Japan faces the challenge of reducing its greenhouse gas emissions while maintaining economic growth and energy security. This study aims to analyze the potential impact on Japan’s economy and industries if the country achieves its 2030 greenhouse gas reduction target, implements a power mix plan to meet that target, and simultaneously pursues the Growth Strategy Council’s proposal for a power mix plan to achieve carbon neutrality by 2050. The study also investigates an alternative carbon neutrality pathway without nuclear power. The research question is whether these low-carbon policies can lead to both economic growth and decarbonization in Japan. To address this question, the study uses the E3ME-FTT macroeconomic model with endogenous technology diffusion to simulate different policy scenarios and assess their economic and environmental impacts. The results indicate that by 2050, Japan could meet its carbon neutrality target, and at the same time, the GDP could increase by approximately 3% compared with the baseline scenario, with or without nuclear power. This growth is expected to occur in several sectors due to increased demand for decarbonization-related investments and strong private consumption. Additionally, the overall economy is expected to benefit from the increased demand for low-carbon and decarbonization-related investments, reduced costs associated with renewable energy generation, and an improved trade balance resulting from a significant decrease in fossil fuel imports.

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.