Innovation, Investment, and Influence: Advancing U.S.-Japan Energy Leadership Abroad

This commentary is part of the Deepening U.S.-Japan Clean Energy Cooperation project, a CSIS initiative featuring analysis by leading Japanese and U.S. experts on the potential for enhanced coordination on energy strategy.

Introduction

As leaders in clean energy innovation, the United States and Japan have a strategic opportunity to deepen collaboration on technology development and deployment, consistent with the United States’ national interests and “energy dominance” agenda. The U.S.-Japan alliance, which is already strong in areas from defense to information and communication technologies, is increasingly focused on a new era of energy expansion. As global energy demand rises, with the dual imperatives of achieving energy security and curbing emissions, collaboration between Washington and Tokyo can be a pillar to ensure that market economies drive the development of next-generation energy solutions.

By focusing on priorities like nuclear power, geothermal energy, hydrogen, liquefied natural gas (LNG) infrastructure, carbon capture and storage (CCS), and critical mineral supply chains, the United States and Japan can out-innovate aggressive competitors like China and Russia. This is best achieved when underpinned by a strong culture of innovation, led by the private sector, with strategic government policies and investments. Additionally, expanding academic, scientific, and business exchanges can accelerate the global deployment of cutting-edge energy technologies by harmonizing technical standards and sharing best practices. 

Along with bilateral efforts, the United States and Japan can work with other like-minded countries on a pragmatic energy agenda to unlock new market opportunities for innovators and entrepreneurs, while supporting geopolitical stability through access to reliable, affordable, clean energy. In doing so, the United States and Japan can promote viable alternatives to Chinese and Russian state-owned enterprises (SOEs) that compete unfairly in global energy markets, often offering dangerously low-quality infrastructure coupled with predatory lending.

However, China’s energy innovation ecosystem, in particular, is rapidly advancing and could overtake the United States and its allies in key technologies without decisive action. To stay ahead, the United States and Japan must not only strengthen their technological leadership but also partner with third countries to build secure, alternative energy supply chains. Those who neglect innovation risk increasing their dependence on adversaries who weaponize energy. With the right policies and global coordination, the United States and Japan can secure a stronger energy future at home and abroad.

Strengthening the Foundation for U.S.-Japan Clean Energy Innovation: Progress in the Trump Era

During the first Trump administration, the United States and Japan expanded energy and infrastructure cooperation across the Indo-Pacific. The 2017 Trump-Abe Summit launched the Japan-U.S. Strategic Energy Partnership (JUSEP) to promote access to reliable, affordable energy in Southeast Asia, South Asia, and sub-Saharan Africa. The U.S. Overseas Private Investment Corporation (later reformed into the U.S. International Development Finance Corporation [DFC]) and Japanese partners signed agreements to finance high-quality infrastructure, while the U.S. Trade and Development Agency and the Japanese Ministry of Economy, Trade and Industry (METI) formalized energy project collaboration.

In 2018, the Trump administration launched Asia EDGE (Enhancing Development and Growth through Energy) to increase U.S. engagement in regional energy markets. By 2019, it had supported nearly $200 billion in advocacy cases. For their part, Japanese partners aligned financing with technical assistance through this framework to deploy smart grids and resilient power systems across the Indo-Pacific.

Civil nuclear cooperation was another shared priority. The U.S. Departments of Commerce and Energy signed an agreement with METI and the Japanese Ministry of Education, Sports, Culture, Science and Technology (MEXT) to strengthen collaboration on nuclear innovation, safety, and deployment in third countries. The 2019 Trump-Abe Summit advanced this agenda, and this work continues across areas like fuel cycle management, research and development (R&D), and small modular reactor (SMR). This foundation set the stage for renewed momentum. At their February 2025 meeting, President Trump and Prime Minister Ishiba reaffirmed energy expansion as a strategic priority, emphasizing LNG, critical minerals, and advanced nuclear technologies. Both leaders called for commercial ties and cooperation with countries like Australia, South Korea, and the Philippines. As global competition intensifies, the alliance is poised to make progress on supply chain resilience and the deployment of next-generation energy technologies.

Enhancing Bilateral Clean Energy Innovation

Advancing Next-Generation Nuclear Energy

U.S.-Japan collaboration in energy science and technology is among the longest-standing and most robust in the world, underpinned by decades of joint research and a deep network of institutional partnerships. Japan has historically been one of the U.S. Department of Energy’s most active international partners, with the highest number of MOUs across the energy portfolio. Building on this foundation, bilateral cooperation is now advancing innovation in newer technologies like next-generation nuclear. Joint efforts between national labs, research institutions, and private industry—including the integration of Japanese and U.S. corporations into the U.S. National Lab system—can accelerate progress in nuclear fuel development, reactor safety, waste management solutions, and other areas.

Continued investment in SMRs and accident-tolerant fuels is vital for future energy security. Enhanced joint R&D initiatives, including leveraging pilot projects, demonstration plants, and facilities like the Versatile Test Reactor (VTR), would support validating innovative SMR designs. Binational test sites could facilitate collaboration on licensing, operational modeling, and regulatory alignment, streamlining the deployment of new technologies.

