Experts told me these investments probably won’t lead to much large-scale DAC deployment within Japan, where the geology is poorly suited to carbon sequestration. Many of these corporations likely don’t even plan to purchase DAC-based carbon offsets anytime soon, as they haven’t made the type of bold clean energy commitments seen among U.S. tech giants, and cheaper forestry offsets still dominate the local market.
Rather, contrary to current sentiment in the U.S., many simply view it as a fantastic business opportunity. “This is actually a great investment opportunity for Japanese companies now that the U.S. companies are out,” Yuki Sekiguchi, founder of Startup Navigator for Climate Tech and the leader of a group for the Japanese clean tech community, told me. “They get to work with really high caliber startups. And now everybody’s going to Japan to raise money and have a partnership, so they have a lot to choose from.”
Chris Takigawa, a director at the Tokyo-based venture firm Global Brain, agreed. Previously he worked at Mitsubishi, where he pioneered research on CO2 removal technologies and led the company’s investment in Heirloom. “Ultimately, if there’s going to be a big project, we want to be part of that, to earn equity from that business,” he told me of Mitsubishi’s interest in DAC. “We own large stakes in mining assets or heavy industrial assets. We see this as the same thing.”
Takigawa said that he sees plenty of opportunities for the country to leverage its engineering and manufacturing expertise to play a leading role in the DAC industry’s value chain. Many Japanese companies have already gotten a jump.
To name just a few, NGK Insulators is researching ceramic materials for carbon capture, and semiconductor materials company Tokyo Ohka Kogyo is partnering with the Japanese DAC startup Carbon Xtract to develop and manufacture carbon capture membranes. The large conglomerate Sojitz is working with academic and energy partners to turn Carbon Xtract’s tech into a small-scale “direct air capture and utilization" system for buildings. And the industrial giant Kawasaki Heavy Industries has built a large DAC pilot plant in the port city of Kobe, as the company looks to store captured CO2 in concrete.
During his time at Mitsubishi, as he worked to establish the precursor to what would become the Japan CDR Coalition, Takigawa told me he reached out to “all the companies that I could think about that might be related to DAC.” Most of them, he found, were already either doing research or investing in the space.
Japan has clear climate targets — reach net-zero by 2050, with a 60% reduction in emissions by 2035, and a 73% reduction by 2040, compared to 2013 levels. It’s not among the most ambitious countries, nor is it among the least. But experts emphasize that its path is stable and linear.
“In Japan, policy is a little more top down,” Sekiguchi told me. Japan’s business landscape is dominated by large conglomerates and trading companies, which Sekigushi told me are “basically tasked by the government” to decarbonize. “And then you have to follow.”
Unlike in the U.S., climate change and decarbonization are not very politically charged issues in Japan. But at the same time, there’s little perceived need for engagement. A recent Ipsos poll showed that among the 32 countries surveyed, Japanese citizens expressed the least urgency to act on climate change. And yet, there’s broad agreement there that climate change is a big problem, as 81% of Japanese people surveyed said they’re worried about the impacts already being felt in the country.
The idea that large corporations are being instructed to lower their emissions over a decades-long timeframe is thus not a major point of contention. The same holds for Japan’s now-voluntary emissions trading scheme, called the GX-ETS, that was launched in 2023. This coming fiscal year, compliance will become mandatory, with large polluters receiving annual emissions allowances that they can trade if they’re above or below the cap.
International credits generated from DAC and other forms of carbon removal, such as bioenergy with carbon capture and storage, are accepted forms of emissions offsets during the voluntary phase, making Japan the first country to include engineered credits in its national trading scheme. But to the dismay of the country’s emergent carbon removal sector, it now appears that they won’t be included in the mandatory ETS, at least initially. While a statement from the Chairman and CEO of Japan’s Institute of Energy Economics says that “carbon removal will be recognized in the future as credits,” it’s unclear when that will be.
Sekiguchi told me this flip-flop served as a wake-up call, highlighting the need for greater organizing efforts around carbon removal in Japan.
“Now those big trading houses realize they need an actual lobbying entity. So they created the Japan CDR Coalition this summer,” she explained. Launched by Mitsubishi, the coalition’s plans include “new research and analysis on CDR, policy proposals, and training programs,” according to a press release. The group’s first meeting was this September, but when I reached out to learn more about their efforts, a representative told me the coalition had “not yet reached a stage where we can effectively share details or outcomes with media outlets.”
Sekiguchi did tell me that the group has quickly gained momentum, growing from just a handful of founding companies to a membership of around 70, including representatives from most major sectors such as shipping, chemicals, electronics, and heavy industry.
Many of these companies — especially those in difficult to decarbonize sectors — might be planning for a future in which durable engineered carbon offsets do play a critical role in complying with the country’s increasingly stringent ETS requirements. After all, Japan is small, mountainous, densely populated, and lacks the space for vast deployments of solar and wind resources, leaving it largely dependent on imported natural gas for its energy needs. “We’ll always be using fossil fuels,” Takigawa told me, “So in order to offset the emissions, the only way is to buy carbon removals.”
And while the offset market is currently dominated by inexpensive nature-based solutions, “you have to have an expectation that the price is going to go up,” Sekiguchi told me. The project developer Deep Sky is certainly betting on that. As the company’s CEO Alex Petre told me, “Specifically in Japan, due to the very strong culture of engineering and manufacturing, there is a really deep recognition that engineered credits are actually a solution that is not only exciting, but also one where there’s a lot of opportunity to optimize and to build and to deploy.”
As it stands now though, the rest of the world may expect a little too much of Japan’s nascent DAC industry, experts told me.
Take the DeCarbon Tokyo conference, which was held at the beginning of December. Petre, Sekiguchi, and Takigawa all attended. Petre’s takeaway? “Deep Sky is not the only company that has figured out that Japan is really interested in decarbonization,” she put it wryly. DAC companies Climeworks and Airmyne were also present, along with a wide range of other international carbon removal startups such as Charm Industrial, Captura, and Lithos Carbon.
Overall, Sekiguchi estimated that about 80% of the participants in the conference were international companies or stakeholders looking for Japanese investment, whereas “it should be the other way around” for a conference held in Tokyo.
“I think there’s big potential, Japan can be a really big player,” she told me. But perhaps Americans and Europeans are currently a little overzealous when it comes to courting Japanese investors and pinning their expectations on the country’s developing decarbonization framework. “There’s so much hope from the international side. But in Japan it’s still like, okay, we are learning, and we are going steadily but kind of slowly. So don’t overwhelm us.”
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