissions, especially in the industry, freight transport and waste sectors. Japan incinerates almost 80% of its municipal waste, mostly with energy recovery, the highest rate in the OECD (Figure 4, panel A). Incineration plants can provide electricity to local communities, but their power generation efficiency is relatively low. GHG emissions from incineration have hovered around the same level in the last decade, remaining strongly coupled to the amount of incinerated waste (Figure 4, panel B). The country’s heavy reliance on waste incineration can be an obstacle to improving recycling.

Japan’s policy mix has been effective in controlling generation of household waste. Municipal waste generation per capita is less than two-thirds of the OECD average (Figure 4, panel A) and has continued to decrease in the last decade, albeit moderately. However, the recycling rate of municipal waste should be improved as it is lower than that of Japan’s economic peers (Figure 4, panel A). Japan has taken steps to promote circularity, including by setting targets in the Fundamental Plans for Establishing a Sound Material-Cycle Society. The most recent plan, adopted in 2024, sets targets to 2030. It expands the set of indicators to better monitor synergies between improving circularity and reducing GHG emissions, a positive development. The country is on track to meet the 2030 target for the resource cyclical use rate, while the waste cyclical use rate has been hovering around the target level in the last decade. This suggests a review of these targets could be explored. The government is promoting unit-based fees for municipal waste services. Experience from other countries shows that unit-based charging schemes can help reduce waste generation and encourage recycling (Brown, 2024_[17]). Charging households and businesses for waste management has progressed, but cost recovery for municipal waste services is still low (12% nationwide in FY2022).

Further promoting prevention and recycling of plastic waste can contribute to meeting climate mitigation goals, as it helps curb GHG emissions from incineration and from Japan’s large plastics industry. The country’s plastic waste generation per capita is higher than the OECD average (OECD, 2024_[14]). Most plastic waste is used as fuel in incineration plants with energy recovery, and only 25% as mechanical and feedstock recycling (PWMI, 2023_[18]). Japan set targets and introduced several measures, including the 2022 Plastic Resource Circulation Act, that are expected to reduce plastic waste generation and increase reuse and recycling. The fee on single-use plastic bags, introduced in 2020, has contributed effectively to reducing use and triggered behavioural changes in consumers. Certain regions implement deposit-refund schemes, which encourage the collection of non-contaminated recyclable plastic waste. However, Japan could broaden the set of policy measures to further curb the use of single-use plastics and enhance recycling.

More efforts are needed to reduce food loss and waste, and promote recycling and composting.3 Food waste decreased by over 25% in the last decade and is on track to meet the FY2030 domestic target. In FY2022, Japan had already achieved its target of halving business-related food waste by FY2030 from the FY2000 level, suggesting the target could be raised. However, direct waste of non-used foods from homes remained almost constant over 2012-22 (MOE, 2024_[19]). Food waste from franchise convenience stores is substantial, partly due to a business model that encourages franchises to over-order (Kimura, 2022_[20]), as well as consumer expectations for food freshness. Food waste and scraps account for a quarter of household waste; they are mostly incinerated, where their high moisture content lowers incineration efficiency. The composting rate of municipality waste is significantly lower than in other OECD countries (Figure 4, panel A).

Enhancing circularity of critical minerals is crucial to secure energy supply in a decarbonised energy system, in Japan as in other countries (IEA, 2023_[21]). Japan has potential to leverage un-managed electrical and electronic waste (e-waste). It has among the highest levels of e-waste generation per capita in the OECD but one of the lowest e-waste collected and recycled volumes per capita (OECD, 2024_[22]). The government aims to increase the amount of electronic scrap recycled and processed, including rare metals, by 50% between 2020 and 2030. It has supported the development of related recycling facilities and implemented measures to prevent abandonment or illegal dumping of solar power generation equipment. To prepare for an expected peak in PV panel disposal beginning in the late 2030s, more could be done to promote circularity, including by setting targets for PV panel recycling as in the European Union. Japan has commendably worked with international partners to enhance critical mineral security, including by establishing partnerships between Japan and the Association of Southeast Asian Nations.

Japan has made some progress in slowing biodiversity loss in the last two decades. While forest, freshwater and urban ecosystem degradation have stabilised, the quality and extent of agricultural and coastal and marine ecosystems have continued to decline (Table 1). Conservation projects have helped restore the populations of some threatened species, but many remain threatened (IUCN, 2024_[23]). The rapid post-war economic development and the ensuing habitat loss continue to drive ecosystem degradation today. Direct drivers of biodiversity loss in recent years include small-scale conversion of natural land to built-up areas, farmland abandonment, invasive alien species and climate change (Working Group for Comprehensive Assessment of Biodiversity and Ecosystem Services, 2021_[24]).

Japan met the 2020 Aichi targets for protected areas but needs to expand conservation areas to reach the 2030 target under the Kunming-Montreal Global Biodiversity Framework (GBF). In 2024, 20.6% of land and 13.3% of sea areas were designated as protected areas. Protected areas have been moderately effective in preventing pressures on biodiversity, depending on strictness and location of the area (Shiono, Kubota and Kusumoto, 2021_[25]). To achieve the 30by30 target of conserving at least 30% of both terrestrial and marine areas by 2030, the government plans to expand officially protected areas and adopt Other Effective area-based Conservation Measures (OECMs). These OECMs will focus on areas of high biodiversity value such as satochi-satoyama rural landscapes, forests, and urban and coastal areas. The MOE established a scheme to certify areas hosting community or private biodiversity conservation initiatives. These Nationally Certified Sustainably Managed Natural Sites may qualify for registration as OECMs if outside officially protected areas. As of December 2024, Japan had registered 159 sites in the international OECM database (UNEP-WCMC and IUCN, 2024_[26]).

