Japan urged to ditch fossil fuel support to maximise clean-tech exports

Japan’s exports of clean energy technologies could more than double by 2035 as Asia accelerates its electrification, according to energy think-tank Ember, but it urged the government to abandon policies that support fossil fuels to maximise its clean-tech potential.

The nation’s exports of batteries, electric vehicles (EVs) and motors, heat pumps and grid equipment could be even higher with the right policies in place to ensure it remains competitive and fully embraces the market for clean energy technologies, Ember’s analysis found.

Japan’s exports of clean energy technologies could more than double by 2035 as Asia accelerates its electrification, according to energy think-tank Ember, but it urged the government to abandon policies that support fossil fuels to maximise its clean-tech potential.

The nation’s exports of batteries, electric vehicles (EVs) and motors, heat pumps and grid equipment could be even higher with the right policies in place to ensure it remains competitive and fully embraces the market for clean energy technologies, Ember’s analysis found.

Rapid electrification also means the country’s exports of combustion engine cars, engines, hybrid vehicles and other fossil fuel-powered equipment could more than halve by 2035, falling to about $70 billion from $161 billion in 2024 amid faster-than-expected EV adoption in the region.

Ember director Kingsmill Bond said Japan had the potential to become a leader in clean energy technologies due to its strong engineering base and some of the world’s lowest borrowing costs.

“It should be one of the big winners of the electric age,” he said. “Instead, public money is going into cheap fuel, ammonia for coal plants and new gas plants. Every yen spent propping up the old system is a yen not spent building the home market that Japan’s electrotech companies need to compete abroad,” he added.

Japan in the age of electricity

Ember’s analysis is based on its rapid-change scenario, in which clean energy technology exports keep rapidly winning market share. It also assumes that Japan keeps its share of export markets.

Japan is already the world’s fifth-largest exporter of clean-tech goods, following China, Germany, the US and Mexico. In 2024, it exported clean energy technologies worth $44 billion, driven by exports of EVs and grid equipment.

At home, it is also one of the world’s most electrified countries, with electricity supplying 32% of its final energy use, according to the International Energy Agency, meaning Japanese buildings and factories already run on electricity more than those in China, the EU or the US. Yet, Japan’s electrification rate has barely increased in the past decade.

At COP31 in Türkiye this week, a coalition of countries is expected to back a global pledge to increase the share of electricity in final energy consumption to 35% by 2035.

In addition, Japan’s solar and wind potential, including on rooftops and offshore, could generate 13 times the country’s electricity demand every year, according to Ember. Despite this, Japan imports nearly all of the fuel it burns, having almost no fossil fuel reserves.

At the same time, its early manufacturing lead in areas such as batteries and EV drivetrains is slipping away, Ember said.

Falling behind

In Southeast Asia, where Japanese brands have long dominated, the energy supply crisis triggered by the Iran war and the closure of the Strait of Hormuz sped up the uptake of EVs, and Chinese companies are pulling ahead.

In Thailand and Indonesia – two of the region’s largest car markets – more than 85% of EV sales came from Chinese brands in 2025, according to BloombergNEF’s latest EV outlook.

The shift illustrates the rapid transformation of a region which remains highly exposed to fossil fuel imports. Asia holds just 4% of the world’s oil and gas reserves but has become home to three-quarters of its clean-tech factories, according to Ember.

But Japanese carmakers bet on manufacturing hybrid vehicles rather than fully electric ones. Since 2019, the share of Japanese carmakers in global car sales has fallen from 31% to 26%.

“Unless Japan pivots fast to electric cars, it will cede one of its biggest industries to China,” said Sam Butler-Sloss, manager at Ember.

A way forward

Japan’s current energy policies favour fossil fuels and are holding back its potential to deploy electricity technologies, according to Ember.

Since 2022, Japan has spent about $86 billion on fuel and energy-bill subsidies intended to keep prices down, the report found. At the same time, the country has struggled with high electricity prices and slow electrification growth.

Meanwhile, the government has spent public money on technologies that rely on the old fossil-based system such as LNG, hydrogen and carbon capture and storage.

Ember called on the government to set an electrification target and to respond to the energy crisis with renewable power, EVs and batteries rather than fuel subsidies. It found the government can leverage the country’s industrial strength for producing electric technologies by building up its domestic market.

This could include putting an end date on sales of new petrol cars and coal power generation, providing funding for suppliers and regions to switch to clean power generation, shifting taxes from electricity to fossil fuels, and pivoting public funding to electricity technologies.

Rolling out clean energy technologies across the transport, electricity and heating sectors could also significantly reduce Japan’s dependence on fossil fuel imports.

Noriaki Oba, energy analyst and founder of the Japan-based Post-Oil Strategy Institute, said contributing Japanese technology to Asia’s electrification “would offer Japan a major opportunity for both its industrial competitiveness, as well as its diplomatic and economic security”.