Japan and Korea are two of the most developed economies in the Asian region, accounting for 5% of global GDP, with a per capita GDP of approximately 2.5 times the global average. Energy investment represents 1.5% of GDP, and clean energy investment per dollar of fossil fuel investment is 9.8 – over five times the global average. This reflects recent growth in clean energy investment as well as the fact that both Japan and Korea import almost all of their fossil fuels. From 2021 to 2023, average annual clean energy investment in Japan and Korea increased by around 40% and 10%, respectively, compared with the 2016-2020 average. Both countries have announced targets to reach carbon neutrality in 2050 and in our Announced Pledges Scenario (APS), the countries increase their clean energy investment by a further 27% by the end of the decade to align with these goals. This expands investment in low-emission power sources, as well as in the decarbonisation of heavy industry and transport.

Both countries are pursuing policies to promote investments in energy transitions. Japan has clarified investment policies and industry-specific roadmaps for its energy transition under the Basic Policy for the Realization of GX. Multiple plans (such as the Basic Hydrogen Strategy and the CCS Long Term Roadmap) have been developed to support innovation and increase investment in the deployment of a range of decarbonisation technologies. Japan is introducing carbon pricing and setting incentives for companies to accelerate investments in decarbonisation by announcing plans to increase carbon prices in the future. 

Korea’s drive for energy security and its transition to clean energy sources have spurred substantial investments in recent years. With its first National Basic Plan for Carbon Neutrality and Green Growth announced in 2023 (in line with its pledge to achieve carbon neutrality by 2050) Korea plans to significantly increase power generation from renewable energy sources as well as nuclear power, develop core green technologies and nurture new green industries through policy and private financing support, alongside improvements to relevant systems. Commitments to boost carbon neutrality policies are backed by enhanced financial support, such as climate response funds to mobilise private investment. Korea also aims to refine its emission trading systems (ETS) and introduce emissions permit trading. International export and cooperation are also seen as key pillars of Korea’s plan to help finance the energy transition, targeting the industrialisation of nuclear exports, as well as the EV, renewable energy, hydrogen and CCUS industries. Additionally, Korea has pledged to raise the amount of its development assistance devoted to climate and global energy transitions to OECD average levels by 2025.