Japan carmakers, from Toyota to Nissan and Honda, are attacking carbon by any means necessary

HEKINAN, Japan — Below the looming No. 4 boiler tower at Hekinan Station, Japan's largest thermal power plant, black mountains of coal — the power source of the past are piled high.

But inside this massive facility, in an effort to help Japanese industry reduce carbon emissions, the utility's operator is experimenting with a fuel of the future.

JERA Co., which delivers half the electricity to the Japanese industrial heartland that Toyota Motor Corp. and its supplier network call home, is burning a 20 percent mix of carbon-free ammonia along with the usual pulverized coal. If all goes well, JERA hopes to completely replace coal with ammonia-fired electric energy at the plant by 2050 and go completely green.

The audacious bid is a key part of an effort to turn Japan's auto sector fully carbon neutral by midcentury.

Tapping next-generation energy sources such as ammonia and hydrogen will help Toyota and Japan's other automakers, including Nissan, Honda, Mazda and Subaru, reduce the life cycle carbon footprint of their operations.

The sweeping campaign — kicked off by the government in 2020 — encompasses everything from new manufacturing processes and carbon-cutting car technologies to the rapid rollout of recharging stations and comprehensive plans for recycling virtually every bit of a vehicle.

Importantly, Japan's approach is technologically agnostic.

In an era gone gaga for full-electric vehicles, Japan's path is open to anything that helps — including fuel cells, newfangled versions of internal combustion that use carbon-neutral synthetic e-fuels, even hydrogen-powered engines.

The strategy may seem counterintuitive. But in Japan, the mission is cutting carbon by any means necessary.

"There must be more than one route to reach carbon neutrality," Toyota's then-CEO Akio Toyoda said last year, speaking in his role as chairman of the Japan Automobile Manufacturers Association. "Regulations should not limit our choice of technologies."

How Japan fights the battle against carbon matters to the rest of the world simply by dint of its industry's far-flung international reach.

Decisions made in Japan about product, manufacturing techniques and even energy infrastructure affect plants and operations around the world, including millions of employees and customers. And Japan's choices could make or break the competitiveness of its carmakers.

But the country is also a flashpoint in the debate about how best to wage the intensifying war on carbon.

Japan and its automakers are often criticized for foot-dragging on full EVs, the path championed in many corners of the industry as the quickest route to cutting carbon.

To be sure, EVs so far make up only a tiny fraction of Japan's domestic market, where hybrids have long held sway. Homegrown brands offer only a handful of low-volume EV nameplates, such as the Mitsubishi eK X EV, Nissan Ariya, Subaru Solterra and Toyota bZ4X. EVs have only a 1.4 percent market share in the country.

In 2021, EV penetration in Japan languished below such countries as Greece and Poland, not to mention the U.S., China, South Korea and Germany, according to the International Organization of Motor Vehicle Manufacturers.

The only Japanese automaker to announce a timeline for completely phasing out internal combustion power is Honda, which wants to go all-electric or hydrogen fuel cell by 2040.

How that squares with the global industry's push for decarbonization partly reflects Japan's national energy mix.

Thermal power — as exemplified by the mammoth coal-fired Hekinan plant, one of the world's biggest carbon dioxide emitters — accounts for about 75 percent of the country's energy, according to the Japan Automobile Manufacturers Association. That compares with just 39 percent in Europe, where nuclear power is more prevalent.

Japan once relied more heavily on nuclear power, but most of its plants were mothballed after the 2011 Fukushima nuclear disaster. Thus, a wholesale switch to EVs would have a limited impact on overall carbon emissions because those cars would get a lot of their charge from burning coal.

The country's use of gasoline-electric hybrids has had a more immediate impact on cutting carbon, the Japan Automobile Manufacturers Association says. From 2001 to 2019, CO2 emissions from vehicles in operation in Japan dropped 23 percent, the group said. In the U.S., by contrast, emissions rose 9 percent.

Including hybrids, there were 1.35 million electrified vehicles in operation in 2020 in Japan, representing 36 percent of the market. The U.S. had 750,000, for a 5 percent market share.

But going forward, that energy-vehicle mix will not be enough to zero out carbon.

Part of Japan's conundrum is that the country exports about half of the 10 million vehicles its factories produce every year. If stringent life cycle carbon regulations in those export markets should preclude manufacturing vehicles with dirty energy in Japan, it could hit the country's economy hard.

And if that export volume is lost, it could cost Japan up to 1 million jobs, Toyoda warned.

"Carbon neutrality is tantamount to an issue of employment for Japan," Toyoda said. "Some politicians are saying that we need to turn all cars into EVs, or that the manufacturing industry is an outmoded one. But I don't think that is the case. To protect the jobs and lives of Japanese people, I think it is necessary to bring our future in line with our efforts so far."

As a result, Japan's response is a multipronged approach. While stepping up its action on full EVs, it is also preparing hydrogen vehicles and e-fuel combustion technologies. Carmakers here even envision a future of hybrid vehicles running on engines powered by synthetic fuels.