Robust supply chains are essential for deploying innovative reactor designs. Leveraging U.S. and Japanese manufacturing capabilities could ensure a stable supply of nuclear fuel and critical components. Joint financing mechanisms, involving institutions like the DFC, the Export–Import Bank of the United States (EXIM), and the Japan Bank for International Cooperation (JBIC), as demonstrated by JBIC’s NuScale Power investment, could incentivize private sector commercialization of these innovations. The bipartisan ADVANCE Act, which eased foreign ownership restrictions, may promote international investment and cooperation in advanced nuclear technologies.

Additionally, a U.S.-Japan Advanced Nuclear Export Alliance could coordinate strategic investment in emerging markets, positioning their technologies to outcompete Chinese and Russian SOEs. Aligning industrial policy and trade frameworks could strengthen commercialization, supply chains, and global energy security. Together, the United States and Japan can lead in next-generation nuclear innovation and maintain their competitive edge worldwide.

Hydrogen and Ammonia Market Expansion

Innovation is crucial for realizing hydrogen’s potential in both the U.S. and Japanese energy strategies. Aligning regulations and developing cross-border supply chains would help commercialize hydrogen and ammonia as viable clean energy carriers.

Key areas for innovation include storage, transportation, industrial applications, and advanced electrolyzer technologies for efficient production. U.S. and Japanese companies, like ExxonMobil, JERA, and Mitsubishi Corporation, are exploring partnerships to leverage U.S. resources and meet Japanese demand for low-carbon hydrogen and ammonia. Deeper U.S. and Japanese R&D, led by the private sector, can drive breakthroughs in cost reduction and enhance technological efficiency, accelerating market growth.

Expanding Geothermal Energy Cooperation

Geothermal energy is a promising yet underdeveloped source of clean, firm baseload power. The United States has vast untapped resources, while Japan brings advanced drilling and mapping technologies that can improve exploration and efficiency. METI has recently introduced new incentives to support small-scale geothermal development, encouraging private sector involvement. In January 2025, President Trump’s national energy emergency declaration highlighted geothermal as part of a broader strategy to expand domestic energy production. Energy Secretary Chris Wright has also emphasized geothermal’s potential to deliver stable, emissions-free power by building on existing oil and gas expertise.

Joint U.S. and Japanese efforts could accelerate innovation in advanced drilling systems and heat-resistant materials, especially for next-generation superhot-rock technologies. These breakthroughs would expand geothermal’s viability and scalability. By aligning technical strengths with resource potential, both countries are well-positioned to elevate geothermal as a reliable component of the future energy mix, enhancing energy security and diversifying clean power without overdependence on foreign-controlled supply chains.

LNG Infrastructure and Carbon Capture

LNG is critical to Japan’s energy security, offering a reliable, lower-emission alternative to coal. With the United States as the world’s largest LNG supplier, joint initiatives—such as the Alaska LNG project, recently highlighted by President Trump as a strategic “joint venture”—illustrate the potential to deepen bilateral trade. Mitsui & Co.’s interest reflects growing demand in Asia. Beyond supply security, U.S.-Japan cooperation presents opportunities to improve liquefaction, transport, and infrastructure technologies, helping both countries stay ahead of their competitors.

In parallel, the United States and Japan have advanced collaboration on CCS to reduce emissions from energy and industrial sectors. The Petra Nova project in Texas, a joint effort by NRG Energy and JX Nippon, remains one of the largest post-combustion CCS facilities. A 2020 memorandum of cooperation between the U.S. Department of Energy and METI formalized joint R&D on capture efficiency, cost reduction, and deployment. The U.S.-Japan CCUS/Carbon Recycling Working Group, launched in 2023, has since expanded this agenda to include advanced capture materials, integrated storage, and carbon utilization technologies.

Applying CCS to LNG infrastructure offers the potential to cut emissions while maintaining LNG’s competitiveness, though technical challenges persist, such as managing multiple carbon dioxide sources and the energy cost of capture and compression. In the United States, no operational LNG terminals or gas-fired electricity generation units currently use CCS, highlighting the need for innovation. Collaborative pilot projects could leverage U.S. expertise in carbon capture and Japan’s engineering strengths to develop more energy-efficient, scalable solutions.

Recommendations: U.S.-Japan Innovation with Partner Nations

Start at Home: Let the United States Build and Sharpen the International Tool Kit

The most effective way for the United States to lead on global energy issues is to strengthen its own capacity to innovate, build, and deploy technologies. While the United States leads in energy innovation, regulatory and permitting delays are preventing these technologies from reaching the market at the pace required. Streamlining federal permitting processes would empower U.S. companies to accelerate energy project development, reduce costs, and respond more effectively to rising global demand. It would also make the United States a more attractive destination for investment from trusted international partners, reinforcing its role as a global center of energy innovation and manufacturing.

