ADBIWorkingPaperSeriesTECHNOLOGYFORESIGHTFORHYDROGENSOCIETYTRANSITIONINJAPAN:APPROACHOFGTAP-E-POWERMODELMichaelC.Huang,YokoIwaki,andMing-HuanLiouNo.1403July2023AsianDevelopmentBankInstituteTheWorkingPaperseriesisacontinuationoftheformerlynamedDiscussionPaperseries;thenumberingofthepaperscontinuedwithoutinterruptionorchange.ADBI’sworkingpapersreflectinitialideasonatopicandarepostedonlinefordiscussion.Someworkingpapersmaydevelopintootherformsofpublication.Suggestedcitation:Huang,M.C.,Y.Iwaki,andM.-H.Liou.2023.TechnologyForesightforHydrogenSocietyTransitioninJapan:ApproachofGTAP-E-PowerModel.ADBIWorkingPaper1403.Tokyo:AsianDevelopmentBankInstitute.Available:https://doi.org/10.56506/BYKL5188Pleasecontacttheauthorsforinformationaboutthispaper.Email:michael-huang@spf.or.jpMichaelC.HuangisaSeniorResearchFellowattheOceanPolicyResearchInstitute,theSasakawaPeaceFoundationandaVisitingResearcheratSciREXCenter,NationalGraduateInstituteforPolicyStudies(GRIPS).YokoIwakiisaResearchFellowatGRIPSAlliance.Ming-HuanLiouisDirectoroftheEmergingMarketStudyCenter,TIER.TheviewsexpressedinthispaperaretheviewsoftheauthoranddonotnecessarilyreflecttheviewsorpoliciesofADBI,ADB,itsBoardofDirectors,orthegovernmentstheyrepresent.ADBIdoesnotguaranteetheaccuracyofthedataincludedinthispaperandacceptsnoresponsibilityforanyconsequencesoftheiruse.TerminologyusedmaynotnecessarilybeconsistentwithADBofficialterms.Discussionpapersaresubjecttoformalrevisionandcorrectionbeforetheyarefinalizedandconsideredpublished.AsianDevelopmentBankInstituteKasumigasekiBuilding,8thFloor3-2-5Kasumigaseki,Chiyoda-kuTokyo100-6008,JapanTel:+81-3-3593-5500Fax:+81-3-3593-5571URL:www.adbi.orgE-mail:info@adbi.org©2023AsianDevelopmentBankInstituteADBIWorkingPaper1403M.C.Huangetal.AbstractWithitsportable,storable,andzero-emissionfeatures,hydrogenenergyisregardedasoneofthemostpromisingalternativeenergiesforthenextgeneration.Alongwithdevelopinghydrogentechnologyapplications,Japan’spilotexperimentshavedemonstratedthefeasibilityofahydrogensociety.However,empiricalstudiesarestillscarceandlimitedtoenergyefficiencyanalysisorcost-benefitanalysis,andlackinclusivediscussioncontributingtotheevidence-basedapproachtargetingpolicyimplementationofthehydrogenroadmap.TheresearchaimstoprovideaquantitativeimpactassessmentofJapan’shydrogensocietybyapplyingtheGTAP-E-Powermodelwiththetechnologyforesightparametersof2025–2035sourcedfromtheSciREXPolicyIntelligenceAssistanceSystem–EconomicSimulator(SPIAS-e)toinvestigatethechangeinoutput,price,anddefragmentationofsupplychainsofenergysectors,aswellastheemissionofcarbondioxidefromdomesticandforeignfirms.Inthescenariooftransitioningtheexistingfossilpowerofcoal,naturalgas,crudeoil,andotherrenewableenergiesincludingsolarandwindpower,thesimulationresultsdemonstratedthattheCO2emissionbydomesticfirmsinthetransportationandservicesectorscouldbereducedby3.3%and2.3%,respectively,forpowergenerationsectors,atotalequivalentto26.6milliontonsthankstotheimprovementinenergyefficiency.Incomparison,theexportoftransportequipmentandenergy-intensivesectorsincreasedby6.5%and5.6%,respectively.Moreover,thewelfareanalysisofequivalentvariationsofJapan’shydrogensocietyshowedanincreaseof$75,696millionanda1.3%growthinGDP.Keywords:hydrogensociety,CO2emission,SPIAS-e,net-zerosociety,GTAP-E-PowerJELClassification:C68,R11,O13,O14,Q47ADBIWorkingPaper1403M.C.Huangetal.Contents1.INTRODUCTION.......................................................................................................11.1DevelopmentofHydrogenTechnology..........................................................11.2Japan’sRoadmapforHydrogenSociety........................................................21.3RephrasingtheHydrogenStrategyundertheGlobalTrendofDecarbonization.........................................................................................21.4ResearchQuestionandStructure..................................................................32.LITERATUREREVIEW.............................................................................................42.1R&DMeasuresforHydrogenSocietyRoadmap............................................42.2ApplicableSectorsforHydrogenSociety.......................................................52.3IntegratedPowerSystemintheCaseofNorway...........................................52.4ThePotentialofHydrogenSocietyforDecarbonization.................................63.METHODOLOGY......................................................................................................83.1TheCaptureofTechnologicalImprovement...................................................83.2GTAP-E-PowerModel...................................................................................84.SCENARIO................................................................................................................94.1TechnologicalImprovement...........................................................................94.2HydrogenSocietyPolicyShock...................................................................105.SIMULATIONRESULTS.........................................................................................115.1ChangeofOutputandPrice.........................................................................115.2ExternalTradesandSupplyChain...............................................................125.3CarbonDioxideEmission.............................................................................145.4ChangeinEmployment................................................................................155.5WelfareAnalysisandGDP...........................................................................166.CONCLUSIONS......................................................................................................176.1PolicyImplications.......................................................................................176.2ResearchLimitation.....................................................................................186.3FutureProspects..........................................................................................18REFERENCES...................................................................................................................19ADBIWorkingPaper1403M.C.Huangetal.11.INTRODUCTIONJapan,ahighlydevelopedcountrywithacriticalshortageofhydrocarbonresources,seesmultiplevaluesintheuseofhydrogen,includingenergysecurity,industrialcompetitiveness,andcarbonemissionreductions.In2017,JapanwasthefirstcountrytoadoptahydrogenframeworkwithitsBasicHydrogenStrategy(METI2020).Theframeworkpromotesanend-useapproachthatfocusesonelectricity,transportation,housing,heavyindustry,andrefining.Meanwhile,beingaleaderinfuelcelltechnology,particularlyfuelcellvehicles(FCVs),manufacturingfirmsfromtherelatedfieldsareseekingtoexportthistechnologytotherestoftheworld.Themainissueistoexperimentwithdifferentoptionsforsourcinghydrogentoadjustitsindustrialandenergypolicyforasocietythatutilizesthedevelopmentofhydrogenenergy.1.1DevelopmentofHydrogenTechnologyToachievethemedium-andlong-termgoalsintheBasicStrategy,andtorealizethe“hydrogensociety”thattheJapanesehavesetout,thegovernmenthasconsistentlyallocatedabudgetof98.9billionyen(approx.