Japan and the United States are considering jointly supporting firms investing in decarbonization projects via a new framework that would give them subsidies and tax breaks, government sources said Tuesday.
Projects related to electric vehicles, as well as hydrogen, viewed as a cleaner energy source, will likely be among the initiatives to be targeted by both nations, which place importance on green growth, they said.
Tokyo and Washington are arranging to include such an agreement in a joint statement to be issued after a planned summit meeting on April 10 between Japanese Prime Minister Fumio Kishida and U.S. President Joe Biden in the U.S. capital, according to the Japanese government sources.
The joint push would help Japan and the United States accelerate their respective efforts to achieve decarbonization and foster domestic industries that can lead growth, the sources said.
For Japan and the United States, longtime security allies, the initiative would also serve as an opportunity to compete with China, which holds significant shares of the EV battery and solar panel markets.
Hydrogen production is known to have a lower carbon footprint. Japan has announced steps to help narrow the price gap between hydrogen and other lower-priced fuels while the United States provides tax breaks for hydrogen producers.
Japan, which aims to attain carbon neutrality by 2050, estimates at least 150 trillion yen ($990 billion) worth of investment will be needed for decarbonization over the next decade.
Part of the funds, or about 20 trillion yen, will be secured by issuing green transformation bonds to assist firms in developing and promoting renewable energy technology.
Based on the Inflation Reduction Act, the Biden administration is ramping up investment in clean energy to combat climate change and ensure energy security. It includes about $369 billion in tax credits and other incentives, partly to encourage consumers to buy EVs.
