Impact of Carbon Neutrality on the Economy and Industry Assuming Japan’s Achievement of 2030 Power Mix Plan: A 2050 Perspective Based on the E3ME Macro-Econometric Model

Shinya Kato (), Soocheol Lee, Yanmin He, Tsutomu Yoshioka, Toru Morotomi and Unnada Chewpreecha
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Shinya Kato: Faculty of Economics, Yamaguchi University, Yamaguchi 753-8511, Japan
Soocheol Lee: Faculty of Economics, Meijo University, Nagoya 468-8502, Japan
Yanmin He: Faculty of Economics, Otemon Gakuin University, Osaka 567-8502, Japan
Tsutomu Yoshioka: Faculty of Business Administration, Toyo University, Tokyo 112-8606, Japan
Toru Morotomi: Graduate School of Economics, Kyoto University, Kyoto 606-8507, Japan
Unnada Chewpreecha: World Bank, CH-1211 Geneva, Switzerland

Energies, 2023, vol. 16, issue 18, 1-18

Abstract: Japan faces the challenge of reducing its greenhouse gas emissions while maintaining economic growth and energy security. This study aims to analyze the potential impact on Japan’s economy and industries if the country achieves its 2030 greenhouse gas reduction target, implements a power mix plan to meet that target, and simultaneously pursues the Growth Strategy Council’s proposal for a power mix plan to achieve carbon neutrality by 2050. The study also investigates an alternative carbon neutrality pathway without nuclear power. The research question is whether these low-carbon policies can lead to both economic growth and decarbonization in Japan. To address this question, the study uses the E3ME-FTT macroeconomic model with endogenous technology diffusion to simulate different policy scenarios and assess their economic and environmental impacts. The results indicate that by 2050, Japan could meet its carbon neutrality target, and at the same time, the GDP could increase by approximately 3% compared with the baseline scenario, with or without nuclear power. This growth is expected to occur in several sectors due to increased demand for decarbonization-related investments and strong private consumption. Additionally, the overall economy is expected to benefit from the increased demand for low-carbon and decarbonization-related investments, reduced costs associated with renewable energy generation, and an improved trade balance resulting from a significant decrease in fossil fuel imports.

Keywords: 2050 carbon neutrality; E3ME; macro-economic model; energy mix; decarbonization innovation; Japanese economy (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2023
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