As battery electric vehicles rapidly become the default vehicle electrification technology, Japan is still betting on hydrogen FCEVs. Rapid technological progress in batteries has eroded the range and refuelling advantages of FCEVs, but Japan’s enthusiasm for hydrogen is still justified by several merits.

FCEVs do not require land-intensive charging lots — a single hydrogen station can support 1,000 vehicles, a boon in densely populated Asian countries. Smaller batteries mean that FCEVs require fewer scarce and expensive materials, providing a buffer from supply chain risks. Hydrogen is well suited to heavy-duty vehicles, freeing long-haul trucks from carting heavy and space-intensive batteries. FCEVs also provide a tangible symbol of a hydrogen society. If steel mills and chemical plants completely decarbonised, most of us would never notice, but an FCEV is a moving ‘billboard’. By increasing the visibility of hydrogen technology, they can foster public and political support.

Japanese government and industry have heavily promoted hydrogen electrification strategies, reflected by ambitious targets of 800,000 cumulative FCEV sales and 1,000 refuelling stations by 2030. The state subsidises around 1.4 million yen (US$11,000) for FCEV purchases and half of the construction costs for refuelling stations. Additionally, hydrogen features prominently in Japan’s energy and climate policies such as the Strategic Energy Plan. But despite this, progress has slowed.

Vehicle supply is particularly problematic. Although available since 2015, only about 7000 FCEVs have rolled off assembly lines, immensely short of the March 2021 target of 40,000 cumulative units. High costs and technological hurdles in mass-producing FCEVs have hampered automakers’ ambitions to enter the nascent passenger vehicle market, where growth potential is uncertain. Until recently, Japanese automakers did not aggressively pursue electric drivetrains, prioritising more profitable hybrids and high-efficiency gasoline engines in vehicle portfolios.

A lack of fuelling infrastructure is also hampering market growth. As of late 2021, Japan had built 160 stations, concentrated around Tokyo, Osaka, Nagoya and Fukuoka. But stations are often located in industrial areas with limited operating hours. And with so few on-road vehicles, operators have miserable prospects of generating profits. This reduces the appetite for further investment, while the underdeveloped refuelling network inconveniences drivers, suppressing demand for FCEVs.

Demand for vehicles is also inferior to historical expectations. Around half of on-road FCEVs belong to private and public corporations. Private consumers have balked at hefty prices (the Toyota Mirai costs around 7 million yen [US$56,000]) and a lack of model choices. Running costs for FCEVs are also higher than for battery electric vehicles. This is especially problematic for commercial fleets like taxis, where running costs strongly impact operation costs.

If hydrogen is to help Japan electrify its road vehicles, this nexus of barriers must be tackled.

Automakers need stronger nudges to produce electric vehicles. Outside Japan, Californian and Chinese policymakers have used mandatory instruments, stipulating a minimum and rising proportion of electric drivetrain sales. Such a scheme would undoubtedly encounter stiff resistance from Japan’s powerful automotive industry, but an approach that financially rewards automakers for electric drivetrain sales could overcome this.

State support for refuelling infrastructure should continue until the target of 1,000 stations and operational self-sufficiency is reachable with market forces alone. Since this will burden the public purse, a carbon market could be established to incentivise low-carbon fuels like hydrogen. California, again, is the pioneer with its Low-Carbon Fuel Standard. Carbon pricing regulation to drive hydrogen uptake would be a paradigm shift for Japan, where policymakers have historically preferred carrots over sticks when seeking to accelerate the diffusion of new technologies.

To stimulate demand, national and prefectural governments could fix electric fleet requirements for public agencies. Rewards could be given for miles driven with hydrogen or batteries, to avoid vehicles gathering dust in carparks. For the public, annual vehicle taxes could also be raised for new gasoline vehicles while reducing those for electric options. Meanwhile, incentives like free-fuel periods and reduced tolls might also spur purchases.

Finally, Japan’s FCEV market suffers from low economies of scale. With South Korea and China also in the hydrogen race, there are ripe opportunities for strategic cooperation across government and industry. By setting a collective cooperation agenda, Asia’s hydrogen frontrunners could mutually grow each market, jointly becoming a global driver of hydrogen mobility.

Emerging hydrogen markets require a source of cheap and sustainable fuel, offering an important opportunity for energy rich countries like Australia and New Zealand. Both are currently collaborating with Japan to explore how abundant solar, wind and hydro reserves can be exported as hydrogen. The use of hydrogen for road, rail and maritime transport across the Asia Pacific could contribute significantly to decarbonisation in this sector. Hydrogen mobility would also decrease reliance on imported oil, which the Russian invasion of Ukraine has shown carries risks for economic and social security.

Gregory Trencher is Associate Professor at the Graduate School of Global Environmental Studies, Kyoto University.