The Japanese contract for difference for hydrogen: how the 15-year JOGMEC support works

The Japanese act on promoting low-carbon hydrogen and its derivatives entered into force in October 2024 (it was passed on 17 May 2024). Its axis is price gap support, i.e. a form of contract for difference (CfD): the subsidy covers the additional cost of the low-carbon fuel compared with an index reflecting the cost of delivering conventional fuels in Japan. The support agreement lasts up to 15 years, and the subsidies are paid by JOGMEC.

How it works

A supplier of low-carbon hydrogen or derivatives (e.g. ammonia) submits a project plan for approval. An approved project can receive a subsidy equal to the difference between the cost of the low-carbon fuel and the conventional fuel cost index. The government expects that, as CO2 pricing develops, the required level of subsidies will fall over time (Norton Rose Fulbright). The design was modelled on British contracts for difference, which proved effective in offshore wind.

Scope and budget

According to CSIRO HyResource, price gap support amounts to 3 trillion yen over 15 years from the start of deliveries; applications were accepted from 22 November 2024 to the end of March 2025. Support is for deliveries to hard-to-abate sectors, which are to start by fiscal year 2030, and the supplier must continue them for a further 10 years after the support period ends. The second part of the act is support for hub development: grants towards part of the costs of FEED design, engineering and construction of domestic transport and storage infrastructure used by many companies.

Low-carbon criteria

According to Norton Rose Fulbright, the Japanese standard is technology-neutral: it requires about a 70% emissions reduction relative to the fossil fuel, regardless of the production method. As a result, demand in Japan can be met by both “blue” and “green” hydrogen, in contrast to the European emphasis on renewable hydrogen in the RED directive. Thresholds (as of 2024): hydrogen up to 3.4 kg CO2e/kg H2 (from sourcing the feedstock to the plant gate), ammonia up to 0.87 kg CO2e/kg NH3, e-fuels up to 39.9 g CO2e/MJ, e-methane up to 49.3 g CO2e/MJ (for the last two – the whole supply chain). Support therefore also covers e-methane, which we write about in separate articles.

Two instruments of the act

Norton Rose Fulbright describes a two-track approach: on the supply side there is price gap support (CfD), on the demand side – support for clusters, i.e. selected industrial locations able to take large hydrogen and ammonia projects. In the first stage of cluster selection in May 2024, 10 feasibility studies were chosen, and the next round was announced for June 2024. The aim is to break the “chicken and egg” dilemma: without demand there is no supply, and vice versa.

First results

According to CSIRO, in October 2025 the media reported the first two projects with price gap support: the installation of low-carbon water electrolysis at the Aichi Steel plant in Chita (Aichi Prefecture) and the use of hydrogen from waste plastics as the sole feedstock for ammonia production at the Resonac plant in Kawasaki. The Ammonia Energy Association reported on them on 22 October 2025, noting that the producer must have the backing of a large hydrogen off-taker. Further projects, including ammonia, were to be certified in the following months – amounts and the full list should be checked in METI and JOGMEC announcements.

The timetable in practice

In spring 2024 the government announced that it would accept applications for price gap support from summer 2024 and select the first participants by the end of 2024 (Norton Rose Fulbright); detailed criteria were to be set by the Basic Policy. In fact the application window ran from 22 November 2024 to the end of March 2025, and the first approved projects were announced in autumn 2025 – so the transition from passing the act to the first subsidies took more than a year. For investors this means that even with a legal framework in place, the selection and negotiation procedure takes a long time.

Lessons for Europe

• A contract for difference limits investor risk but creates a multi-year budget commitment (here about 3 trillion yen).
• For energy carriers with a high unit cost, such as hydrogen, a stable multi-year contract is often a condition for starting an investment.
• For biogas and biomethane, analogous solutions are being discussed in the EU (contracts for difference, premiums, auctions), and the Japanese example shows the importance of clear emissions criteria and project selection. The act does not directly concern biogas; hydrogen from biogas could apply for support provided it meets the low-carbon criteria in the implementing regulations.