Toyota is testing hydrogen combustion as a possible technology of tomorrow — a development that could give parts makers for existing internal combustion engines an extra lease on life in the carbon-neutral age.

Toyoda himself coined the phrase "carbon is our enemy" as a way to highlight the idea that combustion in itself isn't always bad — as long as it doesn't emit CO2.

Other equally cutting-edge technologies are going through trials in Japan, such as ammonia firing at Hekinan. Not far from that power plant, Toyota Group supplier Denso Corp. is developing a way to capture and reuse CO2 as an energy source at one of its factories.

The method, called carbon dioxide circulation, combines the waste emissions with hydrogen to produce methane that, in turn, can help power operations. Denso is piloting carbon dioxide circulation at its Anjo plant, where it makes next-generation technologies for EVs.

Toyota, which has pledged to go carbon neutral by 2050, is advancing the fuel cell technology used in its Mirai hydrogen-powered sedan in a new electrolysis system. The setup uses electricity from wind and solar power to split water and make hydrogen to fire a plant's gas furnace.

Similar carbon-cutting campaigns are being carried out across Japan.

Mazda is developing bioethanol fuel as a path to carbon-neutral combustion. In March, Mazda began a push to install solar panels across unused land in Japan to generate electricity to eventually power plants for the carmaker and its suppliers.

Nissan, meanwhile, introduced "closed loop" recycling in producing the Rogue and Qashqai crossovers. It involves recycling aluminum to achieve a 90 percent reduction in the energy needed to make the same stamped parts.

These small steps are just a start. Over the years, they will take Japan's carmakers closer to the 2050 end zone. But going fully carbon neutral by then will likely require giant leaps as well.

A study by the consultancy McKinsey & Co. found that the path to carbon neutrality in Japan requires monumental adoption of hydrogen and ammonia power generation, as well as renewables or nuclear power and the extensive use of carbon capture.

McKinsey said that to meet Japan's target under its cost-optimal scenario, 90 percent of new vehicles sold in the country in 2030 would have to be battery-electric. And 30 percent of passenger cars in operation nationwide would have to be EVs.

Currently, no Japanese carmaker is suggesting targets anywhere near that.

The Japan Automobile Manufacturers Association envisions a market penetration rate of at least 20 percent for battery-electrics and plug-in hybrids by then, although it is targeting 100 percent by 2035 for electrified vehicles, including traditional hybrids.

As for the worry over a hollowing out of jobs, McKinsey predicts a shift in employment to expanding sectors such as energy and renewables from transportation, rather than an overall net loss.

"There's a plus and minus to the overall economy," said Yuito Yamada, Asia leader of McKinsey's global sustainability practice. "It's not like Japan is going to lose significant labor. If we balanced these things out, it's just a matter of reallocating resources of the country."

That's likely cold comfort to Japanese suppliers making piston rings and spark plugs.

Among requests from the Japan Automobile Manufacturers Association is government support for R&D to reduce the price of EV battery packs to parity with internal combustion technologies, backing for developing better hydrogen fueling stations and a stable supply of so-called green hydrogen produced with renewable energy. Carmakers even want free highway tolls and parking for designated vehicles.

"This is a very tough challenge, so we need the government support and subsidies," said Shinichiro Oka, the Japan Automobile Manufacturers Association's vice president in charge of leading the industry's push for carbon neutrality.

The Japanese government has tackled the challenge with a raft of initiatives. They include a $15 billion Green Innovation Fund to seed companies across all industries working on carbon-neutral projects through 2030. It covers everything from ammonia and hydrogen supply chains to next-generation solar cell development, offshore wind power and carbon-cutting ships and aircraft.

It also earmarks about $1.13 billion for next-generation EV batteries and motors. Another $315.8 million goes to in-vehicle computing power and simulations to improve the energy efficiency of EVs. And $849.6 million supports a "smart mobility" society, with connected infrastructure geared around carbon-neutral vehicles.

The government also aims to increase the number of hydrogen fueling stations to 1,000 in 2030, from around 200 today, and install 150,000 EV charging points nationwide, up from 27,000 now.

In a bid to have zero-emission vehicles make up half of Tokyo's new-car sales in 2030, the city will require new apartment buildings to have EV chargers starting in 2025.

By some measures, the government's green fund is not so hefty. Nissan alone said in 2021 it will spend more than $15 billion on electrification over five years, while Toyota has more than $11 billion for batteries, including solid-state ones. Mazda is throwing a similar amount into electrification.

Meanwhile, the U.S. Congress earmarked $7 billion in its 2021 infrastructure law to support the country's battery supply chain, and it created tax credits and other aid under the 2022 Inflation Reduction Act that could funnel tens of billions into the U.S. auto industry's carbon reduction shift.

Japan's Ministry of Economy, Trade and Industry said last year that Japan needs to triple its annual spending to ¥17 trillion — $127.81 billion — by 2030 to fulfill its 2050 carbon quest.