Japanese bank financed more GHG emissions than France in 2024

A new report released by Friends of the Earth (FOE) Japan ahead of COP30 in Brazil found that the Japanese government has been, via public financing, a major contributor to fossil-fuel based greenhouse gas (GHG) emissions.

The report is focused on the state-owned Japan Bank for International Cooperation (JBIC), one of the largest export-credit agencies in the world.

Via a case-by-case analysis of emissions from every JBIC-supported project, it found that in 2024, the financier was responsible for 408 million tons of CO2-equivalent, more than the annual emissions of France, the United Kingdom, or Italy.

“JBIC’s investment portfolio deviated greatly from the 1.5°C pathway,” said Hiroki Osaka, a campaigner with FOE Japan, during a pre-COP press conference. “We believe it is time for the Japanese government to rethink whether this is the correct way to use Japan’s public funds.”

Not surprisingly, the main culprit is LNG and natural gas. According to the report, gas-related projects accounted for about 60% of total emissions from JBIC-financed fossil fuel projects in 2024.

The report’s finding highlights not only Japan’s central role in the expansion of natural gas and LNG infrastructure and consumption across the world, but also the curious fact that a country seeing declining LNG consumption continues to finance gas expansion globally.

While energy security may be part of the reason, others see JBIC’s role as protecting Japanese industry’s existing investments in gas and LNG, using taxpayer funds for an indirect form of corporate welfare.

“It shows how Japan’s public funding for LNG import and export infrastructure globally is providing profits and power to a small group of companies in Japan and locking other countries in the region into LNG dependence,” Louis Goddard, Head of Research at the research consultancy Data Desk, told Gas Outlook.

Funding overcapacity

Longtime a key player in the global LNG industry since pioneering the process to ship natural gas in the 1970s, Japan’s imports started falling in 2015 due to a shrinking population but also expanding renewables. In 2021, Japan was overtaken by China as the largest importer of LNG, a title it looks unlikely to reclaim.

Despite this long-term decline in domestic consumption, Japanese utilities and traders have continued to sign long-term LNG contracts for figures far beyond what Japan likely needs. The result has been re-exports to other countries, in recent years most notably Europe. Another report also released in early November by FOE Japan and Goddard’s Data Desk highlighted that these reshipments are often directly connected to JBIC and other public financing and that, in 2023, an astounding 37 percent of LNG handled by Japanese companies was resold overseas.

“We argue that there is a risk of massive LNG overcapacity in the world in the coming years,” said Goddard. “It’s a big risk to pour billions of dollars of public money into this system.”

According to Data Desk, in 2024, the largest recipient of excess Japanese LNG was China, followed by South Korea and Taiwan. Through efforts like the Asia Net Zero Emissions Community (AZEC), Japan has been pushing to expand the use of LNG in countries like Indonesia, Thailand, and the Philippines, all potential markets for additional re-exports. To Osada, this shows the folly of JBIC and Japan’s energy finance policy.

“If such a large portion of LNG is not being used in Japan and instead being resold, this makes it clear there is no need to further expansion with the use of public funds,” said Osada.

Risky but strategic advantage

As a resource-poor country with no fossil fuel reserves, Japan has long relied on LNG for its energy security. That is why, despite the potential for renewables to provide energy security for a lower cost, many in the government and private sector want to maintain a focus on LNG, Yuriy Humber with the Tokyo-based energy consulting firm Japan NRG told Gas Outlook.

“If you are going to pick out of all the energy sources, one where you have substantial manufacturing capacity or research advantage, then for Japan, you’d probably say gas,” said Humber. “It makes sense for Japan to still bet on LNG to survive on the market and stay relevant.”

Japanese companies, such as Mitsubishi Heavy Industries, JERA, ENEOS, and Kawasaki, are active in natural gas exploration and transportation around the world. Conversely, Japan has a small solar panel and wind turbine industry, and the government is reluctant to rely on infrastructure from countries like China to expand renewables.

There are risks, though, adds Humber.

“If LNG prices go down, being a trader could be a non-optimal choice,” said Humber. He’s skeptical about a shift under the current economic environment. “I don’t see a strong alternative to the LNG path for Japan. I wish that there was, but I don’t see it yet.”

From Osada’s perspective, the key concern is the role of public finance, especially as Japan has committed to reducing fossil fuel financing and to meeting net zero and Paris Agreement climate targets.

“If LNG is being resold to third countries, this is also contributing to greenhouse gas emissions,” said Osada. “It’s really problematic that Japanese funds are used to fund an excess of gas overseas.”

(Writing by Nithin Coca; editing by Sophie Davies)