Price Discovery: Japan Launches Carbon Corridor as Offshore Wind Pivots from Competition
🙏Apologies for the delayed delivery this week! Aiming to get back on track with Wednesday-Thursday releases going forward 📅
*Editor’s note: This article was originally published on 1/30/2026 on Linkedin.
Welcome to issue 188 of Japan Climate Curation! 📬 I’m Hiroyasu Ichikawa (ichi), curating Japan’s climate news weekly since 2022 for 500+ subscribers on this Substack & [3,100+ on Linkedin].
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[🇯🇵📰👀Japan Climate News Headlines]*Missed last week’s issue? Click here to catch up
【1】💹 Japan sets 2026 price band for carbon market to steer investment by big polluters [01/23 Eco-Business]
Japan will introduce a price corridor for its emissions trading system (GX-ETS) in fiscal 2026, setting carbon prices between JPY 1,700 (US$11) and JPY 4,300 (US$27) per tonne of CO2 ahead of the market’s full launch in autumn 2027. Mandatory participation applies to companies emitting over 100,000 tonnes annually—covering approximately 300–400 firms including Nippon Steel, Toyota, and JERA—representing roughly 60% of domestic emissions. The ceiling reflects estimated coal-to-LNG switching costs, while the floor is based on historical J-Credit prices. From fiscal 2027, both limits will rise annually by inflation plus 3% to incentivize early decarbonization investments. This pricing band aligns with China and South Korea but remains well below California and New Zealand levels. The scheme is central to Japan’s GX strategy targeting carbon neutrality by 2050 while maintaining industrial competitiveness.
【2】⚡ TEPCO puts capital tie-ups at center of updated turnaround plan [01/27 Nikkei Asia]
Tokyo Electric Power Co. (TEPCO) will begin accepting capital tie-up proposals from domestic and foreign companies and investment funds as early as this month. This move addresses mounting funding needs for Fukushima Daiichi decommissioning, nuclear reactor restarts, and power grid expansion, forming the core of its first restructuring plan update in five years. Retail, transmission, and renewable energy operations are open to partnerships. TEPCO aims to source over 60% of electricity from decarbonized sources by fiscal 2040, targeting data center demand growth. President Kobayakawa stated that “realizing partnerships will be key” for decommissioning work and corporate value enhancement, not ruling out privatization. While repaying over 11 trillion yen in government debt, TEPCO pursues growth investments with limited capital.
【3】🌊 Key wind market plans radical relaunch with ‘no more races to the bottom’ [01/23 RECHARGE]
Japan has released final proposals to radically revise its offshore wind auction system. The new framework shifts from pure price competition to evaluating “sustainability, capability, and viability.” This follows the collapse of Round 1 projects, where a Mitsubishi-led consortium withdrew 1.7GW of capacity, and Round 2-3 winners face severe financial strain. The government attributes failures to aggressive underbidding and overzealous scheduling. Reforms include price floors and ceilings, relaxed timeline requirements, stricter withdrawal rules, and enhanced qualitative scoring.
【4】📈 Japan sees rise in power demand on data centre and chip growth, grid monitor says [01/21 Reuters]
Japan’s grid operator OCCTO projects electricity demand to grow 5.3% over the next decade, reaching 846.1 billion kWh by fiscal 2035. Data centers and semiconductor plants drive this growth, adding 56.8 billion kWh. The forecast was revised down from last year’s 5.8% due to construction delays at data centers. Industrial demand is expected to rise 18.3%, while household consumption will decline 5.7% due to population shrinkage and energy efficiency gains. This marks a reversal from pre-2024 forecasts that predicted declining demand.