$693million)inFY2022forresearchanddevelopment(R&D)relatedtofuelcellsandwaterelectrolyzertechnology(METI2021).Toeffectivelyreducetheriskandprovideanincentivetoencourageprivatefirmstowardsthisemergingfield,public-privateco-investmentinR&Dandpilotprojectsisessentialtocreatesynergy(Arque-CastellsandSpulber2022).Thecoreconcernisaboutthemobilitysectorapplyinghydrogentechnologies,suchas“powertogas,”whichisenvisionedasaresolutiontorenewablepowerintermittencyforstimulatingdomestichydrogenproductionwithco-benefits.Inthemarketapplication,hydrogenenergygenerationhasmaturedwithseveralmethodscategorizedinthetablebelowindifferentcolors(Table1.1).Thankstoitsfeatureofstorableenergy,thetransitiontoahydrogensocietycouldbereferredtoasanadditionalaccessoryinvestmentintheexistingpowergenerationsources.ItisalsoforeseenthatitwilldecreasehydrogenenergygenerationcostsifthedemandsandR&Dcontinuetoincrease(GlenkandReichelstein2022;Hodgesetal.2022).Table1.1:HydrogenCategoriesbyGenerationMethodGrayhydrogenReflectsfossilfuels,naturalgas,andwatervaportoproduceH2andCO2througha“steamreforming”process;largeamountsofCO2areemittedintotheatmosphere.BluehydrogenReflectsfossilfuels,naturalgas,andsteamtoproduceH2andCO2;zeroemissions,includingcaptureofproducedCO2andgeologicalstorage(CCS).GreenhydrogenProducedthroughelectrolysisofH2OtoH2andO2fromsourceelectricitygeneratedbyrenewableenergy;zeroCO2emissions.TurquoisehydrogenProducedahydrocarbonfeedstock,suchasmethane(CH4)innaturalgas,asthesourceofhydrogenatoms;thehigh-temperaturereactorcouldusegreenenergy.YellowhydrogenElectrolysisofH2OtoproduceH2andO2usingelectricityfromnuclearpowergeneration;zeroCO2emissionsbutproducesnuclearwaste.BrownhydrogenProducedbygasification,wherecarbonsmaterialsareheatedintoagas.Similartoblackhydrogen.WhitehydrogenH2producedasabyproductintheproductionofotherproducts(e.g.,steelmaking);productionvolumeisuncontrollable.Source:Theauthors.ADBIWorkingPaper1403M.C.Huangetal.21.2Japan’sRoadmapforHydrogenSocietyTheBasicHydrogenStrategywasfirstannouncedin2017bytheMinistryofEconomy,TradeandIndustry(METI)tosetupthehydrogenroadmapwithambitionstoestablishanintegratedhydrogensupplychaindomesticallyandinternationallyby2030,includingproduction,transportation,storage,andconsumptionfromuppertodownstream(METI2017).Increasingrenewableenergygenerationcapacityisvitaltothegovernment’snet-zeroplan.However,becauserenewableenergyisintermittent,itcannotbalancesupplyanddemandonthepowergrid.Inaddition,theincreaseinrenewableenergygenerationcapacitymayresultinmorefrequentcurtailments(i.e.,reductionsinrenewableenergygenerationtobalanceenergysupplyanddemandorduetotransmissionlineconstraints)forfuturerenewableenergypowerplantoperatorsforanoptimalenergymix(HuangandKim2021).Theambitionsweremostlyreconfirmedwiththelong-termstrategyundertheParisAgreementandtheGreenGrowthStrategy(METI2021)towards2050CarbonNeutralitytoreducecarbondioxideemissionssubstantially.Moreover,theJapanesegovernmenthasrecognizedtheneedfornewormodernizedregulationsonhydrogenandammonia,andinfact,theSixthBasicEnergyPlan(METI2021)specifiestheimportanceofJapanplayingaleadingroleininternationalrulemaking.DespiteJapanesecompaniestakingapioneeringroleindrivinginnovationinthefieldofhydrogentechnologywithsignificantgovernmentfunding,Japan’sregulatoryandrulemakingactivitieshavebeencomparativelylimited.However,thesuccessofthenextphaseofthehydrogenrevolutiondependsontheestablishmentofawell-coordinatedandconsistentregulatoryframework.GivenJapan’sstatusasanearlyadopterofhydrogentechnologyandamajorfutureimporterofpurehydrogen,thedevelopmentofthehydrogensocietystillrequiressubstantialeffortintermsofimplementationandpopularity.Tointerpretthetransitiontoahydrogensociety,simplyanalyzingtheadvancementoftechnologyfromanengineeringperspectiveisinsufficient.Therearepilothydrogencitiesequippedwithhydrogenenergypipelines,suchasinKitakyushuCity(FuelCellsBulletin2011)andintheHarumiareaofTokyoMetropolis(FuelCellsWorks2019);thebroaderscopeofasectoralapproachwillbemorebeneficialinillustratingthehopefulpictureofrealizingahydrogensociety.Itisexpectedthattheresearchwillbringmoreinsightsintohydrogenpolicyimplicationsfromacomprehensivemethodologyregardingtechnologicalimprovement,capitalinvestment,thesupplychainofhydrogen-relatedsectors,andtheoveralleconomicimpactassessmentforthetransitiontoahydrogensociety.1.3RephrasingtheHydrogenStrategyundertheGlobalTrendofDecarbonizationAmidtheUkrainiancrisisandtheglobalenergycrisissince2022,Japanrephraseditshydrogenstrategytotaketheleadindevelopingpioneeringregulationsandsupportsystemsforahydrogensocietywithdecarbonizationbysupportingbusinessesindevelopingalow-carbonhydrogenandammoniasupplyinJapanbyaround2030.AccordingtothePolicyFramework(draft)forRealizingaHydrogenSociety(METI2023),thesupportconsistsofanefficientsupplyinfrastructure,suchastanksandpipelines,topromoteinternationalcompetitivenessandefficientsupplychains.Moreover,Japanwillalsopromotehydrogenproductionandutilizationinregionsthroughthedevelopmentoflocalsupplychainsandinfrastructurenetworks.ADBIWorkingPaper1403M.C.Huangetal.3Inthepowergenerationsector,theuseofhydrogenandammoniaishighlyanticipatedasacost-effectivesourceinensuringenergystabilitywhilereducingCO2emissionsfromthermalpowergenerationandpromotingtheexpansionofdemandandcostreductionthroughtheestablishmentofalarge-scalesupplychaintowards2030.Regulationsandsupportwillalsobeimplementedtoacceleratetheuseofhydrogeninpowergeneration,suchastheLong-termDecarbonizationAuctionsandthe2030nonfossilfuelratioof44%ormore.Inthemobilitysector,supportforfuelcellvehicles(FCVs)andhydrogenstationdevelopmenthasbeenprovidedforpassengercars,butthereisaneedtofocusoncommercialvehicles,whichhavegreaterpotentialforhydrogendemandandforwhichtheadvantagesofFCVsaremoreevident.Thisincludesexpandingpolicyresources,includingtaxmeasures,tosupportthelarge-scaleconstructionofhydrogenstations.Forrailways,thedevelopmentanddemonstrationofadomestichydrogensupplychainthroughtheuseoffuelcellrailwayvehiclesandlow-environmental-impactrailwaytransportationwillbepromoted.TheamendedEnergyConservationLawsetstargetgoalsforspecifictransportoperatorsandshippers,includingnonfossilenergyconversiontargetssuchashydrogen.Futuregoalsincludetheimplementationofapproximately800,000FCVs,equivalenttopassengercars,by2030throughtheaccumulationofdemandforlong-distancetransportandtheestablishmentofhydrogensupplychains.Forfuelcellrailwayvehiclesandrailwaytransportation,theaimistoachievesocialimplementationby2030,andforhydrogenstations,thegoalistomakethebusinessself-sufficientbythelate2020s,takingintoaccountcostreductionsduetoregulatoryrelaxation,andtoestablishapproximately1,000stationsby2030.Overall,Japanistakingstepstowardsthecreationofahydrogen-basedsocietywithaviewtoachievingcarbonneutralityby2050.Inaddition,Japanaimstocollaboratewithlocalgovernmentsandcompaniestopromotetheuseofhydrogeninvarioussectorsandindustries,includingportsandfactories.Thecountryplanstoinvestupto2trillionyen($18billion)intheindustryoverthenextdecade.1.4ResearchQuestionandStructureTounderstandtheoveralleconomicassessmentofthetransitiontowardsahydrogensocietyinJapan,theresearchwillapplyaquantitativeapproachtoinvestigatetheimpactofimplementingahydrogensocietythroughcapitalinvestmentinthehydrogen-relatedinfrastructurewiththeforesighttechnologyof2025–2035.Theresearchproceedsasfollows:Section2willprovidealiteraturereviewofthehydrogensocietytrendanditsgapinempiricalstudies;Section3willintroducethemethodologyofthecalibrationforthetechnologicalimprovementparametersandthestructureoftheanalyticalmodel;Section4demonstratesthescenarioandthesettingofpolicyshocks;Section5displaysthesimulationresultsandtheirinterpretation;andSection6presentsconcludingremarksincludingpolicyimplications,researchlimitations,andfutureprospects.ADBIWorkingPaper1403M.C.Huangetal.42.LITERATUREREVIEW2.1R&DMeasuresforHydrogenSocietyRoadmapClimatechangeandtheinterdependencyoftheglobalmarkethavehighlightedtheneedfornewenergysolutions.In2020,theJapanesegovernmentestablishedatargettoattaincarbonneutralityby2050throughtheattainmentofnet-zerogreenhousegasemissions.Thisdeterminationledtotheproposedestablishmentofa“hydrogensociety,”withthepromotionoffuelcellelectricvehicles,hydrogen-basedpowergeneration,andsyntheticgasesintheindustrysector.Despitethefactthathydrogenremainsanemergingandscarcesourceofenergy,theimportanceofrenewableenergyoptionstomeetglobalenergydemandswhilereducingCO2emissionsshouldnotbeunderestimated.AhydrogensocietycouldrefertoJapan’s“smartcommunity”concept,whichleveragesdigitalandcommunicationtechnologiestoefficientlymanagepowergenerationandconsumption.ThesuccessofthispolicyisvitalforsecuringJapan’sfutureeconomicgrowth,energysecurity,andenvironmentalwell-being.However,therelianceonimportedenergycarriersposesasignificantchallengeforJapan’senergysystemandenergysecurity.Toaccommodatethe“hydrogensociety”indicatedinJapan’sbasichydrogenstrategywithitscarbonneutralitytargetin2050,Japan’senergypolicyhasgreatlystrengthenedthegreentransitionbyreducingdependenceonfossilfuelpowerplantswhilepromotingrenewableenergyinfrastructureforindustryandhouseholds.Overaperiodofseveraldecades,Japaneseenergypolicyhasfavoredanambitiontoadvancethedevelopmentoffuelcellsthatarecheaper,moreefficient,andlongerlasting,aswellastheadvancementofhydrogenproduction,storage,transportation,andfuelsupplysystemstofacilitatethewidespreaduseoffuelcells.TheJapanesegovernmentandindustryarestronglysupportiveofthispolicy,andapoliticalconsensusisformingthatJapanshouldshiftawayfromnuclearpowerandactivelypursueanefficient,integrated,andenvironmentallyfriendlyhydrogensociety.Tostrengthenthisstrategy,Japanshouldexplicitlyfocusonexpandingresearchanddevelopmenteffortsinkeyenergysectors(Behling,Williams,andManagi2015).ThecaptureofR&Dfactorswouldprovidemeasurableindicators,whichcouldsubstantiallyhelptheanalysisinmakingafeasibleroadmapforahydrogensociety.Inarecentstudy,Burandt(2021)utilizedastochasticlarge-scaleopen-sourceenergysystemmodel,coupledwithfullhourlypowersystemdispatch,toanalyzethepotentialimpactofhydrogenimportsonthepowersystem,electricityprices,importdependency,andotherindustrialsectors.Thefindingsindicatethattheintegrationofhydrogenimportswouldhaveasignificantimpactonpowersystemdevelopment,leadingtoasubstantialshifttowardrenewableenergysources,suchassolarPV,onshoreandoffshorewind,andhydroelectricpower.Notably,solarPVisexpectedtobetheprimarysourceofelectricity,accountingfor40%–45%oftotalgeneration,whileonshorewindpowerisexpectedtolargelycomplementit,andhydropowerisexpectedtoprovidebaseloadpowerinallcases.Furthermore,hydrogenimportshavethepotentialtolowertheaveragepriceofelectricitygenerationinhighlyurbanizedareas,replacingelectrificationofbuildingsandtheindustrialsectorwithhydrogen-basedtechnologies.Itisimportanttoacknowledgethelimitationsofthemodelingapproachutilizedinthestudy,andfutureanalysesshouldconsidertheselimitationsinordertoprovideamorecomprehensiveoutlook.ADBIWorkingPaper1403M.C.Huangetal.52.2ApplicableSectorsforHydrogenSocietyAhydrogensocietycouldhelpintransitioningfromafossilfuelenergysystemtoasustainablegreeneconomy,takingintoaccounttechnical,environmental,economic,andsocialfactors.Trattner,Klell,andRadner(2022)highlightthepotentialofahydrogensocietyinfacilitatingthetransitionfromafossil-basedeconomytoasustainablegreeneconomy,takingintoconsiderationtechnological,environmental,economic,andsocialfactors.Thistransitionnecessitatesacompleteshiftfromfossilfuelstorenewableenergysources,suchassolar,wind,hydro,environmentalheat,andbiomass,employingelectrochemicalmachines,includingelectrolyzers,batteries,andfuelcells,toenhanceefficiencyandreduceCO2emissionsinallareasofmobility,industry,household,andgreenenergyservices.Theinitialmarketsforgreenhydrogencouldbeintermediatecommoditiesforindustrialapplications,followedbypowergenerationandmobility(Acaretal.2019).Arangeofwell-designedmulti-generationsystemsthatharnessthesolarspectrumandgeneratevalue-addedsystemproducts,suchaselectricity,heat,Cl2,NaOH,cleanwater,andammonia,areavailable.Encouragingsustainablemethodsofhydrogenproductioniscrucialforpromotinginternationalinitiatives.Intherealmofsustainability,implementinggreenpowerandhydrogeninthemobilitysectoriscrucial,asitcanreplacetraditionalfossilfuelsandlowercarbonemissionsinindustrialapplications.However,theadoptionofhydrogenasanenergycarrierrequiresalterationstocombustionchambersandburners,andthereplacementoffossilfuelsineachprocessmustbetakenintoaccount.Astheutilizationofhydrogenforfuelcellelectricvehiclesgrows,amajorautomotivecompanyintheRepublicofKoreahasdeemedthecurrenthydrogensupplyinfrastructureandstrategiesfordevelopingthehydrogenindustryfeasible(Kimetal.2023).Variousmethodsforhydrogenproductionandtransportationarebeingexplored,includingnaturalgasreforming,renewableenergy,andgreenhydrogen.Inanefforttoreducethepriceofhydrogengas,theKoreangovernmentisprovidingsubsidiestotheprivatesectortoencouragetheinstallationofmorehydrogenrefuelingstations.Topromoteastablesupplyof,anddemandfor,hydrogen,countriesshouldcapitalizeontheirstrengthstoproducehydrogenanddevelopappropriatefuelingstrategiesthroughpublic-privatepartnershipsandinternationalcooperation.InJapan,policymakersfacesignificantchallengesinensuringsustainableenergysecurityintheaftermathoftheFukushimanuclearcrisis.Therefore,theyneedtodecarbonizetheenergysystemwhileensuringsafetyandcontinuityincaseofnaturaldisasters.AccordingtoKhan,Yamamoto,andSato(2020),thehydrogenfuelcellvehicles(HFCVs)couldbarelymeetinJapan’sgreentransitionevenwithincentivesprovidedbythegovernmenttopromoteHFCVsasanenvironmentallyfriendlytechnology.Thus,potentialdemandforHFCVsandgovernmentincentivesremaincriticalfactorsintheadoptionofhydrogenasanenergycarrierinJapan.Themobility,industry,service,andhouseholdsectorsarehighlycorrelatedwithapotentialspillovereffectgeneratedamongdifferentusers.Therefore,acomprehensivemodelplatformcouldserveasabetteranalyticaltoolforinterpretinganintegratedpowergridandhydrogensociety.2.3IntegratedPowerSystemintheCaseofNorwayInordertofosterthedevelopmentoflow-carbonhydrogen,theNorwegiangovernmenthasimplementedvariousR&D-relatedsupportmeasures.The“HydrogenStrategy”waspublishedbythegovernmentinJune2020,referringtotheentireenergysectorandprovidingaroadmapforhydrogen.AccordingtotheIEA(2022),NorwayplanstoADBIWorkingPaper1403M.C.Huangetal.6graduallyphaseoutitsoilexportindustryby2050,andhydrogenwillplayacentralroleinthetransitiontowardsalow-emissionsociety.ThisshifttowardshydrogenhighlightstheimportanceofdecarbonizationinNorway.Althoughtheoilsectorstillaccountsforapproximately30%ofNorway’sCO2emissions,hydrogenisexpectedtoreplacefossilfuelsinthetransportationandindustrialsectors.InlightofNorway’sambitiousgreenhousegasreductiontargetofachievinga90%–95%reduction(excludingsinks)from1990levelsby2050,greenenergyhydrogenfuelsareseenasthekeytolowemissiontechnology(IEA2022).Despitethis,theadoptionofhydrogentechnologyremainslimitedduetothelackofpolicyandregulatorysupport,aswellaslimitedpublicawareness.Inordertopromotethewidespreaduseofhydrogentechnology,variousfactors,suchasenvironmentalawarenessandbenefits,theavailabilityofhydrogeninfrastructure,thecompatibilityofhouseholdandindustrialheatappliances,fuelpricelevels,mediacoverage,andsupportforthehydrogenmarket,needtobetakenintoaccount(Høyland,Kjestveit,andSkotnes2023).Toinvestigatetheeconomicimpactsofpoliciesaimedatreducingfossilfuelproductionandpromotingthehydrogendemandinintegratedpowersystems,ComputableGeneralEquilibrium(CGE)modelscanserveasavaluabletool.Espegrenetal.(2021)employedadynamicmulti-regionalCGEmodeltosimulateNorway’senergytransition,demonstratingthepotentialforsignificantdecarbonizationby2050withtheaidofhydrogen.Nonetheless,thestudyalsohighlightschallengesandtrade-offsassociatedwiththetransition,includingpotentialimpactsonGDPgrowth.TheanalysisindicatesthatGDPgrowthrateswillinitiallybelowerthaninthemainalternativescenariobutwillrecoverafter2030.Inordertoanalyzeintegratedpowersystemswithvariousenergysources,theuseofCGEmodelscanbebeneficial,astheyallowforathoroughexaminationoftheeconomicimplicationsofdifferentpolicymeasuresaimedatachievingasustainableenergysystem.Dammanetal.(2021)employahybridapproachthatcombinesqualitativesociotechnicalanalysiswithquantitativemodelingtoexplorethesociotechnicaldynamicsthatledtothecurrentsituationinNorwayregardinghydrogenintheenergytransition.Thismethodofanalysiscanbeparticularlyusefulincomplexsituations,withmultiplepathwaysandsolutionsbeingconsidered.Theyemploytwomodels,namelythebottom-upoptimizationmodelofthenationalenergysystem(TIMES-Norway)andthetop-downgeneralequilibriummodel(REMES),toconductaquantitativeanalysisoftheviabilityofdifferentroutestowardazero-emissionsocietyinNorwayby2050.Thestudypointsoutthateffectivetransformationnecessitatestheconsiderationofnumerouspathwaysandtheplausibleconditionforeachpathwaytoberealized.Norway’sabundantresourcesofhydropower,onshoreandoffshorewind,andheavydependenceonoilandgasoffervariousopportunitiesforhydrogenenergysolutions,therebysheddinglightonthepotentialandchallengesofdeployingandproducinghydrogenonalargescale.2.4ThePotentialofHydrogenSocietyforDecarbonizationHydrogenenergyisacriticalelementinachievingalow-carbonsociety,butitsexpansionfacesvariousobstacles,includingtechnical,financial,andinstitutionalchallenges.Whiletherehavebeenrecommendationsfromthegovernmentandbusinessperspective,studiesonhydrogenstationusersarelimited,andrespondentsoftenlacksufficientinformationonthetechnology.Thecharacteristicsofafuturehydrogeneconomyarecurrentlysubjecttodebate.Oliveira,Beswick,andYan(2021)proposeavisioninwhichhydrogenisprimarilyusedfordecarbonizationwithaADBIWorkingPaper1403M.C.Huangetal.7three-stagehydrogendeploymentplanthatincludesvarioussectors,includingindustry,transportation,buildingandheating,andelectricity,showingthathydrogencoulddecarbonizearound18%ofenergy-relatedsectors.Meanwhile,Hienukietal.