Japan’s government wants to get companies to make climate commitments

Japan’s government wants to get companies to make climate commitmentsThe environmental policies of the Liberal Democratic party, which ruled Japan from the mid-1940s up to 2009, may have succeeded in improving efficiency but they failed to make fundamental change. On the other hand, the new government of the Democratic Party of Japan under Yukio Hatoyama is working to realise economic and employment growth, and pledged in September 2009 to cut greenhouse gas emissions 25% by 2020.

A few months on, the Japanese economy is not at its best. GDP has declined from ¥515tn ($5.6tn) in 2007 to ¥473tn ($5.1tn) in 2009, and the unemployment rate is high at 5%. On the public finance front, government bonds to be issued next year are projected to exceed tax revenue, a similar situation to that in post-war Japan 65 years ago. In addition, the population is rapidly ageing, putting increasing pressure on the pension system.

The question is, then, how Japan can achieve economic as well as employment recovery at the same time as addressing sustainability issues, when it can’t possibly expect to continue large spending.

In March Japan’s cabinet endorsed a climate protection bill, which must be voted on in parliament before it becomes law.

In terms of emissions reductions systems, a cap-and-trade scheme has been considered the default option. However, after strong opposition from Japan’s ministry of economy, trade and industry, a system of reductions based on carbon “intensity” – emissions per production unit – has also been included as an option.

Jobs impact

The response to these proposals has varied. The Japan Business Federation criticised the government for not considering the impact on employment. Nine industry organisations, including the Japan Iron and Steel Federation and the Petroleum Association of Japan, issued a joint statement opposing the bill, saying there was no assessment of whether all major emitters’ current reduction targets meet the conditions. “We ask the government to ensure the public understands the issues before the bill is debated in the parliament,” the statement says.

Although generally criticised by industry, there are signs that a new group of companies is moving forward progressively to a sustainable low-carbon economy. Five member companies belonging to the Japan Climate Leaders Partnership (Japan-CLP) – Ricoh, Aeon, Fujitsu, Tokyo Steel and SAP Japan – issued a joint policy proposal on April 2 supporting progressive policy measures.

“We recognise there is opposition in industry to this 25% reduction target,” says Keizo Fukushima, deputy director at Japan’s ministry of the environment. “But the target shows the government’s will to recognise climate change as a precondition for economic competition while allowing social as well as industrial structures to change in a dynamic way to improve competitiveness.”

The Hatoyama administration’s policies certainly go beyond the previous administration’s approach.

Consultant Peter Pedersen praises the approach of “using peer pressure to encourage incremental changes on the ground”. Japan’s world-leading efficiency can be attributed to these policies of “encouragement”.

Yet, Japan lags other developed countries in terms of renewable energy, with just 2-3% of the total energy share. “Japan has some of the world’s best renewable energy technologies but the domestic market has not been developed anywhere near enough,” says Luke Poliszcuk of eQualC Sustainability Communications. Overall, with a lack of government coordination, companies were not encouraged to make investments.

Similarly, an “eco points” scheme for electronics and cars that was introduced recently as part of economic stimulus measures may have had some effect to invigorate spending, but the real environmental effect needs to be assessed in the long term. From April, the scheme applies to housing, but the effect is still yet to be determined. The maximum ¥300,000 ($3,200) subsidy for a new house may be just too small to have a real impact.

This incremental incentivising approach has led to an efficiency paradox where, because more and more “environmentally efficient” components or goods are used, overall emissions increase. In fact, CO2 emissions in Japan had increased by 9% by 2007 compared with 1990 levels. “Step by step improvement is good at the beginning,” says Frank Ling, a Japan-based climate change policy expert. “But an integral approach is necessary for the long term.”

Employment matters

Crucial to the success of Hatoyama’s 25% reduction plan is employment. In December 2009, the government announced a new growth strategy to achieve 2% nominal GDP growth while reducing unemployment from 5% to 3% by 2020. The environment and health are identified as two key areas for growth.

In the green energy sector, the strategy proposes a new ¥50tn market creating 1.4 million new jobs that would cut up to 1.3bn tonnes of CO2 (equivalent to Japan’s current annual CO2 emissions) through the use of efficient Japanese technology worldwide. A comprehensive policy package will be introduced to lead Japan to become a world environmental leader.

Climate proposals

Japan’s proposed climate bill includes a number of provisions.

• Aim for 25% GHG reductions (from 1990 levels) by 2020, on the condition that all other major emitters agree to a fair and realistic international treaty that calls for ambitious reduction targets. 
• Work towards a long-term target of 80% reductions (from 1990 levels) by 2050.
• Set emissions allowances for large companies and establish a domestic cap-and-trade policy.
• Consider a possible carbon tax from April 2011.
• Expand “feed-in tariffs” to cover all renewable energy, including biofuels, hydro, solar, wind and geothermal power.
• Supply 10% of primary energy from renewable sources by 2020.
• Expand nuclear generation capacity.

Kazunori Kobayashi is a Tokyo-based activist and ecological economist. He is CEO of sustainability-focused consultancy EcoNetworks, manager of Japan for Sustainability, an NGO, and a lecturer at the University of Tokyo.

Additional research for this briefing was provided by Luke Poliszcuk, CEO and chief sustainability officer at eQualC Sustainability Communications, a Tokyo-based corporate communications firm specialising in sustainability and corporate social responsibility.