When G7 countries gather in Canada on June 8, it’s not unreasonable to expect common ground will be hard to find in many policy areas.

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When it comes to energy, US President Donald Trump’s Paris withdrawal and his public “digging” of coal have grabbed the headlines and caused furrowed brows amongst US allies. But with less fanfare, another G7 country, Japan, has also been purposefully going about its business of promoting and financing the dirtiest of the fossil fuels.

While cheap shale gas and ever lower costs of renewable energy plus ongoing energy productivity gains will almost certainly doom Trump’s bid to resurrect the US coal industry, Japan continues to construct new coal power plants at home and abroad.

Japan should be a clean energy leader

New research from the National Resources Defence Council (NRDC), Overseas Development Institute, Oil Change International, and Global Subsidies Initiative reveals that Japan pours about US$9 billion of public finance into fossil fuels per year, more than double the amount of any other G7 nation and six times that of the US. The bulk of this public money supports the construction of fossil fuel-based power plants (about $3.5 billion a year), but also fossil fuel exploration ($2.5 billion a year) and oil and gas production (2.8 billion).

This is surprising and short-sighted on a number of levels.

Japan would seem to be the ideal candidate for leading the technology-driven transition to clean energy, not least because today it is so reliant on high-priced coal imports and a nuclear industry still lacking in public trust post-Fukushima.

Japan’s $24bn coal bill

To put it in perspective, at current prices, Japan’s 2018 coal import bill will exceed US$24 billion.

What’s more, Japan has a long track record of developing and manufacturing high-quality cutting-edge technology, whilst its financial sector strength provides a critical advantage in being able to source debt and equity capital at scale.

Common sense would seem to dictate that Japan should invest in clean energy and at home, to act as a springboard for the global market.

Japan doubles down on fossil fuel exports

Instead, with an eye on the growth markets of Southeast Asia, Japan is inexplicably doubling down on exporting “clean coal” and liquid natural gas (LNG) capital projects.

Its rationale for doing so is classic flimsy greenwash. “Should Japan cut funding,” the argument runs, “then China and South Korea would take up the slack, with the result being lower quality coal plants and more pollution.”

This promotion of greenfield fossil fuel projects at rising stranded asset risk is highly questionable, not least since the most recent plant funded by Japan, Nghi Son 2, located in Vietnam, was revealed to be so polluting that commercial bank Standard Chartered chose to walk away.

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This kind of deal poses a threat to Japan’s hard-earned reputation and undermines credibility with respect to its Paris Climate Agreement treaty obligations. Moreover, backing coal is a bet on an industry already consigned to the past.

Renewables will power the future, so the even greater concern for Japan is to be left behind as other countries and their companies dominate the industry

Renewables will power the future, so the even greater concern for Japan is to be left behind as other countries and their companies dominate the industry.

Globally, the energy transition across both the renewable energy and electric vehicle sectors is outpacing even the most bullish predictions of analysts. While it is still possible for some near-term profit to be squeezed from fossil fuel projects over the next decade, the smart money is heading into high growth, zero emissions, and deflationary renewable energy infrastructure.

The clean energy transition gathers pace

Other major Asian economies are aware of this, with South Korea and Taiwan both becoming regional clean-energy champions. China, while no saint in terms of coal finance, has positioned itself up to be a global leader in terms of solar, storage and electric vehicles, and the extensive upstream value chains supporting this, including rare earth and lithium ion processing.

Meanwhile, forward-looking long-term energy policy in India has already seen renewable energy becoming cheaper than coal, and the country is now home to half of the 10 largest solar parks under construction on the planet.

There are some glimmers of hope for Japan. Last month, Dai-ichi Life Insurance became the first Japanese financial institution to impose limits on lending to coal fired-fired power stations, while Nippon Life, Sumitomo Mitsui and Mitsubishi UFJ Financial Group are each making tentative steps to follow Dai-ichi Life’s lead.

What’s more, leading Japanese institutions such as Softbank are already investing in renewables at home and abroad, with breath-taking investment commitments in solar in India and Saudi Arabia just this year, with others like Marubeni also showing signs of a transition, supporting the rapid emergence of offshore wind in Europe and Taiwan.

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This is prudent. But it is being hampered by indecision, the blame for which can partly be laid at the feet of the government, which lacks long-term vision on clean energy policy, ignoring the obvious industry development, carbon emissions reductions, current account improvements and enhanced energy security outcomes this would have for Japan.

On the contrary, as the NDRC analysis states, “Instead of phasing down fiscal support and public finance for fossil fuels, Japan has announced in the ‘Growth Strategy 2017’ continued support for coal-fired power plants both at home and abroad – committing to finance trips of foreign government officials to visit Japan to promote coal, and to fund many more coal projects globally.”

Doing so is a missed opportunity for Japan, which should be at the leading edge of the technology-driven clean energy transition, rather than teaming up with the US president to fight for a coal industry past its use-by date.