[Column Series] Key Issues to Address in Japan's Strategic Energy Plan (No.8) How Much Emission Will Japan’s “Zero Emission Thermal Power” Emit?With Proposed Low-carbon Hydrogen and Ammonia Standards, Coal Remains “Unabated”

in Japanese

[Special Contents] Key Issues to Address in Japan's Strategic Energy Plan
(originally published in Japanese on 26 July 2024)

1. Introduction

Several European countries and the United States have already defined low-carbon hydrogen emission standards by late 2021 and early 2022, as part of their efforts towards a decarbonized society. In Japan, following the enactment of the Hydrogen Society Promotion Act in May 2024, draft standards for low-carbon procurement have recently been released¹. These draft standards guide businesses when applying for government support to cover the price difference between fossil fuels and low-carbon hydrogen-based fuels, including ammonia, synthetic methane, and synthetic fuels².

The presented standards for low-carbon hydrogen and ammonia are intended to achieve a 70 percent reduction in emissions compared to fossil fuel-derived gray hydrogen and gray ammonia. However, we found that the current standards for low-carbon ammonia do not achieve a 60 percent reduction in gray ammonia emissions³.

The government plans to launch its first price difference subsidy project by the end of this year, targeting the co-firing of ammonia with coal-fired power, a scheme referred to as “Zero Emission Thermal Power.” According to the proposed emission standards, the government goal of achieving 50% co-firing by mid-2030 will still leave approximately 70% emissions from conventional coal-fired power. Similarly, the goal of 100% ammonia-firing by late 2040 would result in around 40% of the emissions remaining. Additionally, because these resources are significantly more expensive than coal, the required subsidies for the price difference could amount to several trillion yen. This continued reliance on imported fossil fuels may jeopardize Japan’s energy security and risk diverting taxpayers’ money from investments in domestic industry and employment to support short-term price differentials.

This column explores these issues and the related challenges.

2. Emission Standards for Japan and Other Countries

Table 1 displays the greenhouse gas (GHG) emissions standards for low-carbon hydrogen and other fuels as presented by the Ministry of Economy and Trade and Industry (METI). These values are presented as 70% lower than those for gray hydrogen and gray ammonia produced from natural gas (i.e., about 30% of which is emitted). Comparing these hydrogen standards with those of the major European countries and the US (Table 2), the EU taxonomy standards are slightly more stringent than those of Japan, and the German requirements are even more stringent because they are based on green hydrogen that uses renewable electricity and also require proof of origin. The UK’s low-carbon hydrogen reference standard of 2.4 is more stringent than that of Japan, while the US has a broader scope for emissions intensity, with a tax incentive scheme based on CO₂ emissions.

Table 1　GHG Emission Standards for Hydrogen and Ammonia in Japan⁴

Table 2　Emission Standards for Hydrogen in Major Western Countries

The "Well-to-Gate" scope for emission calculations in Tables 1 and 2 refers to the period from raw material extraction to the output of hydrogen production plants. It’s important to note that fossil fuel-derived hydrogen inherently emits GHGs due to energy inputs and methane leaks during raw material extraction. Consequently, even if 100% of the CO₂ generated during hydrogen production is captured and stored, GHG emissions from upstream of the production process still occur. This issue will be discussed further in the following section.

3. Ammonia Production Process and the Scope for Emission Standards Calculation

JERA, Japan’s largest power generation company, plans to procure low-carbon ammonia by 2028⁵. Until then, gray ammonia is expected to be used for co-firing with coal-fired power, with price difference assistance now available. Figure 1 shows an overview of the production process and supply chain of fossil fuel-derived blue ammonia⁶.

The production and supply chain process involves five main steps:

1. Fuel Supply and Transportation: This step covers the extraction of natural gas and its transportation to production plants for blue hydrogen and ammonia. This upstream process not only generates CO₂ from the energy required to extract and transport natural gas but also emits methane, a potent greenhouse gas, due to leaks during extraction and transportation. These emissions significantly impact global warming⁷.
2. Ammonia Production and Processing: In this step, hydrogen is produced from natural gas. The CO₂ generated during this process is captured and stored underground to produce blue hydrogen. This blue hydrogen is then reacted with nitrogen extracted from the air to produce ammonia⁸.
3. Processing and Transportation: The produced ammonia is cooled, liquefied, and transported by specialized vessels. The liquefaction process and transportation require energy, which results in additional CO₂ emissions.
4. Storage and Transportation: Upon arrival in the destination country, the ammonia is unloaded, stored, and transported to its point of use.
5. Use: Finally, the ammonia is used at its destination. In the context of co-firing with coal, this step refers to the power plant where the ammonia is utilized.

Figure 1　Fossil Fuel-derived Ammonia Supply Chain (production and transportation processes)

In summary, the only stage where CO₂ is not emitted directly from burning ammonia is step 5 (the use of ammonia). However, all other processes generate CO₂ due to methane leaks and energy consumption. Even if CO₂ emissions from the production of fossil fuel-derived hydrogen and ammonia are 100% captured and stored, GHG emissions from methane leakage and energy use during the upstream processes are unavoidable.

Therefore, it is crucial to determine the appropriate scope for establishing GHG emission standards for hydrogen, ammonia, and related fuels. The scope can be categorized as follows, with a broader range indicating higher GHG emissions:

• Gate-to-Gate: Emissions are measured from the production plant only.
• Well-to-Gate: Emissions include the entire process from raw material extraction to the outlet of the production plant.
• Well-to-Point of Delivery: Emissions cover the full process from raw material extraction to the delivery point for end use.
• Well-to-Wheel: Emissions account for the entire lifecycle, from raw material extraction through to after the fuel has been used.⁹

Understanding these scopes is essential for accurately assessing and setting GHG emission standards.

