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Policy Proposals  Environment and Energy Proposal for Global Warming Countermeasures under the Paris Agreement

October 18, 2016

1. New Phase of Global Warming Countermeasures

The 21st Conference of Parties under the UN Framework Convention on Climate Change (COP21) was held in Paris in December 2015, and adopted a COP decision, including the new international framework "Paris Agreement" to replace Kyoto Protocol. The Paris Agreement is an epoch-making framework, in which all the major emitters of developed, emerging and developing countries make commitment on tackling global warming; this is what Japanese business community has sought for many years. From now on, the international community requests all major emitters to take on global warming countermeasures under the Paris Agreement with ensured fairness and effectiveness.

Japan certainly needs to contribute to the rule-making and elaboration of operational details for the Paris Agreement, and to exert the utmost efforts to achieve its mid-term target of "26% emission reduction from 2013 level by 2030", registered at the UN as Japan's INDC, while pursuing the harmony of "environment and economy". Moreover, Japan needs to develop low-carbon technologies, and transfer such technologies to other nations, in particular to developing countries with largest emission reduction potentials.

Japanese business community is determined to pursue and promote "Keidanren's Commitment to a Low Carbon Society," which is thought of a pillar in achieving Japan's mid-term target, and contribute further to global greenhouse gas (GHG) emission reduction.

2. Building Effective and Fair International Framework

(1) Basic Concept

As mentioned above, the Paris Agreement is an extremely important international framework, in which every major emitter commits to take on global warming countermeasures. The Agreement has been ratified or accepted by major emitters and regions, including China, USA, India and EU, and expected to enter into force soon.

In view of such global trend, and in terms of fulfilling its responsibility in the international community, Japan must accelerate the domestic process for the ratification of the Paris Agreement.

Furthermore, it is important to intensify the discussion of major challenges as shown below, and to promote the introduction of global warming countermeasures.

(2) International Review

Under the COP decision including the Paris Agreement, each nation is to submit to the UNFCCC Secretariat a biennial report on the information of their global warming countermeasures, which should be subjected to an international review. In the upcoming process of rule-making for the international review, to ensure effectiveness and fairness of domestic measures is vital to the achievement of NDCs.

The Paris Agreement has adopted a "Pledge and Review" approach, under which parties are to make pledge for their "NDCs" (global warming countermeasures), and to undergo a periodical international review to stock-take their progresses. This "Pledge and Review" approach is what Japanese business community has adopted and implemented for a long time with significant success under "Keidanren Voluntary Action Plan on the Environment" and "Keidanren's Commitment to a Low Carbon Society." Japan must proactively contribute to the rule-making process of the Paris Agreement, by disseminating the experiences and knowledge accumulated, and lessons learned, from the years of practicing the "Pledge and Review" approach.

The voluntary program of Japanese business community for "Pledge & Review" approach embraces not only sector-specific emission reduction measures, but also measures to encourage contribution to the international community, and to promote technological development. In its review process, a third party committee performs multi-dimensional review in a transparent way, with consideration of the characteristics, business environment and measures taken of each industry/sector. (Refer to the attached document, "Trajectory of Japanese Businesses Communities' efforts to counter global warming".) The international review under the Paris Agreement should be designed in a way to allow multi-dimensional evaluation from a bottom-up viewpoint which enables the evaluation and incorporation of elements, such as emission volume per unit GDP, sector-specific energy efficiency, introduction of Best Available Technology (BAT), and marginal reduction cost, in addition to the simple comparison of reduction rates from a specific base year identified in the NDCs.

Moreover, upon the revision of national "contribution" due every 5 years from 2020, each nation is expected to conduct ambitious yet solid examination of their pledge based on the latest situation and future projections of national energy and global warming policies at the time of the review.

(3) International Contribution

To provide significant contribution to global emissions reduction, Japan must develop an environment to deploy and disseminate, in a commercial scale, its most advanced energy-saving and low-carbon technologies, products, and services to other nations, in particular to developing countries.

