Role of energy finance in geothermal power development in Japan Farhad Taghizadeh-Hesary a, * , Aline Mortha b , Hadi Farabi-Asl c , Tapan Sarker d , Andrew Chapman e , Yosuke Shigetomi f , Timothy Fraser g a Tokai University, Hiratsuka-shi, Kanagawa-ken, Japan b Graduate School of Economics, Waseda University, Tokyo, Japan c Research Institute for Humanity and Nature, Kyoto, Japan d Griffith Business School, Griffith University, Brisbane, Australia e International Institute for Carbon-Neutral Energy Research (WPI-I2CNER), Kyushu University, Fukuoka, Japan f Graduate School of Fisheries and Environmental Sciences, Nagasaki University, Nagasaki, Japan g Department of Political Science, Northeastern University, Boston, USA ARTICLE INFO Keywords: Geothermal energy Energy finance Vector error correction model ABSTRACT The Fukushima nuclear disaster in March 2011 drastically changed the energy consumption pattern of Japan. Not being able to rely on nuclear energy, the country turned to fossil fuels and attempted to increase the share of renewable energy in its electricity generation mix. This paper will explore why geothermal energy is stagnating in Japan, despite the availability of resources and technologies. The paper first analyzes the various barriers to geothermal energy deployment in Japan from social, legal, economic, financial and technical viewpoints. The major contribution of this study is the quantification of the magnitude each barrier and supportive policy has on the development of geothermal power, with a special focus given to energy finance measures. The analysis is performed using a Vector Error Correction Model (VECM) using data from 1974 to 2017 and identifies the existence of a long-term relationship between variables, public research and development expenditures and the Feed-in-Tariff scheme. The latter appears to be the most effi- cient stimuli to foster geothermal power generation. Subsidies in their current form, on the other hand, have mixed results both in the long and short term. Environmental concerns and social opposition appear to be among the major barriers in both the short and long term. 1. Introduction After the Fukushima-Daiichi nuclear power disaster in March 2011, Japan found itself facing an energy supply crisis. Backlashes against nuclear energy forced the government to halt nuclear generation. The country first turned to fossil fuels, and in 2014, 88% of electricity was coming from fossil fuel (Ministry of Economy, Trade and Industry, 2016). As a consequence, Japan’s energy self-sufficiency fell from a high of 20.2% in 2010 down to 6.4% in 2014 (Ministry of Economy, Trade and Industry, 2016). Taghiza- deh-Hesary, Rasoulinezhad, and Kobayashi (2016) found that following the Fukushima nuclear disaster and resultant nuclear shutdown, and due to a higher reliance on fossil fuels, the elasticity of the consumption of most energy sectors concerning oil price fluctuations reduced, endangering energy security within the country. At the same time, this incident engendered an opportunity for the renewable energy (RE) sector. The share of RE in the generation mix rose from 9% in 2010 to 12% in 2014 (Taghizadeh-Hesary et al., 2016). * Corresponding author. E-mail addresses: farhad@tsc.u-tokai.ac.jp, farhadth@gmail.com (F. Taghizadeh-Hesary). Contents lists available at ScienceDirect International Review of Economics and Finance journal homepage: www.elsevier.com/locate/iref https://doi.org/10.1016/j.iref.2020.06.011 Received 22 June 2019; Received in revised form 4 June 2020; Accepted 9 June 2020 1059-0560/© 2020 Published by Elsevier Inc. International Review of Economics and Finance 70 (2020) 398–412