Further to its enactment and promulgation in May 2024, the Hydrogen Society Promotion Act (the "Act")1 – Japan's first law regulating businesses relating to hydrogen and its derivatives – came into effect on October 23, 2024. On the same day, both METI2 and JOGMEC3 launched their respective webpages dedicated to the Act.
The overarching goal of the Act is to facilitate the expansion of the use of low-carbon hydrogen and its derivative products. One of its objectives is to provide support to approved businesses specifically through the "Support Focusing on the Price Gap" ("CfD Scheme") and the "Support for the Development of Hubs" ("Hub Support Scheme").
CfD Scheme
Subsidies under the CfD Scheme will be awarded to suppliers of low-carbon hydrogen and its derivatives (whether produced domestically or imported from overseas) for use in Japan, targeting the price gap between the costs of domestic or overseas hydrogen production and transportation and the price of conventional fuels.
To apply for the subsidies under the CfD Scheme, applicants must first apply to METI and obtain approval of their business plans, and then apply to JOGMEC for the subsidies themselves. Please refer to the flowchart diagram below. Though the details of the JOGMEC process are not yet available, JOGMEC plans to release its subsidies application guidelines once finalized, which we expect to be in the next few weeks.
View full image: Subsidies Application Flowchart (PDF)
Hub Support Scheme
Subsidies under the Hub Support Scheme will be awarded to developers of domestic transport and storage facilities needed for the use of low-carbon hydrogen and its derivatives, for a portion of the costs for Front-End Engineering Design (FEED), engineering, and construction.
The application process for the subsidies under the Hub Support Scheme will likely be similar to the process for the CfD Scheme described above.
Special Regulatory Rules
In addition to the above subsidies, applicants that have obtained approval from METI under the Act will also be eligible for special regulatory arrangements, including:
- deemed approval and notification exemption under the Port and Harbour Act;
- special approval under the High Pressure Gas Safety Act; and
- mandatory approval under the Road Act.
METI Approval Process
METI has released the forms that must be used for the application for approval of business plans. These forms require, among other things, information relating to: (i) applicant entity; (ii) low-carbon hydrogen to be supplied; (iii) target figures for supply and use; (iv) methods of supply, use, and storage; (v) supply period; (vi) relevant infrastructure; (vii) development team; and (viii) project cost.
These forms along with its attachments must be submitted electronically through the government's "G-Biz" portal.4 METI will notify once the portal becomes available and will designate a specific time period for accepting business plans through the portal.
METI has released its responses to Frequently Asked Questions in relation to the CfD Scheme5 and will accept requests for consultations and queries regarding the application process.
Future Outlook
The formal enforcement of the Hydrogen Society Promotion Act represents a significant step forward in the country's commitment to achieving its carbon neutrality goals. By facilitating the development of a stable and predictable environment for hydrogen, the subsidies provided under the Act are expected to have a far-reaching impact on both domestic and international market players and investors.
We expect that METI will commence its business approval application process and that JOGMEC will release its subsidies application guidelines, within the next few weeks. Accordingly, businesses that are looking to apply for the subsidies under the CfD Scheme or the Hub Support Scheme will need to review the forms released by METI in relation to the business plan approval process and to consider whether a consultation process with METI may be helpful for their potential application.
1 The Act on the Promotion of Supply and Utilization of Low-Carbon Hydrogen and its Derivatives for a Smooth Transition to a Decarbonized, Growth-Oriented Economic Structure. For details of the Act, please refer to our previous newsletter On the path to decarbonisation: Japan enacts its first legislation on hydrogen and CCS | White & Case LLP dated 25 June 2024.
2 The Ministry of Economy, Trade, and Industry. Please see METI's website dedicated to the Hydrogen Society Promotion Act (in Japanese).
3 Japan Organization for Metals and Energy Security. Please see: JOGMEC's website dedicated to the Hydrogen Society Promotion Act (in English); JOGMEC's website dedicated to the Hydrogen Society Promotion Act (in Japanese); and JOGMEC's website dedicated to the CfD Scheme (in Japanese).
4 G-Biz portal operated by the Digital Agency of the Japanese government.
5 FAQ by METI in relation to the CfD Scheme.
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