Policy Design for Diffusing Hydrogen Economy and Its Impact on the Japanese Economy for Carbon Neutrality by 2050: Analysis Using the E3ME-FTT Model

Abstract

To achieve carbon neutrality in Japan by 2050, renewable energy needs to be used as the main energy source. Based on the constraints of various renewable energies, the importance of hydrogen cannot be ignored. This study aimed to investigate the diffusion of hydrogen demand technologies in various sectors and used projections and assumptions to investigate the hydrogen supply side. By performing simulations with the E3ME-FTT model and comparing various policy scenarios with the reference scenario, the economic and environmental impacts of the policy scenarios for hydrogen diffusion were analyzed. Moreover, the impact of realizing carbon neutrality by 2050 on the Japanese economy was evaluated. Our results revealed that large-scale decarbonization via hydrogen diffusion is possible (90% decrease of CO2 emissions in 2050 compared to the reference) without the loss of economic activity. Additionally, investments in new hydrogen-based and other low-carbon technologies in the power sector, freight road transport, and iron and steel industry can improve the gross domestic product (1.6% increase in 2050 compared to the reference), as they invoke economic activity and require additional employment (0.6% increase in 2050 compared to the reference). Most of the employment gains are related to decarbonizing the power sector and scaling up the hydrogen supply sector, while a lot of job losses can be expected in the mining and fossil fuel industries.