For all the talk of a solar boom in Japan, coal still has a future there, and potentially a big one at that.

Japan’s government and industry are backing emerging coal technologies they say are less damaging to the environment. While they’re pushing the most polluting fossil fuel at home and abroad, Japan’s government will be trying to burnish its environmental credentials at climate talks that begin at the end of the month in Paris.

Japan is the biggest backer of public coal financing globally, according to a June report co-authored by the Natural Resources Defense Council, a U.S. environmental group, and partners. The country also ranks last among Group of Seven nations in efforts to move away from coal, according to E3G, a non-profit group promoting a low-carbon economy, in a statement last month.

By promoting new and advanced coal technologies as cleaner burning and more efficient, Japan is contradicting environmentalists such as NRDC and WWF seeking to discourage investors from backing fossil-fuel. For major Japanese suppliers of power generation systems such as Mitsubishi Hitachi Power Systems Ltd., the national push also offers the opportunity to market their products in countries where coal is still widely used.

“Support from developed countries for high efficiency coal-fired generation is needed” to keep plants with low efficiency from expanding in countries where the fuel is readily available, said Nobuyuki Zaima, a project manager in charge of clean coal at Japan’s trade ministry-affiliated New Energy and Industrial Technology Development Organization.

Coal Technology

“We can certainly contribute to the reduction of CO2 through applying Japan’s superior coal technology,” he said.

Japan has about 23 gigawatts of coal capacity in various stages of planning or development at home, according to Kiko Network, a Kyoto-based environmental group. That compares with Japan’s coal capacity of 41 gigawatts in 2014, according to Bloomberg New Energy Finance.

“Consumption in the OECD, where coal use faces strong policy headwinds, is projected to drop by 40%” through 2040, according to the International Energy Agency’s World Energy Outlook. “By 2040, Asia is projected to account for four out of every five tons of coal consumed globally, and coal remains the backbone of the power system in many
countries in our central scenario,” according to the outlook.

At the forefront of Japan’s push to show that coal can be burned more efficiently and with less pollution is the Osaki CoolGen project in Hiroshima by a venture between Chugoku Electric Power Co. and Electric Power Development Co. Osaki is a government-backed demonstration project that will use a technology called integrated gasification fuel cell combined cycle, or IGFC. That means it will use some of the captured emissions to power a fuel cell, generating additional electricity.

The approach builds on another advanced technique known as IGCC, which heats or cooks coal to produce a gas that’s burned in a turbine. Waste heat is used to drive a steam turbine to produce more electricity.

Compared with the most widely-used coal plants in Japan, IGFC is expected to increase efficiency by 15 percentage points and cut carbon dioxide emissions by 30 percent, according to government estimates.

Project Cost

The advanced coal technology has drawbacks that go beyond emissions, notably price. The cost for the first stage of the Hiroshima project is estimated at 89.5 billion yen ($736 million), with the government paying one-third, according to a trade ministry document. The project’s full cost has yet to be made public, according to Electric Power Development, known as J-Power.

“IGCC and IGFC don’t change the picture,” said Sebastien Godinot, an economist for the WWF’s European policy office. “They are not ready commercially. It is now that an urgent shift to low-carbon power is required.”

In July, Japan’s trade and industry ministry released a roadmap outlining the next-generation thermal power technologies that nation expects to adopt. The plan projects that IGFC technology could be ready for broad use around 2025 – making the nation one of the biggest backers of the technology.

“This is a colossal program to make IGFC possible,” said Hiroshi Sasatsu, director of J-Power’s research and development department.

Not everyone supports the idea of promoting more efficient coal power.

Financing Pressure

“Even though the efficiency of coal-power generation is improved, coal plants emit about twice as much carbon dioxide as plants powered by natural gas,” said Yuki Tanabe, a program coordinator at the Japan Center for a Sustainable Environment and Society.

Proponents must convince investors and environmentalists that the technologies make sense at a time when pressure is mounting on lenders to shy away from fossil fuels. Citigroup Inc., the third-biggest U.S. bank, said in October it will cut back on financing for coal-mining projects. In September, Norway’s $830 billion wealth fund estimated a proposed ban on coal investments would prompt it to sell holdings in 120 companies valued at about 55 billion kroner ($6.4 billion).

Nonetheless, coal is cheap and attractive to some developing countries with ample reserves, said Toshi Arimura, professor of environmental economics at Waseda University in Tokyo. That makes clean coal technology the second-best choice, he said.

“It will be great if wind and solar power can work as substitutes, but they can’t immediately serve as baseload power sources like coal does,” he said.