Japan has increasingly engaged the business community in biodiversity conservation and in mainstreaming biodiversity into economic activities. It developed the National Biodiversity Strategy and Action Plan (NBSAP) 2023-2030 in response to the GBF goals and targets. The NBSAP emphasises NbS, the 30by30 target and nature-positive economies that harness synergies between biodiversity conservation and economic opportunities, including at local level. The local biodiversity strategies and action plans (LBSAPs) should consider these elements. All prefectures and about 10% of municipalities have formulated their LBSAPs. The 2024 inter-ministerial Transition Strategies toward Nature-Positive Economy encourage companies to reduce environmental impacts and contribute to nature conservation throughout their value chain. As of December 2024, Japan had the world’s highest number of institutions adopting recommendations of the Taskforce on Nature-related Financial Disclosures (TNFD). Keidanren (Japan Business Federation) also promotes biodiversity considerations within industry through its Nature Conservation Council.

Expanding the areas under conservation effectively will require sound governance and management to address complex land ownership patterns, overlapping laws and limited administrative resources. It will also call for appropriate incentives for engaging the private sector (Tanaka and Takashina, 2023_[27]). With this aim, since September 2024, Japan has been piloting a scheme that issues certificates to individuals or entities supporting OECMs. These certificates can be leveraged for TNFD purposes and enhancing investor relations. Likewise, programmes of payments for ecosystem services (PES) can provide financial resources to support OECM implementation (Sharma et al., 2023_[28]). A few PES programmes are implemented at subnational level.

Agricultural ecosystems are vital to Japan’s biodiversity, and the government has focused on supporting sustainable farming. Over the last two decades, it has actively promoted revitalisation of the traditional and culturally significant satochi-satoyama rural landscape, which is threatened by farmers’ ageing, farmland abandonment and conversion to other uses. More recently, the MIDORI Strategy for Sustainable Food Systems sets targets on agriculture’s environmental performance (e.g. GHG emissions, organic farming, fertilisers). It also introduces farm certification and product labelling to encourage eco-friendly farming practices and consumption choices. However, market-price support and payments based on agricultural output and inputs, including fuels, still accounted for about 80% of farmer support in 2021‑23 (OECD, 2024_[29]). These subsidies potentially distort markets and contribute to high domestic food prices. OECD work has shown that these measures are also potentially harmful to the environment, though the actual environmental impacts of these policies depend on several local context-specific factors. Reforming these subsidies can encourage innovation and improve the environmental sustainability of agriculture, as well as its resilience to climate change (OECD, 2024_[29]).

With limited land available for farming, Japan’s agriculture is intensive, with high use of chemical fertilisers and pesticides, and negligible organic farming (OECD, 2023_[30]). Rice paddies occupy more than half of all agricultural land. The country’s high nitrogen surplus has contributed to water and soil pollution, as well as eutrophication of lakes and enclosed coastal waters, although eutrophication has been declining over the past two decades (Working Group for Comprehensive Assessment of Biodiversity and Ecosystem Services, 2021_[24]). While 88% of water bodies meet organic pollution standards, progress has stalled in the last decade. Compliance of lake water with nitrogen standards has improved, but the rate of achievement of chemical oxygen demand standards has decreased. Regulatory measures and public investment in wastewater treatment aim to reduce water pollution. The government subsidises advanced decentralised wastewater treatment systems (johkasou) in rural areas.

The government has strengthened regulations for sustainable fisheries management, but further action is needed. Fishing is important in Japan, with seafood central to its diet. Japan is one of only three countries engaging in commercial whaling. Despite declining fishing capacity and catch volume, half of the assessed commercial fish stocks remain in unfavourable biological conditions. Japan provides large support to fisheries, primarily for general services (OECD, 2022_[31]). In a welcome move, Japan accepted the World Trade Organization’s Agreement on Fisheries Subsidies in 2023. However, it continues to exempt fuel for fishing boats from excise duties and subsidises it when fuel prices rise above a certain threshold, as has occurred since 2022. In general, support for fuel presents a high risk of encouraging unsustainable fishing in the absence of effective fisheries management. It also tends to disproportionally benefit large companies over small-scale coastal fishers (OECD, 2022_[31]).

Japan has consistently advocated, both domestically and internationally, for a “synergistic approach” to address the triple planetary crisis of climate change, biodiversity loss and pollution effectively (Chapter 2). In addition, the MOE has long promoted the vision that environmental initiatives can revitalise regions facing depopulation and economic stagnation. In line with this vision, the Sixth Basic Environment Plan (BEP), approved in 2024, focuses on improving citizens’ well-being and maximising synergies, including through regional development. Numerous other plans address each environmental policy area, as well as sectors related to the environment, such as energy, transport and agriculture. The GX Basic Policy aims to foster decarbonisation, energy security and economic competitiveness through a mix of green investment, transition finance, international collaboration and carbon pricing. While commendable, the GX could be more effective with a synergistic vision of the country’s transformation towards net zero, and circular and nature-positive economic and social systems.

