Investigating Cost-Effective Policy Incentives for Renewable Energy in Japan

Michael C. Huang and Chul Ju Kim

Chapter 7 in Energy Security, Transition, and Economic Growth, 2025, pp 127-148 from World Scientific Publishing Co. Pte. Ltd.

Abstract: The Great East Japan Earthquake (GEJE) and Fukushima nuclear disaster that occurred in 2011 gave a sharp reminder to Japan’s energy security to reconsider the reduction of nuclear power dependence with a better energy mix. We use a recursive CGE model based on Japan’s renewable energy input–output model to analyze the energy composite of power generation and consumption to investigate cost-effective policy incentives to achieve an optimal energy mix to reduce the nuclear power dependence to less than 5% within 10 years. Moreover, we create scenarios of: (1) nuclear power decommission, (2) renewable energy promotion and (3) virtual power plant (VPP) implementation with public R&D expenditure and power infrastructure investment. The simulation results show that renewable energy could gradually replace nuclear power with capital-use subsidies. Under the direction of nuclear power decommission, the VPP installation could reduce the fiscal cost of wind power by 13%, solar energy by 8% and the social cost by 36%. We provide empirical evidence that the implementation of VPP should be promoted in addition to the renewable policy promotion policy to facilitate power allocation and overcapacity problems better.

Keywords: Energy Security; Energy Transition; Just Transition; Economic Growth; Green Growth; Sustainable Development; Renewable Energy; Green Finance; Climate Finance; Carbon Emissions Reduction; Carbon Markets; Energy Efficiency; Environmental Sustainability; Policy Recommendations; Regional Analyses; Country-Level Studies; Energy Intensity; Capital Efficiency; Solar Technology Adoption; Health and Pollution; Southeast Asia; Central Asia; OECD Countries; Developing Economies; Electricity Tariffs; Energy Governance; Fossil Fuel Dependency; Economic Resilience; Agricultural Energy Use; Virtual Power Plants; Energy Policies; Energy Economics; Energy Poverty; Clean Energy Transition; Financial Incentives; Global Energy Markets (search for similar items in EconPapers)
JEL-codes: O13 Q01 Q42 Q43 Q48 Q54 (search for similar items in EconPapers)
Date: 2025
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