【5】🔋 Idemitsu to build pilot solid-electrolyte plant for Toyota’s EVs [01/29 Reuters]
Idemitsu Kosan, Japan’s second-largest oil refiner, has made a final investment decision and begun construction of a large pilot plant to produce solid electrolyte for all-solid-state lithium-ion batteries. The company is collaborating with Toyota to support the automaker’s goal of launching EVs equipped with solid-state batteries by 2027-2028, marking a significant step toward commercialization. The plant, with production capacity of several hundred metric tons per year, is set for completion in 2027 at Idemitsu’s Chiba facility near Tokyo. Construction has been contracted to Chiyoda Corporation. This development comes as automakers and battery suppliers worldwide race to develop solid-state batteries, seen as crucial for longer-lasting, safer, and more affordable EVs.
【6】🏭 Japan utility weighs building LNG power plant in Hokkaido [01/28 Nikkei Asia]
Hokkaido Electric Power is considering building an LNG-fired power plant adjacent to the Tomato-Atsuma coal plant in Tomakomai, with 500MW-1GW capacity, completion in late 2030s, and costs exceeding ¥100B. Driven by 10%+ demand growth through 2035 (largely data centers), the utility plans to balance rising demand and decarbonization through nuclear restarts (from 2027) and LNG expansion while phasing out coal/oil plants. A Pacific-facing LNG terminal is also under consideration.
【7】⚛️ U.S. Department of Energy and Kyoto Fusioneering Launch Strategic Partnership [01/29 Kyoto Fusioneering]
The U.S. Department of Energy and Kyoto Fusioneering have formed a strategic partnership to accelerate commercial fusion deployment. Centered on collaboration with Oak Ridge National Laboratory, they will jointly develop tritium breeding blanket technology critical for sustaining fusion power. UNITY-3, a world-leading test facility, will be built at ORNL with endorsement from ten partners including seven U.S. fusion companies. This agreement pioneers coordinated public-private investment and strengthens U.S.-Japan alliance cooperation in clean energy.
【8】🚢 Japan’s Mitsui O.S.K. Lines, MOL, Unveils First Carbon Removal Results [01/22 CarbonCredits.com]
MOL has announced its first carbon removal results under Environmental Vision 2.2, reporting credits equivalent to 2,000 tons of CO2 in FY2024 and targeting 2.2 million tons by 2030. The shipping giant secured offtake agreements across three technologies: 13,400t via Climeworks’ DAC (a global first for shipping), 30,000t from Captura’s ocean capture, and 10,000t through Alt Carbon’s enhanced weathering in India. MOL also launched a joint venture with Marubeni for nature-based credits in India and partnered with ITOCHU on environmental certificates, demonstrating a diversified, cross-industry approach to maritime decarbonization.
【9】🚗 Tesla’s Japan victory is more retail than revolution - Company changes tack and sells 10,600 cars — double the number it sold the previous year in the country [1/29 Financial Times]
Tesla’s Japan sales doubled to 10,600 units in 2025 despite global automotive revenue declining 11% in Q4. Success came from shifting away from online-first strategy to physical retail: expanding mall showrooms and easier test drives. Though Japan’s EV market remains under 2% of new registrations, Tesla achieved 366 cars per dealership, outperforming imports like Mercedes-Benz and BMW. While impact on global earnings is limited (China and US represent three-quarters of revenue), the results demonstrate effectiveness of traditional retail fundamentals in a market Tesla entered in 2010.
【10】🇪🇺 Climate KIC/JETRO Call for Partners [01/29 Climate KIC]
Climate KIC and JETRO are seeking European investors, corporates, and research partners to collaborate with five high-potential Japanese climate tech start-ups visiting Europe in February 2026. This initiative is part of the J-StarX Global Growth for Climate Tech in Europe Programme, a strategic acceleration effort designed to help Japanese climate innovators enter and scale in European markets. The selected start-ups span diverse sectors including hard-to-recycle plastic recycling, sustainable AgriTech, circular economy bioproducts, AI-powered optical sensing, and climate-resilient crop innovation. This visit offers a unique opportunity for face-to-face engagement to explore concrete partnerships, pilot projects, and investment opportunities.
📬 That’s a wrap for this week! Thank you for reading.
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