The Evolving Policy Landscape for Direct Air Capture (DAC) in Japan
So far, at Planet Savers, we have been organizing global technology development trends and policy trends related to Direct Air Capture (DAC) and Carbon Dioxide Removal (CDR) in Japanese through our Carbon Removal Research Institute.
In the course of this work, we have received numerous inquiries from overseas DAC and CDR stakeholders regarding Japan's policy and technological trends.
With Japan actively promoting climate change measures, such as the launch of the GX-ETS and its commitment to Green Transformation (GX) and carbon neutrality, there are high expectations from the international community. However, we feel that Japan’s DAC policies have not been clearly communicated on a global scale.
This article compiles past and the latest DAC policy developments in Japan. We hope it serves as a useful reference for global DAC players!
1. Challenges in Promoting DAC in Japan
Japan has been actively advancing Direct Air Capture (DAC) technology as part of its broader climate strategy to achieve net-zero emissions by 2050. The country's policy direction reflects a growing recognition of DAC’s role in carbon dioxide removal (CDR) and its integration into industrial decarbonization efforts.
However, such future growth of DAC in Japan is not without its own challenges. Some of which we list down below.
Limited CO2 Storage Infrastructure: Unlike other countries with extensive underground storage capacity, Japan lacks suitable geological formations for storing large volumes of captured CO2. This could create bottlenecks in deploying DAC at scale unless alternative utilization pathways, such as synthetic fuel production or mineralization, are developed.
Slow Renewable Energy Deployment: DAC is an energy-intensive process, and Japan's slow progress in expanding renewable energy infrastructure may limit its ability to power DAC facilities with clean energy. Without a faster transition to renewables, DAC could contribute to higher energy demand and emissions, making it less effective as a decarbonization tool.
Barriers to International Participation: Japan’s DAC market remains relatively closed to foreign companies due to language barriers, regulatory complexities, and business culture differences. These factors can make it difficult for international DAC startups to enter the Japanese market, potentially slowing innovation and competition.
Addressing these challenges will be essential for Japan to fully integrate DAC into its decarbonization strategy and ensure its success in meeting long-term climate targets.
2. Progress and Evolution of Japanese DAC Policy
Meanwhile, Japan has made strong efforts so far to facilitate the development of the DAC industry domestically. We touch upon some key policy initiatives as well as wider decarbonization efforts below.
NEDO’s Moonshot Research & Development Program
In 2019, the New Energy and Industrial Technology Development Organization (NEDO) launched the Moonshot Research & Development Program, a government-funded initiative aimed at achieving sustainable resource circulation for global environmental regeneration by 2050. The amount that was made available at the inception of this R&D fund was 100b JPY to be utilized for a 10-year project life cycle. DAC has been identified as a core technology under this program, positioning it as a key pillar of Japan’s long-term climate strategy. The program aims to accelerate research and innovation to scale up DAC technologies and enhance their economic viability. It is worth mentioning however, that the downside is its rather weak ambition regarding timeline, aiming for a pilot-scale facility by 2030 with commercialization only being expected by 2040. (Source)
DAC Working Group and METI’s Role
Japan’s Ministry of Economy, Trade, and Industry (METI) has been leading discussions on DAC through various working groups and committees. The DAC Working Group, established under METI, has been instrumental in shaping the regulatory and financial frameworks necessary for DAC deployment. The latest discussions highlight the need for clearer policy direction, funding mechanisms, and international cooperation.
The uniqueness of the discussions under this working group lies in the fact that they have quite openly admitted the challenges of the current Japanese environment for DAC early on (similar to the challenges outlined above in this article), which limits the scalability of DAC industry and has clearly identified markets outside of Japan as a place to develop DAC projects by not only exporting Japanese DAC technologies but by also investing in projects outside of Japan. This seems to have led to the recognition of CO2 reductions achieved outside of Japan to be counted under the GX-ETS described below. The working group has also highlighted the need for Japan to create demand for CDR/DAC through the establishment of a long-term DAC capacity target and furthering the design of carbon pricing. (Latest DAC Working Group materials)
Latest Developments in Japan’s GX-ETS and Integration of CDR/DAC
Japan has taken a groundbreaking step by integrating carbon dioxide removal (CDR), including DAC, into its Green Transformation Emissions Trading Scheme (GX-ETS). This initiative is the country’s first attempt to incorporate DAC-based CO2 reductions into a compliance market, setting a precedent for global carbon trading.