Much has been done to improve institutional co‑ordination and coherence between environmental, economic and social policies. Several inter-ministerial bodies co-ordinate policies such as climate mitigation and GX. However, a “silos” administrative practice (tatewari gyōsei) tends to persist, where different government ministries and agencies operate with a high degree of independence and limited co‑ordination (Aoki, 2023_[32]). Many countries face similar institutional challenges, which can hinder comprehensive policy making and lead to inefficiency in tackling multifaceted environmental and socio-economic problems. Some countries have established government secretariats directly attached to the Prime Minister to co‑ordinate development of national strategies for climate, energy, biodiversity and the circular economy.

Adopting a green budgeting approach could also help Japan strengthen policy synergies and enhance the transparency of budget allocations. While Japan tags the environment-related budget allocations, it has not fully integrated climate and environmental considerations into its budget and fiscal frameworks (OECD, 2024_[33]). The government does not systematically evaluate the environmental impacts of budgetary and fiscal policies, including taxes and subsidies, or assess their alignment with environmental goals.

Citizens in Japan demonstrate a strong interest in environmental issues such as climate change and plastic waste, according to public opinion surveys. More than 90% of respondents expressed willingness to take action in these fields (Cabinet Office, 2023_[34]; 2019_[35]), thanks in part to environmental education and awareness-raising initiatives. However, recognition of biodiversity issues remains lower, although showing some signs of improvement.

Public participation in policy formulation is secured by established mechanisms, such as the public comment process in developing the BEP. However, there is room to improve such mechanisms for communication, consultation and stakeholder engagement in decision making. Overall, stakeholder engagement in Japan is relatively low; many people perceive their opinions during public consultations are often overlooked (OECD, 2023_[36]). Japan has been working to improve the balance in gender and age representation to address the disparity in opportunities for women and youth to participate in and influence government decisions (OECD, 2024_[37]). Efforts to improve these engagements are essential for fostering a more inclusive and participatory approach to environmental policy making in Japan. This is particularly important for decisions about reactivating nuclear power plants and the siting of renewable energy infrastructure, which have been facing opposition from local communities, as well as of emerging technology installation, such as CCUS and hydrogen transport infrastructure.

A comprehensive policy package is needed to advance towards the green transformation in an integrated and cost-effective manner. The policy mix should include public investments, better regulations, innovation, support and incentives for businesses and households, and consistent price signals. To enable a smooth transition and seize its economic opportunities, Japan will need structural reforms that facilitate reallocation of capital and labour resources and help it adjust more quickly to economic shifts (Kurachi et al., 2022_[38]; OECD, 2024_[11])

Environmental impact assessment (EIA) is routinely implemented in Japan for a wide variety of projects, including infrastructure, power plants, and industrial, commercial and residential developments. Wind power plants accounted for more than 80% of the EIAs in process as of March 2024, reflecting developers’ interest in renewables but also the complexity and length of the procedure. However, the EIA scope could be broadened to cover some activities with potentially high environmental impacts that are excluded, such as mining or aquaculture (OECD, 2024_[39]). Japan also needs a more adaptive EIA framework that can address the challenges posed by emerging technologies, especially those needed for the clean energy transition. Local citizens and governments can provide their views at several stages of the EIA process. However, more inclusive and effective public engagement methods can be pursued (Kitamura, 2023_[40]). Japan would benefit from introducing environmental assessments at the level of plans, programmes or policies (strategic environmental assessment, or SEA) as recommended by the OECD (OECD, 2024_[39]), while ensuring effective public participation during the SEA process.

Japan’s environmental permitting system for economic activities is medium-specific, with separate permits for air emissions, water discharges and waste disposal. EU countries and some others issue integrated environmental permits that cover all releases and processes, in line with the OECD Recommendations on Integrated Pollution Prevention and Control (IPPC). In Japan, licensing conditions for pollution sources on air emissions, as well as water discharges and waste disposal, are set based on EQSs and technological feasibility. These conditions consider best available techniques (BATs) for certain substances like mercury. BATs are defined as the most environmentally effective and economically viable proven techniques within each sector. To promote BATs further, Japan could implement a stepwise approach that identifies BATs by sector and establishes national BAT-based standards systematically, in line with the OECD IPPC Recommendation. Using these standards to set permitting conditions would increase the effectiveness of the permitting system to continuously minimise pollution, with increasingly stringent conditions as technology develops.

A strong culture of adherence to rules leads to a low rate of non-compliance, ranging from almost full respect of air emission standards to 6% non-compliance with water effluent standards. The country leverages a toolbox for compliance promotion, including training or guidance provided during inspections. In addition, numerous governmental and business organisations help disseminate information. In case of non-compliance, and before issuing a sanction, inspectors provide administrative guidance with recommendations to improve pollution control measures and support the facility to return to compliance. This is an effective compliance promotion practice. Some 10-20% of inspections lead to issuing administrative guidance, while administrative orders (i.e. sanctions) are rarely seen. The intervention of the authority is already regarded as a sanction due to a potentially high reputational damage.

Regulations, voluntary agreements, research and development (R&D) support and generous subsidies play a key role in Japan’s environmental policy. The 2023 GX Basic Policy considerably boosts support for business investment in the clean energy transition to 2030 and beyond. The longstanding Voluntary Action Plan (VAP) of Keidanren (Japan Business Federation) has encouraged industrial companies to improve their environmental performance, particularly energy efficiency, GHG emission abatement and waste management. Reporting requirements, benchmarking and targets encourage energy savings in manufacturing industry – the country’s largest energy user – and services. Many listed companies publish reports on corporate social responsibility, environment and sustainability. Japan hosts the world’s largest number of companies and institutions supporting the recommendations on climate-related and nature-related financial disclosure.

