Market Forces says that this group of seven leading “trading houses”, together with JERA, the country’s largest power company, are exacerbating energy insecurity in Asia by increasing the region’s dependence on gas.
In a critical moment for global energy transition, Japan’s leading trading houses, known as “sogo shosha,” continue to expand their fossil fuel investments, increasing Asia’s dependence on gas and undermining the shift towards renewable energy.
A report released today by the environmental advocacy group, Market Forces, highlights the troubling role of these corporations and JERA Co. Inc., Japan’s largest power generator and LNG trader, in perpetuating energy insecurity and climate risk in the region.
The seven major trading houses — Itochu Corporation, Marubeni Corporation, Mitsubishi Corporation, Mitsui & Co., Sojitz Corporation, Sumitomo Corporation, and Toyota Tsusho — are economic giants with vast global operations. With an average market capitalization 11 times the size of an average Tokyo Stock Exchange Prime listed company as of October 2024, these firms wield significant influence over multiple industries, including energy.
The claim that lifecycle emissions of gas power are lower than coal power is increasingly being questioned. Yet these companies are pouring investment into new gas power plants in Asia and gas export facilities around the world. If built, the 8 gigawatts (GW) of gas power plants planned by these companies would release greenhouse gases equivalent to 584 million tonnes of CO2 over the plants’ operating lives. This is equal to more than half of Japan’s annual emissions in 2022.
The report warns that the activities of the sogo shoshas expose emerging economies in Asia to financial and environmental risks associated with fossil fuel dependency. This exposes the region to volatile global gas markets and undermines the transition to clean energy.
Risky Expansion of Gas Infrastructure
Despite growing global consensus on the need to transition away from fossil fuels, Japan’s trading houses and JERA plan to build an additional 8 gigawatts (GW) of gas power plants, predominantly in South and Southeast Asia. If completed, these plants would release greenhouse gas emissions equivalent to 584 million tonnes of CO2 over their operational lifetimes—more than half of Japan’s annual emissions in 2022.
The International Energy Agency (IEA) has stated that the world has enough gas capacity under all scenarios up until 2040. Furthermore, gas plant capacity utilization rates are projected to decline from 2030 onwards, reinforcing the argument that further expansion in gas infrastructure is unnecessary and financially unsound.
The planned expansion of gas power infrastructure is particularly concerning for South and Southeast Asia, regions that are already vulnerable to energy price volatility and supply disruptions. Of the 8 Giga Watts of gas power capacity planned by the Japanese firms, 96 per cent is concentrated in Asia. Shockingly, these companies are investing 8.6 times more in gas power than in solar and wind combined in these regions.
While gas has often been marketed as a cleaner alternative to coal, recent studies challenge this claim, particularly when considering full lifecycle emissions, including methane leaks. The continued prioritisation of gas over renewable energy threatens the long-term energy security of these nations, locking them into costly and polluting infrastructure.
Environmental and Social Costs of Gas Expansion
Japan has set a target for renewable energy to comprise a significant share of its energy mix by 2030. However, the trading houses and JERA are making negligible contributions to this goal. Their total existing and planned solar and wind capacity accounts for only 5 per cent of Japan’s 2030 renewable energy target. Given their dominant position in energy supply chains, this shortfall is a glaring failure to align with national and international decarbonisation efforts.
The trading houses’ reluctance to shift away from gas is also a financial risk. Companies that fail to transition to renewables face growing regulatory, reputational, and investment-related risks. Investors are increasingly scrutinizing firms for their sustainability strategies, and failure to adapt could lead to capital flight and declining competitiveness in the global market.
Beyond economic concerns, the report sheds light on the environmental and social controversies surrounding Japanese fossil fuel projects. Communities and ecosystems in developing nations are being sacrificed for these companies’ financial ventures. Case studies indicate that local populations face displacement, pollution, and economic instability due to these gas projects.
For example, the construction of LNG terminals and power plants in Southeast Asia has led to widespread deforestation, loss of marine biodiversity, and air and water pollution. Additionally, reliance on imported gas makes these countries highly susceptible to global price fluctuations, creating long-term economic instability.
Call for a Sustainable Future
The failure of Japanese trading houses and JERA to set clear policies and targets for transitioning away from gas puts them at odds with global decarbonisation trends. As major financial institutions and investors increasingly prioritize sustainability, these companies risk losing credibility and profitability.
The report urges investors to demand stronger commitments to renewables and pressure these firms to align their business models with climate goals. Without immediate action, these trading houses will not only jeopardize their own financial future but also undermine Asia’s energy security and climate resilience.
Japan’s major trading houses and JERA are at a crossroads, Market Forces says. Their current trajectory of expanding gas infrastructure poses a significant threat to climate goals, energy security, and economic stability in Asia. While they have the expertise and resources to lead the global transition to renewables, their continued focus on fossil fuels suggests a dangerous miscalculation of future energy trends.
The sogo shoshas have played a crucial role in Japan’s industrial and economic development. However, Market Forces says that these corporations continued investment in liquefied natural gas (LNG) terminals and gas power plants contradicts global decarbonisation efforts.
The environmental advocacy group warns that if these companies fail to pivot toward sustainable energy solutions, they risk financial instability and reputational damage in a world that is rapidly moving toward decarbonisation. The time for action is now, and investors, policymakers, and stakeholders must hold them accountable to ensure a sustainable energy future for Asia and beyond.
Image: Market Forces
