Facing a warming global climate and the failure of nations to reduce their carbon emissions, technologies to remove greenhouse gases from the air are gaining momentum. Carbon capture and storage (CCS) traps CO₂ emissions from industrial processes and power generation before they enter the atmosphere, transporting them for permanent underground storage in geological formations such as depleted oil and gas reservoirs. Carbon capture utilization and storage (CCUS) follows the same capture process but repurposes the CO₂ for industrial uses like concrete production or chemical manufacturing. While the utilization pathway distinguishes the two, both share identical capture and compression infrastructure, face the same economic and regulatory challenges, and serve the same fundamental climate goal: preventing CO₂ from reaching the atmosphere. In practice, the distinction matters less than their shared role as essential decarbonization tools for hard-to-abate industries like power generation and minerals processing. For the purposes of this article, CCS will be used throughout.
CCS enjoys broad institutional support across Asia, with governments, multilateral banks, and energy bodies aligned on its necessity. The Asia CCS Network, established in 2021 under the East Asia Summit framework and led by Japan and the Economic Research Institute for ASEAN and East Asia, brings together governments across Asia-Pacific to accelerate CCS deployment through knowledge sharing, research, and capacity building. With fossil fuels accounting for nearly 80 percent of the region’s energy mix, the Network views CCS as indispensable for balancing continued economic growth with decarbonization commitments. The International Energy Agency recommends governments accelerate CCS deployment by coordinating shared hub infrastructure, streamlining permitting through dedicated regulatory agencies, and combining carbon pricing, grants, and tax credits to stimulate investment. Meanwhile, the ASEAN Centre for Energy presents CCS as a practical and accelerating pillar of Southeast Asia’s energy transition, and is helping track progress across the region. The Asian Development Bank has also provided funding to CCS development across the region through financial assistance, technical expertise, and feasibility studies, with projects spanning China, Indonesia, Pakistan, and regional initiatives. Together, these institutions present CCS as an indispensable tool for balancing economic growth with decarbonization.
Among Asia-Pacific countries, perhaps no country is more serious about CCS deployment than Japan. CCS is an essential part of Japan’s strategy to achieve decarbonization targets of carbon neutrality by 2050 and a 46 percent emissions reduction by 2030 versus 2013 levels. Japanese companies such as Toshiba Energy Systems & Solutions, Chiyoda Corporation, and Mitsubishi Heavy Industries are global leaders in deploying CCS capture technologies at nine sites across the country. Wood Mackenzie estimates that Japan’s capture capacity will increase more than 30-fold by 2035, driven by ambitious private sector investment and a stable regulatory framework that strengthens the commercial viability of CCS investments.
Prime Minister Sanae Takaichi’s statements at the third Asia Zero Emission Community (AZEC) Leaders Meeting in October 2025 were an early sign that her administration will maintain strong continuity in Japan’s commitment to regional decarbonization, providing investors with the policy stability needed to advance CCS partnerships. Building on the framework established under Prime Minister Fumio Kishida, Takaichi reaffirmed Japan’s “One Goal, Various Pathways” approach, emphasizing simultaneous decarbonization, economic growth, and energy security. Japan’s CCS investment environment appears predictable and government-backed, offering a critical signal for private sector partners evaluating long-term infrastructure commitments across the Asia-Pacific.
However, Japan’s geography presents a major barrier as it attempts to scale up CCS deployment. Given the limited availability of land storage sites, Japan must consider either offshore sequestration or shipment to other countries that can store carbon more affordably. The latter option has attracted significant attention, culminating in a landmark bilateral agreement with Malaysia.
The October 2025 Memorandum of Cooperation between Japan’s Ministry of Economy, Trade and Industry (METI) and Malaysia’s Ministry of Economy marks the beginning of Southeast Asia’s first cross-border CCS project. Under the agreement, Japan plans to capture CO₂ from heavy industries including steel, cement, power generation, and refining, transporting it via specialized liquefied CO₂ carriers to offshore geological storage sites near Sarawak, Borneo. Japanese government agencies are planning to develop nine storage sites across the Asia-Pacific this decade, five in Japan, three in Malaysia, and one more planned for deployment in an unspecified country in Oceania. If successful, the model could be replicated across Indonesia and Thailand.
The Malaysia-Japan agreement has opened the industry to new criticism that investors will need to contend with should they view CCS projects as bankable. Numerous environmental activists, including Friends of the Earth Japan, Sahabat Alam Malaysia, and WALHI Indonesia, have argued that Japan sending carbon waste to Malaysia amounts to “carbon colonialism.” The Center for International Environmental Law contended that Japan is claiming to clean up its emissions while continuing to pollute, and that Malaysia risks becoming a carbon dumping ground for industrial pollution. A separate agreement between Japan and Singapore – under which the two countries will share CCS technology and collaborate on storage site identification – may intensify this criticism further, as two wealthy economies partnering to ship their emissions to less developed nations could strengthen the narrative that CCS enables rich countries to avoid genuine structural change.
Critics also question whether CCS can deliver emissions reductions at a scale and cost that justifies the investment. Wood Mackenzie forecasts Japan alone will need at least USD 10 billion in direct government support to make CCS commercially viable through 2050, covering the gap between what carbon pricing and emissions trading revenues can deliver and the actual full cost of building and operating CCS projects. A Stanford University study found carbon capture to be 9-12 times more expensive than a full renewable energy transition when health and emissions costs are included. Proponents counter that the two approaches are not mutually exclusive; renewables alone cannot decarbonize heavy industry on the timelines required, and CCS is not intended to replace the energy transition but to address the emissions that renewables simply cannot.
An additional risk for investors in Japan’s CCS sector is Takaichi’s broader energy policy priorities. While she has supported the AZEC platform and its commitment to CCS deployment, the core of her energy agenda is revitalizing Japan’s nuclear sector, which she views as essential for meeting rising electricity demand – particularly from energy-intensive data centers – and reducing dependence on energy imports. Since taking office, Takaichi has overseen the approval of two significant reactor restarts: the Tomari No. 3 reactor in Hokkaido and Tokyo Electric’s Kashiwazaki-Kariwa plant in Niigata, the first TEPCO facility approved to restart since the 2011 Fukushima disaster. Her government has also signaled support for renewed geothermal investment, which enjoys broad public backing. Although there is no indication that Takaichi will move to undermine Japan’s CCS commitments, her continued support cannot be taken for granted given the sector’s high cost and the competing demands on government resources.
Japan’s CCS sector remains a compelling investment proposition, underpinned by sustained government commitment, a strengthening regulatory framework, and the Malaysia agreement that directly addresses Japan’s most critical bottleneck, namely insufficient domestic storage capacity. Broad endorsement from the IEA, ADB, and the Asia CCS Network further validates the technology’s trajectory. However, investors must price in meaningful risks: intensifying environmental opposition, the need for long-term public financing, high cross-border transport costs, and Takaichi’s competing nuclear and geothermal priorities all introduce uncertainty. Those who build political and regulatory risk into their expected returns and monitor the evolution of bilateral storage agreements closely will be best positioned to capture the upside of what remains one of Asia’s most strategically significant decarbonization investment opportunities.
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Maxwell Abbott
Maxwell Abbott is a Principal at Meriwether & Co., a specialist advisory firm helping investors and corporations navigate political risk and geostrategy across Asia-Pacific. He brings over a decade of experience combining political risk analysis, strategic intelligence, and on-the-ground investigations across the region, with particular expertise in Southeast Asia.