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Japan’s natural gas industry has been making controversial claims about the fuel with the hopes of making it more appealing to climate-conscious buyers.

Tokyo-based Inpex Corp. this month said it sold two “carbon neutral” liquefied natural gas (LNG) shipments to Shizuoka Gas Co. and Toho Gas Co., offsetting the fuel’s lifetime emissions using credits from projects that include forest conservation in Indonesia. Those credits would offset more than 450,000 tons of carbon-dioxide emissions from the two shipments, covering the entire value chain from production to combustion, according to spokespeople at Shizuoka Gas and Toho Gas.

The three Japanese companies said they will use the credits to meet their targets for net-zero emissions. The companies didn’t disclose who paid for the credits, price or supplier.

But terms such as “carbon neutral” and “net-zero” imply balancing emissions by removing an equivalent amount of carbon from the atmosphere. Climate scientists from bodies including the United Nations-backed Science-Based Targets initiative (SBTi) say measures such as preventing deforestation or supporting renewable energy projects actually do little to extract additional carbon from the air, and shouldn’t contribute to net-zero claims.

Inpex, whose biggest shareholder is the Japanese government, is aware that SBTi does not consider the use of compensation-type offsets for net-zero calculation, and understands the intention is for companies to prioritize initiatives on reducing their own emissions impact, according to a spokesman.

Inpex Corp. has sold two
Inpex Corp. has sold two “carbon neutral” liquefied natural gas shipments to Shizuoka Gas Co. and Toho Gas Co. | BLOOMBERG

To that effect, Inpex “will proactively engage in energy structure reforms toward the realization of a net-zero carbon society by 2050,” the company said in an emailed statement. “The strategy includes, but is not limited to, upstream CO2 reduction and developing a hydrogen business.”

A Toho Gas spokesperson said that the credits were certified by Verra, an internationally recognized organization, and they are assisting in removing carbon dioxide from the environment. Verra did not immediately respond to a request for comment.

While the Japanese companies declined to comment on the price of the carbon offsets, LNG traders surveyed by Bloomberg over the last year say that those type of credits generally cost less than $6 a ton. That compares with about €61 ($72) a ton emitters pay in the European Union’s carbon market, the world’s most advanced.

An Inpex spokesman said that the Intergovernmental Panel on Climate Change’s special report on the impacts of global warming suggests it will be necessary to reduce and remove carbon dioxide emissions through forests in order to keep global warming within 1.5 degrees Celsius.

The practice of marking LNG shipments as “carbon neutral” has garnered criticism as there is no standard for measuring emissions from LNG, nor is there government oversight to ensure that offsets come from projects that deliver the carbon savings promised. Japan has been the top destination for these cargoes, importing nine of the 24 shipments since 2019, according to BloombergNEF.

The adoption of LNG with carbon offsets shows the challenges facing Japan and its pledge to achieve net-zero emissions by 2050. The archipelago nation is heavily reliant on imported fossil fuels and has little space for massive solar projects or onshore wind farms. The country is yet to fully embrace technologies like offshore wind and carbon capture and storage, which could help its decarbonization goals without needing a lot more land.

That’s why Japanese companies from utilities to hotels have been eager to purchase “carbon-neutral” natural gas, as they can tell customers and investors that they are zeroing-out emissions by paying a small premium. That’s despite experts warning against the use of offsets for balancing carbon books.

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