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Revision of Japan’s Act on Rationalising Energy Use (Energy Conservation Act) Effective April 2023

Published Date

The government enacted the Act on Rationalising Energy Use in 1979 after the Iranian oil crisis to optimise the nation’s energy utilisation. Accordingly, corporates in the following segments who meet certain annual operational criteria are mandated to report on their energy consumption and conservation plans:

Under the act, applicable corporates are mandated to submit 2 reports due the end of July. Regular reporting needs to be submitted annually concerning energy consumption and other aspects of energy use at its factories, etc. (including matters concerning efficiency in energy use and the emissions of carbon dioxide discharged by the use of energy) as well as the aspects of establishment, modification and demolition of energy consuming facilities and other facilities relating to the rationalization of energy use (Ministry of Justice, Japan, 2018). Medium-to-long-term planning report also needs to be submitted regularly for achieving the targets for the rationalization of energy use that is specified for factories, etc. (Ministry of Justice, Japan, 2018).

After the announcement of Japan's carbon neutrality target by 2050, the Act on Rationalising Energy Use was revised in May 2022 to include three additional scopes. The applicable corporates are required to comply with the below enhancements from April 2023. These aim to provide further incentives for energy conservation efforts and facilitate the shift towards clean energy sources.

Key Changes

1. Expanded scope of energy

The scope of energy under the Act previously was limited to coal and fossil fuel sources such as petroleum, combustible natural gas and coal for generating heat and electricity. After the revision, the scope was expanded to include non-fossil fuels such as biomass, ammonia, hydrogen, solar and wind. The emission factors have been publicly available by Ministry of the Environment for emissions inventory management. Hence, rationalising use of all energy is now promoted under the Act.

2. Additional reporting items related to non-fossil fuels

Previously, the applicable corporates were mandated to submit Regular Reporting on their coal and fossil fuel energy consumption and their Medium-to-long-term Plans for energy conservation projects to the Ministry of Economy, Trade and Industry and State Minister in Charge. After the revision, the Regular Reporting includes the use of non-fossil fuel energy consumption and Medium-to-long-term Plans for shifting energy sources to non-fossil fuels as well.

3. Demand and response integration

To control the demand for electricity with varying times of renewable energy output and to decrease the demand for electricity when the supply-demand balance is tight, the applicable corporates are mandated to report on their performance in demand and response (DR). Previously, they were reporting on electricity consumption by daytime, night-time, and levelling time periods (summer and winter daytime). After the revision, the applicable corporates are required to report on monthly or timely (e.g., per 30 mins) electricity consumption as well as the number of days where they performed DR.

The revision of the Act on Rationalising Energy Use embraced the government’s intent to improve energy consumption intensity and promote a more diversified energy mix. If the applicable corporates fail to comply such as failing to submit the reports or exceeding the legal energy conservation figures, they will be subjected to a violation of law. The government will issue an order to set energy conservation figures below the legal standards, for instance, and if the applicable corporates fail to follow the order, there will be legal actions to correct the situation in stages, including a fine below 1 million Japanese yen.

The revision of the Act encourages the applicable corporates to integrate clean energy transition into their business planning. Furthermore, the government has implemented various support schemes, including subsidies, to promote the utilization of Power Purchase Agreements (PPAs), energy management software, and Industrial Internet of Things (IoT) solutions.

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Background for the revision of the Act

Japan’s energy conservation has improved significantly from 1970 to 1990. One of the reasons why such change occurred was the Moonlight programme launched from 1978 to 1992. The government has made a capital investment of 130 billion Japanese yen to energy efficiency measures including waste heat recovery, magnetoplasmadynamic, high-efficiency gas turbines and a new type of power storage system in this programme. Private sector voluntarily invested accordingly, as well. Steel industry has made approximately 5,000 billion Japanese yen from 1971 to 2011 Such investment initiatives in this programme led to a drastic decrease in energy consumption intensity in the manufacturing sector in those decades.

However, subsequent energy efficiency gains have been stagnant over the last 30 years. This can be attributed to a drop in government funding as a new Sunshine Programme, focused on solar-related R&D for renewable energy implementation, replaced previous energy efficiency grants.



Fig 1: Change in energy intensity by sector in reference to 1973 levels

Contributors:

Eri Taniyama, Schneider Graduate Program Associate

Ryota Wong, Schneider Graduate Program Associate

Sources:

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  6.  Nagata, T. (no date) Japan’s Policy on Energy Conservation - UNFCCC, Japan’s Policy on  Energy Conservation. Available at: https://unfccc.int/files/bodies/awg/application/pdf/2_japan.pdf (Accessed: 17 November 2023).
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