In light of this situation, as shown in Tables 1 and 2, “Well-to-Gate” has been widely adopted when comparing standards across countries, as it excludes country-specific conditions such as transportation. It is, however, important to note that when considering not only green hydrogen, but also fossil fuel-derived blue hydrogen as eligible for support, GHG emissions and methane leakage in upstream processes in the “Well-to-Gate” range are issues that need to be examined.

Figure 2, prepared by the US Department of Energy (DOE) for the development of the clean hydrogen standards, shows how GHGs are emitted during the production of blue hydrogen. The upstream process and the hydrogen production process with CCS are described in detail. The UK has also published the standards that specify each process (upstream process, hydrogen production process, and CCS) and the respective sources that should be accounted for as GHG emissions (Table 3).

Figures 1 and 2, along with Table 3, show that global warming impacts arise from energy consumption and GHG leaks throughout the blue hydrogen and ammonia production process, including fossil fuel extraction, transportation, hydrogen production, and CO₂ storage.

In the case of Japan, fuels are expected to be transported by sea over long distances. Therefore, there are additional processes involving energy consumption and leakage which include liquefaction/storage/loading/marine transportation/landing/storage. Thus, the current "Well-to-Gate" standard is insufficient. Japan needs to develop GHG calculation methods and standards that cover the entire process, similar to the US and UK, which account for all upstream stages. A broader range, such as "Well-to-Point of Delivery," should be used to encompass these additional emissions.

The existing definition of "Zero Emission" thermal power is too narrow, as it excludes significant emissions from liquefaction and transportation. This presents a major challenge for Japan’s strategy of importing hydrogen and ammonia.

Figure 2　GHG Emissions in the Production Process of Blue Hydrogen (the red boxed part of Figure 1)

Table 3　Type and Description of GHG Emission Sources related to Low-carbon Hydrogen Production in the UK

4. GHG Emissions Per Fuel

Table 1 presents the emission standards set by METI, converted to values per unit heat value, and compared with Well-to-Gate GHG emissions for hydrogen and ammonia production as defined by the IEA. Figure 3 illustrates these comparisons for each upstream process.　It shows that the GHG emissions of low-carbon ammonia per unit heat value¹¹ is 38% compared to coal, a reduction of only 62%. The emissions excluding upstream emissions are 115g-CO₂e/MJ_LHV for coal and 32.4 g-CO₂e/MJ_LHV for low-carbon ammonia, suggesting that the emissions for low-carbon ammonia are reduced by 72% compared with coal, i.e., 28% of coal emissions. This raises concerns that Japan’s proposed standard of a “70% reduction from Well-to-Gate” might not account for upstream emissions, unlike the standards set by the US and UK.

Next, we examine the emissions when ammonia is procured under the carbon intensity standard presented by METI.

Figure 3　GHG Emissions for each Fuel including Upstream Processes (Well-to-Gate standard)

5. GHG Reduction Effects of Co-firing and Mono-firing of Ammonia with Coal-fired Power

Figure 4 shows the emissions of coal-fired power based on the METI standards, assuming ammonia co-firing rates of 20%, 50%, and 100%. The co-firing of 50% ammonia results in a mere 31% reduction when the combustion of coal and ammonia, as well as the upstream process of ammonia production, are taken into account. Even for 100% ammonia firing, the reduction compared to coal firing is 62%, taking into account the emissions from the upstream process, with the remaining approximately 40% emitted.

At the G7 Climate, Energy and Environment ministers' meeting held at the end of April 2024, it was agreed to phase out unabated coal-fired power by 2035. According to the IPCC 6th Assessment Report, "abated" implies capturing 90% or more of CO₂ from power plants¹². Therefore, Japan’s carbon intensity standards do not meet international "abated" criteria and fall short of global carbon neutrality goals.

Figure 4　GHG Emission Reduction Effect of Ammonia Co-firing in Coal-fired Power Generation

6. Demand-side Care Emissions “Excluded in the Zero-emission Scope”

Figure 3 highlights that emissions can be reduced by up to 90% with green hydrogen from renewable sources. However, this requires substantial investment in renewable energy upstream, rather than in downstream thermal plants. The RE100 Initiative, which includes over 420 global companies (87 from Japan), is discussing stringent conditions to limit co-firing even with green hydrogen to prevent prolonging the life of fossil fuel-based plants. Revised conditions are expected by year-end. Japan has committed to transitioning to green energy and achieving mono-firing by 2050 but lacks specific standards and a timeline for its review. This raises concerns that Japan may continue relying on fossil fuels. To facilitate this transition, effective incentives such as a carbon price are necessary. The Japan Climate Initiative (JCI), with over 200 members, has advocated for a carbon price of $130/t-CO₂ by 2030¹³ and a phaseout of domestic coal by 2035¹⁴. This recommendation has drawn attention in light of the Japanese government’s support for costly ammonia co-firing projects with limited emissions reductions.

This column explains the implications of the Japanese government’s carbon standards for hydrogen and other fuels, referring to ammonia co-firing with coal-fired power as an example. While Japan’s indication of carbon standards is a step forward, the ammonia standards do not cover emissions associated with the long-distance import process and emissions from the upstream processes. As a result, even if 100% ammonia power becomes feasible, it will allow large amounts of emissions overseas to remain.

In order to achieve the carbon neutrality goal to avoid a serious climate crisis, Japan must establish comprehensive standards that include emissions “excluded in the zero-emission scope”, and a vision for the energy transition.

[Special Contents] Key Issues to Address in Japan's Strategic Energy Plan