Japan to fund $892 million to help develop low-emission fuels

TOKYO, April 19 (Reuters) - Japan's state-backed New Energy and Industrial Technology Development Organization (NEDO) said on Tuesday it will allocate 114.5 billion yen ($892 million) to help develop new fuels such as synthetic ones that emit lower carbon dioxide (CO2).

The financial aid comes as part of the country's 2 trillion yen ($15.6 billion) green innovation fund to promote development of cleaner energy and technology to help the world's fifth biggest CO2 emitter achieve carbon neutrality by 2050.

The projects to be funded include development of synthetic liquefied fuels, made by combining hydrogen with CO2 extracted from the factories or the atmosphere, sustainable aviation fuels (SAFs), synthetic methane and synthetic liquefied petroleum gas (LPG).

Nearly half of the budget will go to the synthetic fuel project by Japan's biggest refiner Eneos, a unit of Eneos Holdings Inc (5020.T), opens new tab.

Eneos aims to complete development of the technology by around 2030, with an aim to commercialize the fuels before 2040, Kazuaki Hayasaka, general manager at Eneos' fuels & chemicals research centre, told reporters on Tuesday.

Synthetic fuels provide an environmentally-friendly means to power combustion engine cars, but producing them is costly and requires large amounts of renewable energy to make them carbon-neutral.

"The biggest technical challenge is to increase the efficiency of the manufacturing processes," Hayasaka said.

"We need to incorporate the expensive raw materials -- hydrogen and CO2 -- into synthetic fuels with as little waste as possible," he said.

Other projects to be supported by NEDO include Idemitsu Kosan's (5019.T), opens new tab SAF development, two different synthetic methane projects by Osaka Gas Co Ltd (9532.T), opens new tab and Tokyo Gas Co Ltd (9531.T), opens new tab and Furukawa Electric's (5801.T), opens new tab synthetic LPG development.

($1 = 128.3500 yen)