While many people fret over an excess of carbon dioxide in the atmosphere, parts of Japan’s industry are gripped by a paradoxical anxiety: a looming CO₂ shortage.

Industrial-grade CO₂ – which is essential for applications ranging from dry ice to welding, water treatment, and carbonated beverages – is harder to source, threatening supply chains and raising costs. In a surprising twist, it may also be complicating one of the potential energy transition pathways, in which CO₂ would be recycled as ‘net-zero’ synthetic fuels for aviation, marine and auto transport.

Today’s problem stems from the global shuttering of oil refineries, historically the backbone of CO₂ production. These facilities captured emissions, filtered impurities, and processed the gas into a valuable feedstock. In Japan, oil refineries and ammonia plants accounted for 80% of the 0.9 million tons of CO₂ needed annually. Yet over the past decade, four major refineries have closed in the country, slashing crude oil processing capacity from 4 million barrels per day to just 3.1 million.

The consequences are stark and perhaps surprising. Japan’s imports of CO₂, once negligible, have surged, doubling to over 22,000 tons in 2023 and already soaring to nearly 30,000 tons by September of this year. Prices, too, are climbing. Gas suppliers have responded with price hikes of 15-30%, further squeezing industries already grappling with inflation and supply chain disruptions.