It is not clear whether progress through the VAP and reporting requirements goes beyond business-as-usual. Environment-related investments, such as those to save energy or recycle materials, are in the companies’ own interest and give them a competitive edge. The VAP has mainly promoted incremental improvements, as companies are incentivised to avoid exceeding their voluntary commitments to prevent more ambitious future targets (OECD, 2010_[41]; IEA, 2021_[13]). The government regularly reviews progress and is consulted when industries set their targets. However, companies have an information advantage that can prevent setting sufficiently ambitious targets that go beyond implementation of BATs.

Expanding the use of environmental taxation and reforming environmentally harmful subsidies would provide more consistent price signals, while contributing to generate revenues. Japan’s public debt amounts to about 240% of GDP, the highest in the OECD. Fiscal consolidation is crucial for the country to rebuild buffers amid rising pensions and health care costs, as well as high investment needs for the green and digital transformation (OECD, 2024_[11]). Tax rates on energy and vehicles are broadly applied but at relatively low rates. As elsewhere, taxes on pollution and resource use are negligible. As a result, environmental taxes account for a lower share of GDP (1.2%) and total tax revenue (3.6%) than in most other OECD countries (OECD, 2024_[42]).

Pricing instruments have generally played a lower role in Japan’s environmental and climate policy mix compared to many other OECD countries (D’Arcangelo, Kruse and Pisu, 2023_[43]). GHG emissions are mainly priced through taxes on energy products, as well as a carbon tax and two subnational emission trading systems or ETSs (Tokyo Metropolitan City and Saitama Prefecture). The headline carbon tax rate and the emission coverage of the ETSs are the lowest among the OECD countries that implement these instruments. The carbon tax and subnational ETSs have had limited impact on reducing GHG emissions in Japan (Wakabayashi and Kimura, 2018_[44]; Gokhale, 2021_[45]). Fossil fuel use in several sectors is partially or totally exempt from the carbon tax and other energy taxes (see below), which further reduces effective carbon prices. Overall, in 2023, fuel and carbon taxes and the ETSs together covered nearly three-quarters of Japan’s GHG emissions, with wide disparities across sectors (Figure 5, panel B) and fuels. The average effective carbon rate (excluding pre-tax subsidies) was EUR 23 per tonne of CO₂, among the lowest rates in the OECD. It is also well below EUR 120, the price needed by 2030 to be consistent with net-zero goals (OECD, 2024_[46]). In 2022, a fuel price support was introduced in response to soaring energy prices. Factoring in this support, the average effective carbon price drops to EUR 3/tCO₂, with only 64% of emissions priced across the economy (Figure 5).

Against this backdrop, the Pro-Growth Carbon Pricing, part of the GX Basic Policy, represents a welcome breakthrough in Japan’s environmental policy. This provides immediate subsidies to industry for investment in decarbonisation technology followed by introducing a country-wide ETS for large emitters and a carbon levy on fossil fuels (GX-surcharge) later in the decade. The future carbon pricing level and coverage are expected to be defined in the first half of 2025. The GX-surcharge is scheduled for FY2028. The ETS has been voluntary since FY2023, covering more than half of Japan’s GHG emissions. It will transition to a mandatory system in FY2026 with participants receiving free CO₂ emission allowance allocations. Auctioning of allowances to power companies is expected to be phased in from FY2033. The government aims to raise finance through its GX Economy Transition Bonds to provide up-front support of JPY 20 trillion (3.4% of 2023 GDP) over ten years and leverage private investment of more than JPY 150 trillion (USD 962 billion). Revenues from future carbon pricing will be used to repay the bonds.

Accelerating implementation of carbon pricing could enhance the effectiveness and economic efficiency of Japan’s climate policy mix (D’Arcangelo et al., 2022_[47]). The GX Economy Transition Bonds are set to provide a substantial low-carbon investment push. However, the long phase-in of the mandatory ETS and carbon levy may limit their contribution to achieving the 2030 emission reduction target (OECD, 2024_[11]). Gradually replacing the allocation of free allowances with auctioning can help mitigate potential market distortions. Evidence suggests that free allowance allocations can reduce the effectiveness of an ETS (Dechezleprêtre, Nachtigall and Venmans, 2023_[48]). They also represent a subsidy to ETS participants that receive them (IEA, 2020_[49]), which include fossil fuel-based power facilities. In addition, the free allowance allocation, along with the late introduction of the carbon levy, will hinder revenue generation (OECD, 2024_[11]). For the ETS and carbon levy to work effectively, it is essential to enshrine in legislation an automatic tightening of the emissions cap and increases in the levy rate to create certainty for investors. Carbon pricing can adversely affect vulnerable households in Japan, which calls for recycling part of the revenue to finance social benefits.

The GX Basic Policy has facilitated greater acceptance of carbon pricing from the regulated business community. Meanwhile, subsidies for decarbonisation technologies that are not yet cost competitive (such as low-emission hydrogen and CCUS) aim to lower their costs and pave the way for large-scale deployment. However, like green industrial policies worldwide based on government financial support, the GX entails risks such as market distortion, picking winners, political capture and windfall gains for companies that would invest even without financial assistance (Millot and Rawdanowicz, 2024_[50]; OECD, 2024_[51]).

