Stranded investment associated with rapid energy system changes under the mid-century strategy in Japan
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SPECIAL FEATURE: ORIGINAL ARTICLE Energy Scenarios for Long-Term Climate Change Mitigation in Japan
Stranded investment associated with rapid energy system changes under the mid‑century strategy in Japan Ken Oshiro1 · Shinichiro Fujimori1,2,3 Received: 5 May 2020 / Accepted: 2 September 2020 © The Author(s) 2020
Abstract Japan’s mid-century strategy to reduce greenhouse gas (GHG) emissions by 80% by 2050 requires rapid energy system changes, which may lead to stranded assets in fossil fuel-related infrastructure. Existing studies have shown that massive stranding of assets in the energy supply side is possible; few studies have involved economy-wide stranded asset analysis. In this study, we estimated stranded investments in both the energy supply and demand sectors in Japan in the context of nearterm goals for 2030 and the mid-century strategy. To this end, multiple emission scenarios for Japan were assessed based on various emission reduction targets for 2030 and 2050. The results show that stranded investments in the energy supply sectors occur mainly in coal power plants without carbon capture and storage (CCS), especially in scenarios without enhanced near-term mitigation targets. Increases of stranded investment in demand sectors were observed primarily under stringent mitigation scenarios, which exceed the 80% reduction target. In particular, investment for oil and gas heating systems in the buildings sector may be stranded at levels up to $20 billion US between 2021 and 2050. We further simulated a scenario incorporating a subsidy for devices that do not use fossil fuels as a sector-specific policy; this reduced the amount of stranded investment in the buildings sector. We confirmed the benefit of enhancing near-term mitigation targets to avoid generating stranded investments. These findings support the importance of inclusive energy and climate policy design involving not only pricing of carbon emissions but also complementary cross-sector economy-wide policies. Keywords Stranded asset · Climate change mitigation · Mid-century strategy · Electrification · Energy policy · Energy system transformation
Introduction
Handled by Masa Sugiyama, University of Tokyo, Japan. Electronic supplementary material The online version of this article (https://doi.org/10.1007/s11625-020-00862-2) contains supplementary material, which is available to authorized users. * Ken Oshiro [email protected]‑u.ac.jp 1
Kyoto University, C1‑3, Kyotodaigaku‑Katsura, Nishikyo‑ku, Kyoto, Japan
2
National Institute for Environmental Studies, 16‑2 Onogawa, Tsukuba, Ibaraki, Japan
3
International Institute for Applied System Analysis (IIASA), Schlossplatz 1, 2361 Laxenburg, Austria
The Paris Agreement requires that parties submit Nationally Determined Contributions (NDCs), which include mitigation targets for reducing emissions of greenhouse gases (GHGs) by 2030, and encourages each party to formulate a long-term low-emission development strategy, known as the mid-century strategy (MCS), which focuses mainly
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