At the same time, enhancing the United States’ development and export finance capabilities is critical to extending this leadership abroad. As the DFC and EXIM approach reauthorization, there is an opportunity to align these institutions more closely with national strategic and commercial interests. Targeted reforms could improve their ability to support U.S.-led energy projects in third countries, particularly in regions where the United States and Japan are seeking to offer alternatives to state-directed models backed by China and Russia. However, individual agency improvements alone are insufficient. Fragmented execution and competing mandates across the U.S. interagency hinder impact. A more coordinated approach—as envisioned under Asia EDGE—is needed to advance key energy technologies strategically and consistently with like-minded partners.

By improving how it builds at home and competes abroad, the United States will be better positioned to lead a coalition of like-minded nations committed to energy innovation, economic growth, and technological leadership.

Infrastructure and Technology Deployment in Strategic Regions

Southeast Asia and Africa offer key opportunities for U.S.-Japan energy cooperation, focusing on deploying innovative technologies and strengthening supply chains. Joint investments in LNG infrastructure; carbon capture, utilization, and storage (CCUS); and modern power systems can provide market-driven alternatives to state-led energy models. For example, Chevron and JX Nippon signed a 2024 agreement to explore exporting carbon dioxide from Japan to CCUS projects in Australia and the Asia-Pacific, highlighting the potential for regional CCUS value chains through international partnerships.

In Africa, the United States and Japan are working with Ghana to evaluate deploying SMRs, including a feasibility study supported by both governments and industry. Through the U.S. State Department’s Foundational Infrastructure for Responsible Use of Small Modular Reactor Technology (FIRST) program, this collaboration also supports workforce development via technical training and infrastructure for nuclear readiness. Meanwhile, geothermal-rich countries like Indonesia, Kenya, and Ethiopia could benefit from U.S.-Japan collaboration on drilling technologies and infrastructure, expanding clean, firm energy access.

Efforts are also underway to diversify and secure critical mineral supply chains, with the United States and Japan partnering to reduce dependence on single-source suppliers and support responsible resource development. Financing tools such as the DFC, JBIC, and EXIM are key in enabling these projects and advancing next-generation energy systems in third countries.

Certain multilateral frameworks, including the Quad and the Minerals Security Partnership, can complement these efforts by reinforcing regional security and supporting coordinated infrastructure investment. Together, these bilateral and multilateral initiatives create pathways for innovation-led energy development in strategic regions, aligned with broader goals of economic resilience and supply chain diversification.

Ending the Moratorium on Nuclear Financing at International Financial Institutions

International financial institutions (IFIs), including the World Bank, play a significant role in global infrastructure and energy development. The World Bank alone manages an energy portfolio exceeding $40 billion and provides advisory support to governments shaping their energy strategies. As the largest shareholders in the World Bank and institutions like the Asian Development Bank, the United States and Japan hold substantial influence over how these funds are allocated.

Despite this, the World Bank currently excludes nuclear energy from its portfolio and lacks in-house expertise on the technology. This limits its ability to support innovation in reliable, emissions-free power and leaves a critical market opportunity to Chinese and Russian SOEs. The current World Bank president has signaled an openness to reversing this stance, and one potential first step could be the creation of a Nuclear Technology Trust Fund—an established model at the bank for advancing other technical priorities. With a modest initial investment from the United States and Japan, such a fund could build institutional expertise, offer technical assistance, and enable more balanced energy planning. Integrating nuclear into the IFI toolkit would expand access to advanced technologies and align global energy development more closely with U.S. and Japanese innovation leadership.

Cultivating a Startup Culture for Clean Energy Innovation

Fostering a vibrant startup ecosystem is essential for the United States and Japan to maintain a competitive edge in clean energy innovation. By expanding incubators, accelerator programs, and university partnerships, both countries can support early-stage technologies like advanced nuclear, hydrogen, geothermal, and carbon capture. Coordinated efforts to align venture capital networks, public-private investment platforms, and regulatory frameworks would help accelerate commercialization and open global markets for emerging solutions. Dedicated funding mechanisms through institutions like the DFC and JBIC can provide critical early-stage capital while reinforcing market-based innovation over state-directed models.

Academic and business exchange programs further strengthen this ecosystem by cultivating the next generation of engineers, entrepreneurs, and technical leaders. Enhanced collaboration between universities, reverse trade missions, and joint research initiatives can deepen ties between U.S. and Japanese institutions and broaden access to talent and technology. These exchanges, alongside industry partnerships and startup accelerators, help translate research into real-world deployment, ensuring innovation remains central to U.S.-Japan energy cooperation.

Conclusion

The U.S.-Japan partnership in clean energy innovation is poised to be a cornerstone of global energy security and economic competitiveness. By enhancing bilateral cooperation, investing in third-country energy expansion, and promoting private-sector-led innovation, both nations can secure their own strategic interests, powered by reliable, advanced, and affordable energy solutions.

Nick Lombardo is the senior program director for international policy at ClearPath, an entrepreneurial, strategic nonprofit with a mission to accelerate American innovation to reduce global energy emissions.