The government has provided sizeable support to shield households and businesses from the sharp increase in global energy prices that began in 2021. However, part of this support is untargeted and in conflict with climate goals. In January 2022, the government introduced a subsidy to wholesalers for preventing excessive price increases of petroleum products, including road transport fuels. This scheme has been repeatedly extended and was still in place in December 2024, with plans to gradually reduce the subsidy rate. In addition, discounts on electricity and city gas rates, first put in place in 2023, were reinstated from January to March 2025. These types of untargeted energy price discounts weaken the incentive for consumers to save energy, are regressive and a fiscal burden. In 2022, the energy price subsidy cost over JPY 3.5 trillion or 84% of the energy tax revenue that year. The fuel price stabilisation mechanism should be phased out as a matter of priority, as it dramatically reduces the already low effective carbon rates (Figure 5, panel A). Any further public support, if needed, should solely target the most vulnerable households, and avoid interfering with energy prices (Hemmerlé et al., 2023_[52]). Improving knowledge of energy poverty would enable more effective targeting of support policies. Official data on the population at risk of energy poverty are lacking in Japan. However, some analysis indicates it is a significant issue for the elderly, single-parent households and students, as well as in car-dependent rural areas (Okushima and Simcock, 2024_[53]).

Several other exemptions and discounts apply to energy taxes, often provided as tax refunds. These include exemptions for fuels used in agriculture, fishery, shipping and certain energy-intensive industrial sectors (IEA, 2021_[13]). Comprehensive data on the fiscal revenue losses due to these fuel tax concessions are not available. These concessions weaken the incentives for energy savings or fuel switching. As such, they will likely undermine the ability of the GX subsidies and carbon pricing to deliver effective price signals.

Japan has long provided direct public support for oil, gas and coal exploration and development projects overseas to increase energy security. Along with other G7 countries and recognising the importance of national security and geostrategic interests, Japan committed to ending new direct public support for the international unabated fossil fuel energy sector by the end of 2022, except in limited circumstances consistent with the goals of the Paris Agreement, as defined by countries. According to Japan’s definition of “limited circumstances”, an unabated fossil fuel project can be financed if it aligns with the host country’s decarbonisation pathway or Japan’s national security, energy security or geopolitical interests (METI, 2023_[54]). It would be prudent to periodically review the implementation of these conditions to ensure that financed projects fully align with global climate goals. Given the lifetime of energy infrastructure, today’s financing and investment decisions in developing countries have the potential of either accelerating their shift to clean energy sources or locking in emissions for decades (IEA, 2021_[55]).

Japan has increasingly invested in the green transformation in the last decade, with most investment targeting the clean energy transition. The government has created a supportive environment for green finance by establishing platforms and formulating guidelines.4 The market for green financial products has grown considerably to more than JPY 5 trillion (about USD 38 billion) in 2023. Public investment for environmental protection grew by 20%, driven by local governments’ investment in waste incineration and recycling facilities.5 The country’s (public and private) average annual investment in the clean energy transition grew by 40% between 2016-20 and 2021-23. Energy efficiency in end-use has traditionally been the primary focus of clean energy investment in Japan. Since 2021, it has attracted over 60% of clean energy investment, a higher share than in many other regions of the world (IEA, 2024_[56]). In 2023, the country invested about USD 15 in clean energy for each dollar invested in fossil fuels, over eight times the global average. Japan’s orderly transition from fossil fuels will require significant investments in low-carbon energy. IEA (2024_[56]) estimates that Japan’s clean energy investment should increase by 17% between 2024 and 2035 for the country to align with its own climate goals.

Clean energy investment could boost technological innovation and business investment, with a positive effect on Japan’s productivity and economic growth (Kurachi et al., 2022_[38]). The country is known for its large R&D spending and high number of patents. Large manufacturing businesses account for most R&D spending. Clean energy R&D including energy efficiency, renewables and hydrogen averaged nearly half of public energy R&D outlays in 2019-23. As a result, Japan has acquired a relative specialisation in technologies that contribute to climate change mitigation, such as batteries, electric vehicles (EVs) and hydrogen. In 2021, the share of green patents in Japan’s total patents was higher than the OECD average.

More investment in renewable electricity and storage capacity will be needed to compensate for the expected decline in fossil fuel capacity, produce low-emission hydrogen and further the electrification of the economy. Large investment led renewable electricity capacity to more than double between 2010 and 2023. An exponential growth in solar PV, driven by generous feed-in tariffs, was the primary factor behind this development. Japan now ranks among the global leaders in installed PV capacity. The Sixth SEP aims to maximise the use of renewable electricity and to reach 36-38% of renewables in power generation by 2030, from 23% in 2023, mostly through solar and wind. The IEA estimates that achieving this 2030 target will require increasing renewable power capacity by 17-25% from the 2022 level. IEA (2024_[57]) estimates that Japan will exceed its 2030 capacity target under current policy and market conditions. Some modelling studies suggest that renewables could account for 70-80% of Japan’s total power generation by 2035 – more than double the 2030 government target – at competitive market prices (REI, 2023_[58]; Shiraishi et al., 2023_[59]), and could help reduce GHG abatement costs in the power sector (Kuwabara et al., 2021_[60]).

