Federal resources minister Madeleine King was in Tokyo last month reassuring Japanese officials that Australia would continue to be a major supplier of gas. Japan has been a major buyer of coal and gas for decades.

However, when Australia introduced climate policy in early 2023 that impacted the economics of proposed fossil fuel projects, Japanese energy businesses raised concerns that Australia was “quiet quitting” the gas business. Japan’s ambassador to Australia declared, “It’s hard to imagine the neon lights of Tokyo ever going out, but … this is exactly what would happen if Australia stopped producing energy resources.”

Keen to reassure Japanese investors, Minister King promised massive new gas projects would go ahead, and that Australia would supply gas to Japan “well into the future.” But these comments ignore the historic energy transition that is currently underway. Australia and Japan have both pledged to shift away from fossil fuels this decade, and will set new climate targets next year. Demand for gas is in decline in Japan, and will fall further as the country embraces cleaner and cheaper sources of energy, like offshore wind, solar, and geothermal.

If Australia is to be a clean energy superpower – and meet our own climate goals – we need to support Japan’s clean energy transition and stop promising to sell Tokyo gas forever.

Australia and Japan: A relationship built on resources

The relationship between Australia and Japan has been based on investment and resources trade for decades and has grown in recent years as both parties moved to deepen diplomatic and security ties.

Since the 1960s Japanese investors have targeted Australian coal and iron ore, and since the 1980s Japan has been a leading investor in liquified natural gas (LNG) projects.

As the clean energy transition accelerates, Japanese investors are looking to Australia for the critical minerals and green metals needed to shift away from coal and gas. During this transition, however, Japan is still Australia’s biggest customer for fossil fuels. Australia currently supplies around 70 percent of Japan’s coal and 40 percent of its gas.

Japanese investments in Australian fossil fuel projects have been based on projections that coal and gas will supply energy for decades to come. However it is clear these projects will fuel harmful climate change and risk becoming stranded assets as both countries and the rest of the world decarbonise. With falling demand for coal and gas, multi-billion-dollar, long-term investments become risky propositions.

Oil and gas company Inpex – which is part-owned by the Japanese government – has spent AUD$ 60 billion developing the Ichthys gas field off northern Australia. Since 2018, gas from this project has been piped 890km to Darwin for shipment to Japan and it represents more than 10 percent of Japan’s gas supply.

Japanese firms also have equity stakes in proposed gas developments – including Woodside’s Scarborough project off West Australia, and Santos’ Barossa project off the Tiwi Islands in the Northern Territory.

Minister King told business leaders in Tokyo the Australian government would ensure both projects came to fruition. However neither project has all the regulatory approvals needed to go ahead – including processes to consider their environmental impacts – and both have faced significant delays due to court challenges.

Emissions in Australia associated with these projects would make it much harder to meet Australia’s target of cutting emissions by 43 percent below 2005 levels by 2030. Investment in long-term fossil fuel supply also risks Japan’s own climate goals.

Shifting away from fossil fuels

The world is undergoing a rapid energy transition as coal, oil, and gas is displaced by clean energy technologies, like wind, solar, and batteries. The International Energy Agency expects global demand for fossil fuels to peak before 2030 and has repeatedly warned of the risks of overinvesting in fossil fuel supply. The agency is predicting a glut in LNG supply from as soon as next year.

It is partly for this reason the United States has paused new LNG export terminals, pending a consideration of both market demand for gas and “the perilous impacts of methane on our planet.” LNG is comprised almost exclusively of methane, which is a significant contributor to global warming.

In December 2023 Japan and Australia joined nearly 200 other countries at the COP28 United Nations climate talks and agreed to accelerate the transition away from fossil fuels in this decade. Australian climate and energy minister Chris Bowen said the decision meant “our future is in clean energy and the age of fossil fuels will end … this is the direction of travel for countries right around the world.” He argued fossil fuel exporters and importers would need to work together to manage the transition.

The technology needed to replace fossil fuels with cleaner sources of energy is readily available, including in Japan. A 2023 study backed by the US Department of Energy shows the decreasing costs of solar, wind (especially offshore), and batteries mean that Japan can achieve a 90 percent clean electricity system by 2035. A rapid shift to renewables would result in a 6 percent reduction in electricity costs and improve energy security by eliminating most of Japan’s dependence on imported gas and coal.

Japan has committed to achieve net-zero emissions by 2050, and to cut emissions by 46 percent by 2030. Next year, Japan will set a new 2035 emissions target. To meet these targets Japan will need to accelerate its roll out of renewable energy. This means we can expect Japan’s demand for LNG to continue to fall over the next decade. Japan’s demand for LNG fell by 8 percent in 2023 alone, and has declined at an average rate of 3 percent over the past decade.

Partners in the clean energy transition

When Madeleine King travelled to Tokyo she took a prospectus, written in Japanese, of 52 “investment ready” Australian critical mineral projects. This is a sign of where the relationship is headed. Japan is the second largest source of foreign direct investment in Australia after the United States. Future investment will shift away from coal and gas toward the critical minerals and green metals Japan needs to decarbonise.

The good news is that growing demand for clean energy technologies is driving record Japanese investment in Australia.

As Japan and other nations in the Asia-Pacific switch away from fossil fuels, Australia is well placed to become a clean energy superpower. Australia is making great strides installing renewable energy and shifting away from coal-fired power. But this progress could be undermined by new coal mines and gas developments.

The federal government urgently needs to reform Australia’s national environment law – the Environment Protection and Biodiversity Act – to consider the climate impact of new fossil fuel projects. The truth is, every new coal, oil, and gas project worsens climate change and endangers us all. Australia will need to be honest with Japan: the days of opening massive new gas fields to meet Japan’s energy needs are over. Our shared future is in clean energy.

Wesley Morgan is a research fellow at the Griffith Asia Institute and a senior researcher at the Climate Council.

This article is published under a Creative Commons License and may be republished with attribution.