The GX-ETS allows for CO2 reductions achieved outside of Japan to be recognized as valid credits, including J-Credits and Joint Crediting Mechanism (JCM) credits.
This expansion is expected to boost investment in DAC technologies and enhance the viability of carbon removal as a market-driven solution.
The move aligns with Japan’s broader strategy to position itself as a leader in international carbon markets.
The Japanese government first introduced the concept of GX-ETS as part of its broader Green Transformation (GX) strategy, aiming to decarbonize the economy while maintaining industrial competitiveness. Initially proposed as a voluntary emissions trading system, it has since evolved into a more structured framework incorporating carbon dioxide removal (CDR) credits, including DAC-derived reductions.
In 2022, the government formally launched discussions on integrating CDR into the GX-League, a public-private initiative aimed at developing market-based carbon reduction mechanisms.
In 2023, Japan announced that CDR credits from J-Credits and the Joint Crediting Mechanism (JCM) would be eligible under the GX-ETS, allowing companies to offset emissions using validated CO2 removal projects, including those implemented internationally.
The government is currently working on the legal and regulatory framework to define methodologies, verification standards, and long-term strategies for DAC and other negative emissions technologies within GX-ETS.
These efforts mark a significant step toward the commercialization of DAC in Japan by providing market incentives and international trading opportunities for carbon removal projects.
Resources:
3. Wider Decarbonization Developments in Japan’s Regulatory Landscape
DAC is now recognized within Japan’s 7th Strategic Energy Plan, the draft Climate Change Mitigation Plan, and the newly announced GX Vision 2040. These policy documents collectively shape Japan’s long-term strategy for achieving carbon neutrality and integrating advanced carbon dioxide removal technologies like DAC.
The 7th Strategic Energy Plan outlines Japan’s overall energy policy framework, setting targets for renewable energy, emissions reductions, and industrial decarbonization. It continues with a 2050 carbon neutral target and reduction of GHG emissions by 46% by 2030. The Plan also explicitly mentions DACCS as a key technology to help achieve the 2050 carbon neutral goal (among other methods including BECCS and carbon sinks). It also mentions that the government will work to evaluate carbon credits obtained via CDR beyond Japanese borders.
The Climate Change Mitigation Plan serves as Japan’s roadmap for reducing greenhouse gas emissions across all sectors, with a specific focus on negative emissions technologies. It states longer term GHG reduction targets - 60% reduction by 2035 and 73% by 2040 before reaching the carbon neutral target.
The GX Vision 2040, introduced as part of Japan’s Green Transformation (GX) strategy, envisions a deep decarbonization pathway by 2040, emphasizing clean energy investments, carbon pricing mechanisms, and the expansion of carbon dioxide removal solutions. CDR is listed as one of the key focus areas that will help drive GX for Japan. It also mentions the government’s plan of introducing carbon pricing by fiscal year 2028.
(7th Strategic Energy Plan & Climate Change Mitigation Plan sources, Cabinet Secretariat, Government Meeting on Climate Policy)
4. Japan’s Plans Ahead – What to Expect in DAC-Related Policy Developments
Looking ahead, there is still some uncertainty regarding how DAC policies in Japan will evolve in the coming months and year but several key developments are expected in Japan’s DAC policy landscape:
Expansion of Public and Private Investment: METI and NEDO are expected to increase financial support for DAC projects, including R&D funding and pilot projects.
New Regulatory Frameworks for DAC Implementation: Japan may introduce policies to regulate DAC deployment, including long-term storage regulations and CO2 monitoring requirements.
Greater International Collaboration: Japan is expected to partner with other countries to develop global DAC supply chains and trading frameworks.
Incentives for DAC Developers: As the GX-ETS expands, more financial incentives and carbon credit mechanisms will likely emerge to support DAC scaling.
Conclusion
Japan is making significant strides in integrating DAC into its climate policies, recognizing its essential role in achieving net-zero emissions. From government-funded R&D programs to regulatory advancements in emissions trading, Japan is positioning itself as a leader in DAC policy innovation. As the framework continues to evolve, increased investment and clearer regulations will be critical in ensuring DAC technologies scale effectively to meet Japan’s ambitious climate goals.
Stay tuned for further policy updates as Japan advances its carbon removal strategy!