To fully tap its vast renewable electricity potential, Japan must overcome key challenges that keep installation costs high (IRENA, 2023_[61]). These include limited land availability, deep offshore waters, grid constraints, complex permitting procedures and social resistance. The fragmentation of the electricity network into regional grids limits the dispatch of renewable power, whose best potential lies in areas far from demand centres. Japan has planned considerable investment in grid and storage infrastructure, but much higher grid investment will be needed to stay on the path to net zero (BNEF, 2023_[10]). The government has taken steps to address administrative hurdles, including simplifying and accelerating the EIA procedure for wind power plants. Japan has also allowed local governments to designate renewable promotion areas with faster EIA and permitting processes. In addition, these areas aim to better address community concerns about safety, disaster prevention and landscape impact by involving residents in decisions. Dual-use land systems, such as combining PV with farming (solar sharing or agrivoltaics), can also help foster public acceptance by preserving traditional land use and offering economic benefits to local communities.

Japan rightly prioritises further improving energy efficiency – especially in buildings – to meet its climate and energy security goals. While space heating energy use is relatively low, space cooling intensity is among the highest in the OECD (IEA, 2024_[62]). This reflects the nearly ubiquitous presence of air conditioning systems, albeit highly efficient ones. Improving energy performance in homes can also reduce energy bills, enhance health and quality of life, and protect against increasingly frequent extreme heat. The government provides financial support for energy efficiency and renewable energy integration into buildings. Targeting aid for renovations to vulnerable and credit-constrained households could prevent the benefits from accruing only to wealthier homeowners (Castaño-Rosa and Okushima, 2021_[63]; Hemmerlé et al., 2023_[52]).

The recent reform of energy performance regulations for buildings is welcome, as most buildings do not meet current standards (MOE, 2024_[15]). Efficiency standards will become mandatory for all new buildings as from 2025, four years after the European Union implemented its nearly zero-energy building mandate for new buildings. The reform also aims for zero-energy buildings and houses for new constructions by 2030 and on average for the building stock by 2050, in line with best international practice.6 Nonetheless, Japan should strengthen efficiency requirements for existing buildings to encourage retrofitting of the worst-performing ones. Greater renewable energy integration into buildings will be key for reducing the carbon intensity of energy use in homes and commercial buildings and fully reap the benefits of electrification. Despite lower energy intensity of space heating and cooling, their carbon intensity has increased with the rising carbon intensity of Japan’s power generation. The MOE’s initiative to source all its energy needs from renewables by 2030 is an exemplary action.

The flagship Top Runner Programme, which sets energy performance targets, has helped improve the energy performance of appliances, office equipment and vehicles for over two decades. However, its targets may lack ambition. Targets apply to the average energy performance of a manufacturer’s products, not to individual products as with minimum energy performance standards. Rising number and usage of electric appliances have partly offset the technical energy efficiency gains (Inoue and Matsumoto, 2019_[64]). Appliance use is the largest energy consumer in Japanese homes. Greater focus on encouraging behavioural changes is needed. Campaigns like the “Cool Choice” and “Decokatsu” are positive steps that could be expanded.

Japan’s GHG emissions from transport have steadily declined over the past two decades, partly due to enhanced fuel efficiency of passenger cars. Emissions decreased by 10% between 2010 and 2019, prior to the abrupt drop in 2020 during the COVID-19 pandemic. However, the Top Runner fuel economy targets for trucks and cars set for 2025 and 2030, respectively, are less stringent than those in the European Union (IEA, 2021_[13]). Japan’s excellent rail system and coastal shipping play a significant role in passenger and freight transport, respectively. Yet, road transport is the dominant mode, accounting for some 90% of GHG emissions from transportation. Transport modes differ significantly between metropolitan and rural areas, with train usage much higher in cities than in rural regions where private cars dominate.

Japan is home to one of the world’s largest automotive industries and has been a frontrunner in the development of hybrid, electric and fuel cell vehicles. While hybrid cars already account for most new domestic car sales, EVs still account for only 3.6% of new car sales and less than 1% of the car stock, far below other G7 countries (IEA, 2024_[65]). The government targets 100% sales of “next-generation vehicles” (including hybrid, plug-in hybrid, electric and fuel cell) by 2035. Modelling suggests that, if power generation quickly shifts to low-carbon sources, a 90% share of battery electric in new vehicle sales by 2030 would help meet the NDC in a more cost-effective manner (Kuwabara et al., 2021_[60]). In addition to fostering electromobility, decarbonising the transport sector calls for reducing private car use and boosting alternative modes of transport through demand-side initiatives, spatial planning and support for shared mobility, especially in rural areas.

Better vehicle taxes and subsidies are needed to accelerate the transition to electromobility, reduce GHG emissions from transport and contain fiscal costs. The government has long provided support to lower-emission vehicles through tax incentives and purchase subsidies. EVs and hydrogen fuel cell vehicles benefit from purchase subsidies and are fully exempt from vehicle taxes.7 Hybrid and internal combustion engine vehicles (ICEVs) with fuel efficiency above certain thresholds, as well as cars running on natural gas, also benefit from vehicle tax exemptions. Such subsidies could delay the transition to truly zero-emission vehicles.

Subsidies may be necessary to bridge the cost gap between EVs and traditional cars, but Japan should carefully manage their cost effectiveness and fiscal implications. The budget allocations to cover the fiscal costs of the EV purchase subsidies tripled in FY2021/23. In addition, EV purchase subsidies are generally regressive. As the country’s EV market matures, subsidies should prioritise low-income buyers and be accompanied and progressively replaced by higher taxation of ICEVs. With the gradual shift to electromobility, Japan will need to further boost its comprehensive road use toll system to internalise costs of car use and substitute transport fuel tax revenues (OECD, 2024_[46]).