(2021)conductedasurveyofuserswhorefuelathydrogenstationstoevaluatethesocialacceptabilityofthesestations.Theycomparedtheacceptanceofusersofself-refuelinghydrogenstationswiththatofexistinggasstations.Byassessingusers’confidenceinthetechnology,theywereabletoimprovetheacceptabilityofhydrogenstationsandbuildontheexistingacceptabilitymodel.Utilizingthepowerexchangemarket,inadditiontoon-sitephotovoltaics,canimprovetheunitcostofhydrogen.Thepower-to-gas(PtG)technologyforhydrogenproductioncouldserveameanofstabilizingpowersystemsandreducingCO2emissions.Yoshidaetal.(2022)examinethepotentialofPtGtechnologyasameansofstabilizingpowersystemsandreducingCO2emissionsthroughhydrogenproduction.Theyproposeamixed-integerlinearprogrammingmodeltooptimizetheannualhydrogenproductionschedule,withtheunitcostofhydrogenproductionastheevaluationindex.TheresultsindicatedthatPtGtechnologycouldserveasapromisingsolutionforreducingemissionsintheindustrialsector,particularlyasmorevariablerenewableenergysourcesareintroducedinthefuture,andcancontributetotheintroductionofhydrogendemandforindustrialapplications.Inrelationtothepotentialofsolarthermal-to-gas(StG)conversionsystemsinfacilitatingthetransitiontowardszero-carbonenergyinJapan,thistechnologyisconsideredhighlypromisingduetoitsabilitytoconvertrenewableenergyintosyntheticgasessuchashydrogenandmethane,whichcaneffectivelystoreintermittentrenewableenergy(Wai,Ota,andNishioka2022).TheproductionofsyntheticchemicalgasesthroughStGconversionhassignificantpotentialasanalternativetofossilfuels,andtheJapanesegovernmentispromotingcost-effectiverenewableenergygenerationandefficientPtGconversion,specificallyforhydrogenproduction,decarbonization,andstorage.Furthermore,JapanispresentlyengagedinthedevelopmentofcarbonrecyclingtechnologiesaimedatdecreasingCO2emissionsandcapturingcarbonfromtheindustrialsector.Toachieveatransitiontowardssustainablesociotechnicalsystemsandestablishenergyconversion,itisimperativetoconsiderthesocialdimensionsofhydrogenconversion.Thesedimensionsencompasscontextualdisparitiesandchallenges,includingtechnicalfeasibility,compliancewithnationalregulations,publicacceptance,andeconomicviability.Incorporatingasocietalperspectiveiscrucialtoensurestableefficientfunctioningofsociotechnicalsystems.However,hydrogen,despitebeingcapableofcomplementingrenewableelectricityandcontributingtovariousenergy-relatedsectors,isnottheprevailingenergysourceatpresent.Tomeetthefuturedemandforhydrogen,thehydrogeneconomymustbeexpanded,andtheadoptionofgreenhydrogeninsectorssuchaschemicalsynthesisshouldbeprioritizedalongwithconventionalenergysourcestoensurethehydrogensupplychainforproductiontoachieveeconomiesofscale.Furthermore,hydrogencanaiddecarbonizationeffortsbyvirtueofitshighmassenergydensity,lightweight,easeofelectrochemicalconversion,andcapacitytostoreenergyoverextendedperiods.ItwouldbedesirabletodevelopaquantitativemeasuretocapturethetransitionofenergysourcestowardahydrogensocietysupportedbythetechnologyadvancementforassessingtheimpactonindustryandGHGemissions.ADBIWorkingPaper1403M.C.Huangetal.83.METHODOLOGYTomakeacomprehensiveimpactassessmentfortransitioningtoahydrogensociety,itisessentialtoutilizetheinstrumentwiththecommonlyacceptedscopeofdatabaseandaconsistentapproach.However,undertheexistingliteratureonhydrogenmainlyfocusesonenergyefficiency.Moreover,theeconomicanalysisisstilllimitedtocost-benefitanalysis,andwefindevidence-basedtechnologicalparametersforimplementinghydrogenpowerwiththeforesighttechnologyindicatorsandapplyaCGEmodeltocomeupwiththeimpactofthehydrogensociety.3.1TheCaptureofTechnologicalImprovementToquantitativelyevaluatethesocialandeconomicpoliciesregardingsciencetechnologyforpresentingmultiplepossiblepolicyoptions,itisindispensabletocapturethetechnologicalcharacteristicsoftangibleandknowledgecapitalasintangiblefixedassetscompilationintheinput-outputtables(Kurodaetal.2018).Themultisectoraleconomicgeneralinterdependencemodelexplicitlycapturestheimpactontheeconomyandsocietythroughthegeneralinterdependenceoftheeconomyintermsofbothflowsandstocksbyindustrysectorbasedontheactivityofthreedimensions:mainproduct,intra-ICT,andintra-R&D.Themodelusesareferencecaseofatechnologicalscenario(scienceandtechnologyandsocialtechnology)thatisexogenouslygiventotheeconomyandsocietywithoutanyspecificpolicymeasurestocompareitsimpactontheeconomyandsocietyusingvariousindicatorstoestablishthedirectionofeconomicandsocialchange.Inaddition,theScREXPolicyIntelligenceAssistanceSystem–EconomicSimulator(SPIAS-e)wascreatedtoserveasananalyticaltoolforunderstandingthecharacteristicsofscienceandtechnologyandtheireconomicandsocialimpactsinthescenarioofJapan’seconomyintheprojectionof2021–2050(HuangandKuroda2021),theparametersofwhichcouldbeutilizedforeconomicanalysis.3.2GTAP-E-PowerModelForanalyzingtheenergyorpowersystemimpactontheeconomyonaglobalscale,theGlobalTradeAnalysisProject(GTAP)modeldevelopedbyPrudeUniversityiscommonlyused(Hertal1997).TheGTAPmodelisbasedonaCGEframeworkwiththeinput-outputtablescontributedbytheresearchcommunity.InmanyextensionsoftheGTAPmodel,theGTAP-E-Powerisanelectricity-detailedeconomy-widemodelthathasdecomposeddifferentpowergenerationsfromfossilfuelsofcoal,crudeoil,andnaturalgas,orrenewableenergysuchashydro,solar,andwindpower(Peters2016a,b).TheGTAP-E-PowermodelimplementstheGTAPmodelinpresentingeconomicindicatorsofoutput,price,externaltrades,andcarbondioxideemissionfrom75sectors,whichmakesitausefulpolicytoolforidentifyingadomesticorglobaleconomicissue(Huang,Iwaki,Liou,2023).Althoughhydrogenenergyisstillnotincludedinthemodel,wecouldutilizetheparameterssourcedfromotheravailabledatabasessuchasSPIAS-eandotherkeyliteraturetoillustratetheimpactofthehydrogensocietyroadmap.ADBIWorkingPaper1403M.C.Huangetal.94.SCENARIOWecreateascenarioofaroadmaptowardahydrogensocietyintheGTAP-E-Powermodel.Asindicated,intheabsenceofthehydrogenenergysectorinthemodelscope,weherebyassumehigherproductivitythankstothetechnologicalimprovementwithhydrogenenergygeneratedbydifferentpowersources.Therefore,insteadofdifferentiatingthehydrogensources,wedemonstratetheimplementationofahydrogensocietybyusingtheparameterssourcedfromSPIAS-efortechnologicalimprovementandtheassumptionsofhydrogencost(IEA2021)asthepolicyshocks.4.1TechnologicalImprovementWerefertotheprojectionofeconomicindicatorsastechnologyforesightbecauseofitsfeaturingintheaccumulatedflowoftangibleandintangiblecapitalstock.InSPIAS-e,theindicatorsinthe50-yearprojectionaregeneratedalongwiththehigherefficiencygeneratedbyinformationcommunicationtechnology(ICT)anddemographicchange(HuangandKuroda2021).Thepriceindexoftangiblecapitalaggregatedfrom93sectorsrepresentsthecostofcapitalinput(Figure4.1);ahigherindexindicatesahighercost.Between2014and2035,theenergysectorsshowthelowestvalue,implyingthatthesectorhasmoresignificanttechnologicalimprovement;ontheotherhand,theservicessectorshowsahighvalue,indicatingthatthedemographicchangeinJapanhasmadethecostofservicesexpensive.TheindicatorscouldbereferredtoasspillovereffectscontributedbytheR&D(Huang,Liou,andIwaki2021).Wethuscalibratedtheindexfrom2025–2035asourparametersfortechnologicalimprovement(Table4.2).Figure4.1:ThePriceIndexofTangibleCapitalSource:SectorsaggregatedfromSPIAS-e.ADBIWorkingPaper1403M.C.Huangetal.10Table4.2:TechnologicalImprovementParametersSectors2025–2035Agriculture4.96%Energysectors6.10%Powersectors2.95%Energy-intensivesectors4.64%Manufacturing1.64%Electronicequipment4.59%Transportequipment5.97%Transportation3.51%Services-1.72%Source:SectorsaggregatedfromSPIAS-e.4.2HydrogenSocietyPolicyShockTheenergyandpowergenerationsectorsintheGTAP-E-PowermodelaremorespecificthansectorsclassifiedinSPIAS-e.Therefore,forsimplicityandconsistency,weunifiedtheparametersforthesetwosectorsandthecapitalinvestmentratioforhydrogengeneration(Table4.3).4.2.1ProductivityGrowthIn2025–2035,theR&Dactivityaccumulatedinthebusiness-as-usual(BAU)pathshowsalowerpriceindexformostofthesectors,especiallyintheenergy(6.1%),transportequipment(5.97%),andagriculture(4.96%)sectors,indicatingthatfirmscouldachievethesameperformancewithlessinput.Nevertheless,duetotheshrinkingpopulation,productivitygrowthdecreasedintheservices(–1.72%)andmanufacturing(–1.64%)sectors.4.2.2CapitalInvestmentToachieveahydrogensociety,capitalinvestmentinhydrogengenerationisfundamental.Theinvestmentratioforfossilfuelpowergenerationisassumedtobe10%followingtheequipmentinstallationwithassociatedsectors.Incomparison,theratioissetat50%fortherenewableenergysourceofsolarandwindpowerbecauseofthedeclarationofthenet-zerocarbonneutralitygoal.Thetotalinvestmentvolumeis$924.7million.4.2.3EnergyEfficiencyAccordingtothecostestimateofhydrogenenergygenerationbytheIEA(2019),asof2019,therelativecostofH2perKGbysteammethanereforming(oilandgas),coalgasification,andelectrolysis(renewableenergy)is1:2:4;weherebyassumethatthehydrogengenerationefficiencyforsectorsofservicesandmanufacturingcouldincreaseby20%,10%,and5%foreachpowergenerationmethod,respectively.Moreover,giventheevidencethatahigherusageratewouldalsoincreasetheefficiency,wethusassumethatthepeakloadpowergenerationforenergy-intensivesectorsforthesimulationanalysis.ADBIWorkingPaper1403M.C.Huangetal.11Table4.3:TheTechnologyandPolicyShocks(Unit:%)SectorsProductivityGrowthCapitalInvestmentEnergyEfficiencyCoal6.10n.a.n.a.Crudeoil6.10n.a.n.a.Naturalgas6.10n.a.n.a.Petroleum6.10n.a.n.a.Powertransmission2.95n.a.n.a.Coal-firedpower2.9510.010.0Oilpower2.9510.020.0Gaspower2.9510.020.0Nuclearpower2.9510.010.0Solarpower2.9550.05.0Windpower2.9550.05.0Hydropower2.9510.05.0Otherpowers2.95n.a.n.a.Agriculture4.96n.a.n.a.Electronicequipment4.5910.0n.a.Transportequipment5.9710.0n.a.Energy-intensivesectors4.64n.a.n.a.Manufacturing–1.6410.0n.a.Transportation3.5110.0n.a.Seatransportation3.51n.a.n.a.Services–1.72n.a.n.a.Note:Totalinvestmentvolumeis$924.7million.Forenergy-intensivesectors,thepowersupplyefficiencyisassumedtodouble.Productivitygrowthisassumedtobeatthesamelevelasthetransportationsector.Source:ByauthorsbasedonSPIAS-eandtheassumptionsoftheIEA(2019)andMETI(2021).5.SIMULATIONRESULTSBasedonthescenario’stechnologicalchangeparametersandpolicyshocks,weobtainedtheresultsofaroadmaptowardahydrogensociety.Sincetheparameterswerecalibratedfortenyears,itimpliedthatthesimulationresultscouldberegardedasaten-yearaccumulatedeconomicindicator(Figure5.1).Weherebydiscussthesimulationresultsfromfourperspectives:(1)outputandpricechange,(2)externaltradesandsupplychain,(3)carbondioxideemission,and(4)GDPandwelfareanalysis.5.1ChangeofOutputandPriceGenerallyspeaking,theenergysectorsshowanincreaseinoutput,excludingaslightfallincoal.GiventhatthevolumeofJapan’soutputforenergysectorsisminimal,theincreasecouldbedisregarded.However,thepricedecreasecouldimplythetransitionofenergysources.Theoutputandpriceofelectricitybothshowedgrowth,indicatingtherisingimportanceofelectricityfromallpowergenerationsources.ADBIWorkingPaper1403M.C.Huangetal.12Figure5.1:OutputandPriceChangeAgricultureoutputshowedaslight0.5%growthanda3.1%decreaseinpricethankstothehigherproductivityofsmartandautonomoussystems.Ontheotherhand,transportequipmentshowedavibrantgrowthof5.0%withadecreasedprice,reflectingJapan’scompetitivenessinthenewvehicleproductionthatfitstheenergytransitions.Meanwhile,itisnotablethattheoutputdecreasedby3.7%inelectronicequipmentand1.0%intheenergy-intensivesectordespiteitsincreaseinproductivity.Themanufacturingsector’soutputfellby6.6%,withthepriceincreasingby6.1%,indicatingthedecayinginfluence.ThedemographicchangehasthreatenedJapan’sservicesector,whichhasthehighesteconomicshare.However,theenergytransitionhashelpedactivatethesector,withslightincreasesof0.7%intransportationand0.4%inservices.Eventhoughthepriceincreasesreached5.4%and15.8%,thepositivegrowthintheservicessectorsplaysaroleinmaintainingthelong-termstabilityofeconomicperformance.5.2ExternalTradesandSupplyChainThescenarioofpolicyshocksonpowerefficiencyandinvestmentinhydrogensociety-relatedsectorsmayalsoimpacttheglobalsupplychainregardingthepercentagechangeoftradevolumewithtradingpartners(Figure5.2).Therefore,interpretingthepotentialconsequencesmayassistfirmsandfacilitatepolicymakinginpreparingfortheadjustmentofproductionandfluctuation.ADBIWorkingPaper1403M.C.Huangetal.13Figure5.2:ChangesofImportfromTradingPartnerCountry(Unit:%)ADBIWorkingPaper1403M.C.Huangetal.145.2.1EnergySectorsSinceJapanonlyproducesverylittleenergy,weshalldisregardthechangeinJapan’sexporttoothercountries.Inadditiontothestablesituationinthecoalandcrudeoilsectors,JapanincreasesitsimportofnaturalgasfromEuropeandfromAsianregions,whileexportingrefinedpetroleumtootherregions.Meanwhile,AustraliaandNewZealandreducedtheimportofpetroleumfromotherregionsbutsubstantiallyincreasedimportsby7.9%fromJapan,whichcouldimplyotherpossibleenergypartnerships.5.2.2OtherManufacturingSectorsWithamorestablepowersupplyforenergy-intensivesectorssuchasthesteel,chemical,andmachinerysectors,Japanhasbecomemoreself-sufficient,withastrongexportincreaseof5.6%toallregions.Moreover,Japan’scorecompetitivenessintransportequipmentalsoshowedinthenotableincreaseinexportby5.7%to7.2%,especiallyinEuropeandinAsianregions.Itisinterestingtoseethesignificantincreaseinexportof15%inJapan’sagriculturesector,whichmainlycontributedtoitshighvalueaddedandsmartsystem.Asnopolicyshockisprovidedfor,Japancouldsubstitutetheimportwithdomesticsupplyfortheseatransportsector.Ontheotherhand,thedemandforJapan’smanufacturingandelectronicequipmentsectorsshowedasignificantdecrease,implyingJapan’sdiminishingcomparativeadvantagesintheglobalproductionnetworks.Nevertheless,thehighinterdependencebetweenJapanandtheworldforenergy-intensiveandtransportequipmentsectorsmayhighlighttheimportanceofdevelopingtheessentialprocesstowardahydrogensocietybyprovidingnext-generationtransportequipmentandupgradingtheproductsfromenergy-intensivesectors.5.3CarbonDioxideEmissionReducingcarbondioxideemissionsthroughtheuseofrenewableenergyistheprimarymeasuretoachievethenet-zerocarbonneutralitygoal(Figure5.3).ThetechnologicalimprovementparameterswesetforpolicyshockscouldprojectpossiblepathwaysofCO2emissionwithinformativepolicyimplicationstowardthereductiontarget.However,astheshocksonlyapplydomesticallyinJapan,weherebyfocusmoreonthedomesticcarbondioxideemission.Ahigheremissionoffossilfuelmayimplyafluctuationintheenergytransition,whilenaturalgasshowedanemissiondecreaseof3.7%.Byimplementingtheassumedhigh-efficiencyhydrogenenergygenerationequipment,thepowergenerationsectors,includingcoal,crudeoil,andnaturalgas,havecontributedtoa2.3%decreaseinemissions,or6.8milliontons.Othersignificantemissionreductionscouldrefertoelectronicequipment(–4.4%)andmanufacturing(9.5%)sectors,implyingthereconstructionoftheglobalsupplychain.Ontheotherhand,theenergy-intensivesectorsshowedanincreaseof5.2%inemissionsduetoJapan’ssectoralcomparativeadvantageasatrade-offforothermanufacturingsectors.Japan’scorecompetitivenessintransportequipmentproductionhaspaidoffinreducingemissionsby1.0%,whichissmallbutunneglectablebecausetheproductionofso-called“zero-emission”electronicvehiclesisnotoriousformassiveCO2emissionsduringitsproductionprocess.Interestingly,evenwithoutenergyefficiencypolicyshocks,theseatransportsectorcouldreacha2.8%emissionreduction,mainlybecauseofthechangeinexternaltradesandtheproductivitygrowthingloballogistics.ADBIWorkingPaper1403M.C.Huangetal.15Meanwhile,the3.3%emissionreductionoratotalof19.8milliontonsinthetransportationandservicessectorsisimpressive,representingvitalindicatorsfortransitioningtoahydrogensociety.Lastly,wemightbegintoworryaboutthemassiveemissionincreaseifwelookattheindicatorsfromtheimportfirms.ThisismainlybecausenotechnologicalimprovementparametersweresetorpolicyshocksappliedtoregionsotherthanJapan.Figure5.3:ChangeofCarbonDioxideEmission(Unit:%)5.4ChangeinEmploymentAlongwiththedemographicchangeandthetechnologicalimprovementtowardthehydrogensociety,sectoralemploymentalsoshowsthetransition(Table5.1).Byimplementingthenewfacilitiesforhydrogengeneration,employmentshowsasignificantgrowthinsolarpower(12.9%)andthepowertransmissionsystem(12.9%),naturalgas(12.5%),andthermalpower(10.3%),whileadecreaseisevidentincoal(–11.6%)andpetroleum(–7.5%).Energy-intensiveandothersectorsdeclineby6.4%–6.9%,whereasasubstantialincreaseisevidentintransportationequipment(10.5%).Inregardtothenumberofemployees,thehigherefficiencyandautomaticsystemhavedecreasedtransportationby413,712people.Nevertheless,theserviceshowsanincreaseof614,248people,indicatingamorespecificworkloadallocationtomaintenanceorthemedicalcaresectors.AsashrinkingandagingpopulationisinevitableinJapan,theemploymentchangeshouldnotbetakenasashock,butratheraprocessoftransitiontowardthehydrogensociety.Thetechnologicalimprovementcouldstillsustainefficientlogistics,transportation,andservicewithasatisfactoryqualityoflifeandmitigateclimatechangewithcleanandrenewableenergysources.ADBIWorkingPaper1403M.C.Huangetal.16Table5.1:ChangeofEmploymentSectorPeopleAgricultural,forestry,fishery,andanimalhusbandry–8,324–0.2%Coal–4,247–11.6%Oilmining1967.0%Naturalgas6,96912.5%Petroleum–1,136–7.5%Thermalpower11,33510.3%Solarpower2,65212.9%Otherpower3,4187.7%Powertransmission12,87912.9%Transportequipment105,10310.5%Energy-intensivesector–290,334–6.4%Othersectors–226,982–6.9%Electronicequipment–14,402–1.0%Transportation–413,712–11.8%Seatransportation–57,473–23.2%Service614,2481.2%5.5WelfareAnalysisandGDPIntheGTAPmodelscope,weuseequivalentvariationstocomparetheutilitychangeintheexanteandexpostconditionstoevaluatethewelfare(Figure5.4).Theregionalutilityisthefunctionofgoods,includingenergyconsumedbyhouseholdsintheregion.Wecalibratedthetechnologicalgrowthparameters,capitalinvestmentforhydrogen-relatedsectors,andenergyefficiencyassumptions,whichcontributedtoasubstantialimprovementinwelfareby$75,696million.Althoughtherelevantparametersarenotappliedtootherregions,ASEANshoweda$299millionincreaseinwelfare,implyingthatitseconomywasalsoaffectedpositivelybyourassumedhydrogensocietytransitionintheregionalsupplychain.Figure5.4:WelfareandGDPGrowthADBIWorkingPaper1403M.C.Huangetal.17ConsistentresultsinGDPalsorevealthatthetransitiontoahydrogensocietycouldbringa1.3%economicgrowth.UpgradingthehydrogenenergysystemwithstrategicinvestmentcouldleadtoahigherqualityoflifewithlessCO2emission.ThehydrogensocietyroadmapcouldpositivelyimpacttheeconomyevenforacountrylikeJapanwithitstremendouspressureondemographicchangewithashrinkingpopulation.6.CONCLUSIONSThecompositionofahydrogensocietyiscomplex,anditrequiresaninterdisciplinaryapproachandinclusiveanalysistocoordinatecriticalfactorstoacceleratethedevelopmentdrawnintheroadmapeffectively.But,moreimportantly,abroaderapproachtosocioeconomicanalysiscouldsubstantiallymotivatemorestakeholderstocooperateforcomprehensiveimplementationforexpandingthedemandtorealizeahydrogensocietywithcleanandsustainabledevelopment.Themaincontributionoftheresearchisitsevidence-basedinclusionofthe2025–2035foresighttechnologyindicatorforanassumedhydrogensocietytransitionscenariowithGTAP-E-Powereconomicmodelingforplausiblepolicyintuitions.Thesimulationresultsprovidedwide-ranginginformationthatcouldassistindustriesinadjustingthefluctuationandopportunityalongwiththehydrogensociety.Thismethodallowedmorespecialiststojointhepolicymakingprocesswiththeirexpertisetostrengthenandaccomplishthepolicyrecommendationsgradually.6.1PolicyImplicationsBasedonthesimulationresultsofJapan’shydrogensocietytransition,wefoundthatcapitalinvestmentinpowergenerationsectorsforhydrogenenergygenerationequipmentcouldimproveenergyefficiency,therebycontributingtostimulatingJapan’seconomybyincreasingGDPby1.3%withanimprovementofwelfareby$75,696million,aswellasanestimatedreductioninCO2emissionsof19.8milliontonsinthetransportationandservicessectors.Morespecifically,thehydrogensocietytransitioncouldreduceJapan’sdependenceonfossilfuelswithamoreresilientglobalsupplychainforenergy-intensive,transportequipment,andevenagriculturesectors.Furthermore,theinvestmentinhydrogen-relatedsectorsalsoreinforcedJapan’scompetitivenessandcreatedthepossibilityofanenergypartnershipwithAustraliaandNewZealandandproductionnetworkswithASEAN.Ourstudyindicatesthattheattainmentofeconomiesofscaleisimperativetomarkedlydecreasetheexpensesassociatedwithhydrogenenergy.Therobustnessofthehydrogensupplychainhingesupontheexistenceofarobustdemandforhydrogenenergyacrossallsectors,includingtransportation,manufacturing,andresidentialdomains.Moreover,toensurethesmoothfunctioningandupkeepofthehydrogensupplychain,theestablishmentofproductionnetworksincrucialdomainssuchashydrogenfuelcellvehicles(HFCVs)andothervitalconstituentsofthehydrogeninfrastructureiscrucialandwouldyieldbenefitsforregionalcollaboratorsinAsiaandthePacific.Thetransformationinemploymentpatternsunderscoresthesignificanceofbuildingcapacityandprovidingtraininginhydrogen-relatedindustries.Whileadvancementsinefficiencycouldleadtothedisplacementofsometraditionaljobsinthefossilfuelsector,thedemandforsustainableenergyisexpectedtogenerateemploymentopportunitiesfortechniciansandservice-orientedsectors,therebyenablinggreaterADBIWorkingPaper1403M.C.Huangetal.18internationalmobilityofhumanresources.Thistransferofknowledgeandskillsislikelytohaveaspillovereffect,notonlywithintheregionbutalsoamongregions,owingtothegrowingadoptionofrenewableenergysourcessuchasoffshorewindpowerandassociatedmanufacturingindustries.Continuouspolicydialoguesconcerningtechnologytransferandstakeholderpartnershipsarevitalforeffectivepolicyformulationandcollaborationwithintheglobalsupplychain.Finally,werecommendtheestablishmentofahydrogensocietypilotzonetofacilitatetheadoptionofhydrogenenergy.6.2ResearchLimitationTofillthegapinhydrogenstudiesbetweentheengineeringapproachandeconomicanalysis,theresearchappliedaGTAP-E-PowermodeltosimulateJapan’shydrogensocietytransitionwithtechnologicalimprovementparameterscalibratedfromSPIAS-e.However,eventhoughinformativeeconomicindicatorswereidentifiedthroughtheassumedscenariointhesimulationofpolicyshocks,limitationsareinevitableforthecurrentresearchscope.Forinstance,theassumptionoftechnologicalimprovementmightbeoversimplifiedunderthehomogeneousenergyefficiencyparametersettingforallsourcesofenergygoodsandpowergenerations.Therefore,morepreciseindicatorsofenergyparametersshouldbemaketoimprovetheaccuracyofthesimulationresults.Moreover,theGTAP-E-Powermodelscopeisastaticmodelandthustherecursiveimpactcouldnotbemeasured,makingitdifficulttoreflectthefiscalfeasibilityofmassiveinfrastructureinvestment.Inaddition,itisunrealisticthattheparametersoftechnologicalimprovementonlyoccurinJapan,whichhasdramaticallyrestrictedtherevelationoftheglobalhydrogensupplychain.ItisdesirabletoovercometheselimitationssothattheGTAP-E-Poweranalysiscanbeamorepracticalinstrumentforinterpretingthehydrogensociety.6.3FutureProspectsAlongwithrecoveringfromtheCOVID-19pandemic,morehydrogen-relatedsystemswillbeinstalledtomeettheroadmapandthegoalforanet-zerocarbonsociety.Tocopewiththeresearchlimitationsindicatedabove,itwouldbeindispensabletoapplymoreaccurateparametersfortechnologicalimprovementindicatorsforJapanandotherregions,specificallytotheparticularpowergenerationsources,tobetterillustratetheimpactoftransitioningtoahydrogensociety.Notwithstanding,itwillbeessentialtorevisetheGTAP-E-Powermodelscopefromstatictodynamictoappropriatelycapturetherecursiveimpactofinvestmentchoicestoenablepolicymakerstodesignatefeasiblefiscalplanstosupporttheprojectundertheevidence-basedreferences.Finally,andfundamentally,similarlytotheeffortexpendedindistinguishingrenewableenergysectorsofsolarandwindpowergenerationfromfossilfuel,itwillbenecessaryforeconomistsandthestatisticianstothinkaboutextrapolatinghydrogenenergyintoanindependentsector.Thistaskwillgreatlyhelpinanalyzingtheinterdependenceamongsectorsandmakingstraightforwardpolicyrecommendationstoacceleratetherealizationofahydrogensociety.ADBIWorkingPaper1403M.C.Huangetal.19REFERENCESAcar,C.,Y.Bicer,M.Demir,andI.Dincer2019.TransitiontoaNewErawithLight-BasedHydrogenProductionforaCarbon-FreeSociety:AnOverview.InternationalJournalofHydrogenEnergy44(47):25347–25364.https://doi.org/10.1016/j.ijhydene.2019.08.010.Arque-Castells,P.,andD.Spulber.2022.MeasuringthePrivateandSocialReturnstoR&D:UnintendedSpilloversversusTechnologyMarkets.JournalofPoliticalEconomy130(7):1860–1918.https://doi.org/10.1086/719908.Behling,N.,M.Williams,andS.Managi.2015.FuelCellsandtheHydrogenRevolution:AnalysisofaStrategicPlaninJapan.EconomicAnalysisandPolicy48:204–221.https://doi.org/10.1016/j.eap.2015.10.002.Burandt,T.2021.AnalyzingtheNecessityofHydrogenImportsforNet-ZeroEmissionScenariosinJapan.AppliedEnergy298:117265.https://doi.org/10.1016/j.apenergy.2021.117265.Damman,S.,E.Sandberg,E.Rosenberg,P.Pisciella,andI.Graabak.2021.AHybridPerspectiveonEnergyTransitionPathways:IsHydrogentheKeyforNorway?EnergyResearchandSocialScience78:102116.https://doi.org/10.1016/j.erss.2021.102116.Espegren,K.,S.Damman,P.Pisciella,I.Graabak,andA.Tomasgard.2021.TheRoleofHydrogenintheTransitionfromaPetroleumEconomytoaLow-CarbonSocietyInternationalJournalofHydrogenEnergy46(45):23125–23138.https://doi.org/10.1016/j.ijhydene.2021.04.143.FuelCellsBulletin2011.HydrogenTownProjectUnderWayinJapanwithPipelineNetwork.FuelC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