Japan's target of carbon neutral or net zero greenhouse gas emissions will pose a big challenge for Australian coal and natural gas producers in the long run.
The target was proposed by Japanese prime minister Yoshihide Suga on October 26 in his first congressional speech since taking office, saying Japan will achieve carbon neutral target by 2050.
Based on the target, the share of fossil fuels in Japan's energy mix will drop from 90% to 50%.
The Australian government's federal budget relies heavily on revenues from exporting the two major products, and Japan is its important export destination, while Japan's demand for liquefied natural gas and coal has slowed dramatically in the past few years, and now the trend will be accelerated by the target.
Japan's move will affect the entire coal export industry, especially in Australia, because Japan is the largest buyers of Australian coal, said Kobard Baffnagri from Bloomberg New Energy Finance.
Some other insiders said that compared with coal producers in other countries, the impact on Australian coal producers may be the least, as Japan prefer to Australian coal because of its premium quality.
Australian Federal Resources Minister Keith Pitt said that high-quality Australian coal will continue to be welcomed, especially in Asia, where many trading partners are installing high-efficiency and low-emission power plants and developing carbon capture storage technology.
Australia's coal and natural gas sales are expected to plummet this year due to energy consumption shock amid pandemic lockdown and the transition to clean energies in the consumer markets.
According to Australia's Industry Department, the country's thermal coal and LNG exports are estimated to fall 25% and 38% year on year respectively in 2020.
(Writing by Shengnan Liu Editing by Harry Huo)
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