Expanding Japan’s EV charging network in co‑ordination with renewables and power grid development is essential to support the transition to electromobility. The public charging network has grown slowly, hindering EV deployment. The government aims to install 300 000 charging plugs by 2030, a ten‑fold increase from 2023. In 2024, it revised the EV subsidy criteria to adjust subsidies by manufacturers based on factors like EV infrastructure provision, maintenance services and used battery collection systems. This is a positive initiative, as it can trigger private investment in charging networks and services that enable a wider EV adoption.

In line with the commitments of the G7 Hiroshima Communiqué, Japan aims to pursue synergies between the environmental goals of climate mitigation, biodiversity conservation and circular economy enhancement. This means considering the interconnections among these environmental challenges to maximise complementarities and minimise trade-offs between policies, thereby enhancing the overall impact of policy interventions. Japan is implementing solutions that aim to resolve environmental challenges and address pressing social and economic issues, such as rapidly declining and ageing populations within weak local economies. This integrated approach is essential for achieving the Sustainable Development Goals.

Japan is perceived as a homogeneous country in terms of a range of social and economic criteria, but it exhibits significant differences in environmental performance (e.g. greenhouse gas emissions, green spaces, waste recycling) across its territories. Such differences can be partly explained by broad challenges and opportunities that distinguish urban areas from rural areas. Even among urban areas, environmental challenges such as the risk of flooding may vary according to population density, infrastructure levels or geography. For example, in Osaka (Kansai) metropolitan area, the second largest urban agglomeration in Japan, 28.6% of the population is at risk of river flooding compared to the OECD average of 12.9%. This underscores the importance of tailoring environmental policies and strategies to the unique characteristics of urban and rural areas.

Understanding and addressing these disparities requires a more robust, consistent and comprehensive framework for measuring and monitoring subnational environmental performance. First, Japan should produce and collect additional data and statistics at functional geographical spaces (e.g. metropolitan areas, water basins), allowing for better comparisons across places. Second, it could produce and collect more granular data and statistics in targeted environmental policy areas (e.g. GHG emissions by sector, energy consumption, biodiversity). This would allow Japan to track progress better, identify regional vulnerabilities and tailor environmental actions to the unique needs of each area, including for vulnerable populations. Japan has made good progress in the areas of water-related risk assessment. As of 2024, 98% of municipalities had prepared and disclosed flood hazard maps, which can be an effective tool to prepare for floods and minimise damage (Huang, 2024_[66]). Such locally grounded geospatial data can also be developed for the other environmental policy areas. Given that many smaller municipalities may lack the capacity to develop robust monitoring and assessment systems, the national government can play a key role in supporting them through pilot projects. It can also provide methodologies and tools to measure impacts of subnational environmental policies for others to replicate them.

The major national environmental plans and strategies illustrate how the national government increasingly recognises the role of subnational governments in achieving national environmental goals and targets. For instance, the Plan for Global Warming Countermeasures requires local governments (alone or jointly) to adopt action plans to reduce greenhouse gas (GHG) emissions arising from their own activities and projects. More than half of subnational governments have committed to achieving net-zero carbon emissions by 2050, either voluntarily or with national support. This demonstrates the success of national plans and strategies in engaging subnational governments (MOE, 2024_[67]). The National Biodiversity Strategy and Action Plan (NBSAP) engages local governments effectively in planning and includes local action in implementation. The NBSAP promotes the development of local biodiversity strategies and action plans (LBSAPs) that reflect regional characteristics and are consistent with broader targets. The government further supports local government action by providing guidelines such as the “Potential Map of Ecosystem Conservation/Restoration” for implementing nature-based solutions for disaster risk management at the local level.

On the other hand, other national strategies such as the newly developed GX Basic Policy are focused on supply-side solutions. As such, they lack sufficient emphasis on local economic and social impacts and demand-side measures, inadvertently overlooking the potential to foster synergies. While the outcomes of these strategies need to be carefully monitored, the lack of subnational engagement may limit the effectiveness of these national measures. This is due both to policy misalignment or simply missed opportunities to mobilise the capacity of subnational governments. The GX 2040 vision, under development, provides an opportunity for Japan to integrate place-based approaches that tailor the GX strategies to regional characteristics.

In addition, Japan’s national initiatives could place greater emphasis on generating co-benefits within the environmental domain, as well as across the social and economic domains. Some national plans and strategies discuss synergies within and across domains, to a certain extent. For instance, the Climate Change Adaptation Plan mentions the importance of integrating biodiversity conservation into adaptation strategies to enhance ecosystems' resilience. To foster such synergetic actions, these connections could be more systematically highlighted in national strategies and the role of local governments could be enhanced.

Japan’s Regional Environment Offices (REOs) could play a more central role in engaging subnational governments and aligning environmental policies across different levels of government. They are MOE’s decentralised branches that co‑ordinate and implement national environmental policies at the local level to ensure alignment between national goals and regional needs. By doing so, REOs can help tailor technical and financial support to meet the needs of cities and regions, particularly small local governments with limited capacity. Strengthening the role of these offices would ensure that national environmental plans and strategies are implemented more effectively, with local governments having the resources and guidance needed.

Japan has made progress in providing local governments with the necessary resources and frameworks to implement integrated approaches that leverage synergies. The country’s strategies focus on regional revitalisation, tackling local economic challenges (such as ageing populations and labour shortages) in tandem with environmental challenges, through sustainable energy and other environmental initiatives. As a flagship initiative, Decarbonization Leading Areas (DLAs) aim to advance locally tailored decarbonisation solutions across 82 diverse regions. There are plans to extend DLAs to 100 regions, tailoring solutions to their specific environmental challenges. Similar to the EU’s 100 Climate-Neutral and Smart Cities programme, DLAs aim to demonstrate how Japan can achieve net-zero emissions by 2050 through local pilot projects. Some DLAs like Yokohama and Kitakyushu have already been demonstrating the effectiveness of these place-based actions through marked emission reductions. The Circular and Ecological Economy (CEE) framework, another flagship initiative, integrates social, environmental and economic considerations across urban, peri-urban and rural areas to address sustainability challenges. According to a survey, 146 subnational governments have implemented their own initiatives in line with the CEE. The uniqueness of these pilot initiatives lies within their wide sectoral coverage and tailored support. This allows cities and regions to address various economic and social challenges, such as depopulation, ageing, labour force shortages, and abandoned farmland, together with environmental challenges.

Japan should extend the reach of the DLA and CEE initiative through awareness raising, training and a regional support network. This would ensure municipalities with low financial and technical capacity and a high sustainability and decarbonisation potential to be targeted for implementing the initiatives. First, informational campaigns could be carried out to ensure that all municipalities know they can take part in these initiatives. Second, the national government could carry out training in collaboration with representatives from successful DLAs and CEE initiatives to inform municipalities about potential projects and getting involved. Third, a regional support network could be developed to allow for knowledge sharing between DLAs or CEE initiatives, national government officials and other municipalities. This could be used to share effective strategies, challenges and resources. To this end, it is essential for the national government to ensure sufficient human and financial resources, so the benefits can reach the areas most in need. Regular monitoring and evaluation of the DLAs and CEE initiatives is also crucial to maximise effectiveness.

Many local governments face significant financial and budgetary constraints to scale up environmental action. While the national government has provided substantial financial support, the distribution of resources has been uneven, positioning regions with limited fiscal capacity at a disadvantage. This challenge is in part because of their limited financial tools, specifically their reliance on subsidies. To address this, Japan would benefit from diversifying its funding and financing tools, which cities and regions can use according to their local contexts. Japan could also promote tools such as biodiversity offsetting, land value capture, payments for ecosystem services and environmental bonds. This would enable cities and regions to leverage private investment in their environmental initiatives. Such an approach will first require enhancing fiscal capacities of cities and regions by generating a broader range of local own revenue streams (e.g. taxes, fees, charges). Moreover, these instruments must mitigate potential negative impacts on vulnerable and marginalised communities (OECD, 2023_[68]).

In 2022, urban prefectures in Japan exhibited, on average, relatively low levels of emissions per capita, in comparison to intermediate and rural prefectures (Figure 6). They have led Japan’s GHG emission reduction between 1990 and 2022, as their total emissions dropped by 16% during the period, compared with intermediary (7.2%) and rural (1.3%) prefectures (Figure 6). GHG emissions from buildings remains a challenge. Urban regions account for most total emissions from buildings in Japan, although emissions from buildings are higher in rural regions on a per capita basis (OECD, 2023_[69]).

Innovative solutions are needed to increase the supply of renewable energy in urban areas. Storage batteries and new technology such as Perovskite solar cells could be introduced. Electricity could also be transmitted from rural and other areas where renewable energy generation exceeds their regional energy demand. In addition, Japan could redouble its efforts to minimise land artificialisation and promote mixed-use, high-density and nature-positive urban development. Such instruments can generate synergies between climate action, biodiversity and material circularity objectives.

While larger, resource-rich cities excel in aligning their development policies with climate objectives, smaller and less well-resourced cities need help implementing similar measures. These disparities result in unequal progress towards urban sustainability across Japan. Developing tailored policy measures suitable for small and medium-sized cities in Japan is needed to ensure they can keep pace with larger metropolitan areas. A dedicated decarbonisation strategy for small and medium-sized cities, for example, could identify and tackle their sustainability challenges with tailored solutions.

Japan’s rural areas face challenges related both to the environment, and demographic shifts such as an exodus to urban centres and an ageing population. Expanding renewables could help address these challenges and improve overall welfare by creating job opportunities in rural areas, where renewable energy potential is high (IRENA, 2022_[70]). There are promising examples of rural areas leveraging local resources for sustainable energy production. Maniwa city, for example, is generating biogas from organic waste, human waste, septic tank sludge and livestock manure, while Sosa city is pursuing agrivoltaic projects. These projects illustrate the potential for rural decarbonisation when tailored to local contexts. However, scaling up these initiatives remains a challenge. The broader integration of climate and biodiversity goals, along with circular economy principles, is still underdeveloped in many rural areas. In particular, local citizens have resisted rural renewable solar energy farms. This has resulted in reactionary restrictive ordinances limiting the expansion of rural renewable energy projects in certain municipalities.

The national government can look to and share international best practices of solar energy generation and agrivoltaics to gain valuable insights and foster greater acceptance of renewable energy projects. For instance, countries such as France, Germany and Korea have successfully integrated solar sharing into their agricultural and renewable energy sectors. In addition, the national government can minimise trade-offs in rural land use by promoting urban-rural collaboration within Functional Urban Areas.8

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