The Paris Agreement has launched a mechanism for the international transfer of successful mitigation outcome between parties through voluntary cooperation. This mechanism can be construed as the one corresponding to the Japan's bilateral offset mechanism - Joint Crediting Mechanism (JCM) - which has been introduced and promoted by the Japanese government for the purpose of greatly contributing to global emissions reduction and sink increase, by encouraging technology transfer to developing countries and introducing and implementing global warming countermeasures there.

To objectively measure mitigation outcome, the UN is expected to develop and adopt a mandatory guideline. What is important for Japan, therefore, is to proactively participate in the guideline negotiation and to contribute to the development of a simple, internationally-unified, and widely available approach for the guideline, which can enhance the usability of JCM, while "visualizing" its contribution to global emission reduction through technology transfers and contributions, so as to develop a favorable environment to encourage international contribution, even further.

Under the Paris Agreement, developing countries will need to prepare their own national greenhouse gas inventory. To ensure the reliability and effectiveness of the international review process, Japan must provide its insights and knowledge in the preparation of national inventory.

(4) Development of Innovative Technology

The development of innovative technology is essential and vital for the long term and drastic reduction of GHG emissions. An international initiative called "Mission Innovation", in which Japan participates, can be valued as an approach to globally accelerate the innovation of energy and environmental technologies.

Another effective way is to take the opportunities of international conferences, such as ICEF (Innovation for Cool Earth Forum) held by the Japanese Government, to communicate the significance of innovative technology development and cooperation measures.

(5) Financial Support

For the financial support to developing countries, the Paris Agreement requests developed countries to continue their financial obligations under the UNFCCC. On the other hand, the parties other than developed countries have been invited to provide financial support and aids voluntarily, though not mandatory.

Considering the rapid economic growth of emerging countries since 1990's, however, to differentiate financial donors and recipients should not be adhered to the rigid categorization of "Annex I" and "non-Annex I" adopted since UNFCCC was established. What is important is to build a system to urge any nation with sufficient capability, including developed countries and emerging countries, to provide funds.

At present, UNFCCC has a financial support tool, called "Green Climate Fund (GCF)" to support emission reduction and adaptation measures of developing countries. By systematically linking their technology support activities related to the climate change measures with Climate Technology Center Network (CTCN), GCF should assist the dissemination of technologies and products of higher environmental values to the world, in particular to developing countries. Japan can greatly contribute to the effective application of both mechanisms through the provision of low carbon technology owned by Japanese business community, and the monitoring of fund provision.

3. Japan's Mid-to-long-term Domestic measures to Tackle Global Warming

(1) Basic Concept

First of all, what Japan must do is to exert extensive efforts to realize its mid-term target (26% reduction of greenhouse gas emissions from 2013 level by 2030), registered to the UN as its "INDC".

As the drastic reduction of GHG emissions will have a significant impact on business and economic activities as well as people's lives, it is essential and vital to harmonize "environment and economy." At the same time, it is necessary to secure funds and capitals for the development of innovative technology to realize drastic reduction of GHG emissions, as well as conversion and transformation of existing products, equipment and infrastructure to energy-saving and low carbon types; and the promotion of technology transfer to other countries, in particular to developing countries. Moreover, we must keep in mind that the realization of sustainable economic growth is a prerequisite for the enforcement of global warming countermeasures. Especially in Japan, since approximately 90% of the total amount of national GHG emissions are carbon dioxide (CO2) from energy sources, it is essential to consider a close linkage between global warming countermeasures and energy measures.

Innovation is a "must" and a key element to continue drastic emission reduction for a long time. Since innovation does not happen every year continuously, it is by no means appropriate to adopt a back-casting concept, in which yearly reduction rate will be discounted linearly from a specific reduction rate.

In terms of a long-term global target, the Paris Agreement stipulates that the international community should seek to limit and control the global average temperature rise to well below 2 degrees Celsius from the level before the industrial revolution, and requests to make utmost efforts to limit the temperature rise to less than 1.5 degrees Celsius. For this global target, Japan, as a nation with around 3% share in global GHG emissions, must take more proactive attitude to contribute to the long-term global GHG reduction on a global scale, not only by reducing its national emissions, but also through innovative technology development, as well as the deployment and dissemination of technologies and products to the international community, including developing countries.

(2) Measures to Achieve the Mid-term Target of "26% Reduction by 2030"

The mid-term target for year 2030 is an ambitious target for Japan, as it means that Japan must realize, within the next 15 years, the same level of energy efficiency improvement that Japan has realized during several decades since the Oil Crisis in 1970's.

In May 2016, the Cabinet decided the "Global Warming Prevention Plan" for realizing Japan's INDC. To ensure the achievement of the mid-term target, Japan must realize the energy mix for 2030 (nuclear: 20-22%, renewables: 22-24%, and thermal: 56%), which provides the basis for calculating the mid-term target, while deploying a PDCA cycle for each industrial sector and policy areas with follow-ups, based on "Global Warming Prevention Plan." Even if a specific sector cannot provide the expected outcome, it will not be appropriate to ask other sectors to further intensify their reduction targets.

Japanese business community has realized significant successes during the first commitment period of the Kyoto Protocol (2008-2012), by achieving a 12.1 % reduction from fiscal 1990 level, which was well over the initial target of "limiting CO2 emissions to the same level as fiscal 1990" based on "Keidanren Voluntary Action Plan on the Environment", through the effective implementation of PDCA cycles. Japanese business community is determined to continue to strive for the promotion of "Keidanren's Commitment to a Low Carbon Society" positioned as a pillar of the "Global Warming Prevention Plan", and to contribute to the achievement of mid-term target designated under the Japan's INDC.

As Japan's residential sector still keep expanding their CO2 emissions, we must reduce them by about 40% in 2030. Especially, it is noticeable that there is a 1.5 times increase in household sector emissions during the past 20 years. In order to ensure household sector to meet its target of 40 % emission reduction, the Ministry of the Environment (MOE) must implement responsible and effective emissions reduction movements involving general public.

The regulatory approaches such as emissions trading and carbon tax would directly impose economic burden to businesses and corporations, provide adverse effects on economic vitality, shrink company budget for research and development, discourage investment into a low carbon society, and impede innovation. Therefore, Japanese business strongly opposes any introduction of regulatory measures, and request the fundamental review of existing regulatory measures, including the possibility of their abolishment. Furthermore, as the forest sink measures will bring multi-dimensional benefits to broader public, their expenses should be allocated to the general expenditure, and should avoid creating a new tax to increase burden on corporations.

(3) Concept of Long Term Global Warming Countermeasures for post 2030

Even the 5th Assessment Report of IPCC (Inter-governmental Panel on Climate Change) indicates the presence of significant uncertainty in regards to the GHG atmospheric concentration needed to realize a long-term target of the Paris Agreement, there has not been any scientific consensus on this matter. Thus, the world needs to continue accumulating scientific insight and knowledge on climate change.

The COP decision including the Paris Agreement invites every party to prepare their low-emission development strategy towards mid-century (the long-term strategy), and to submit by 2020. As a country with energy source CO2 emissions making up 90% of its total GHG emissions, Japan must meticulously and thoroughly examine its long-term strategy, on the basis of its projection for future energy demand/supply system, energy cost, and energy security, while considering their feasibility, including the possibility of the maximum utilization of nuclear power plants, with possible replacement and new construction on the premise of securing their safety. It is unrealistic to draw a linear GHG emissions trajectory path from a specific future reduction target.

The "Global Warming Prevention Plan," which is the mid-term strategy for Japan, describes its long term target "to aim for 80% GHG emissions reduction by 2050, while concurrently achieving economic growth." This "80% by 2050" was the target the Government of Japan advocated before the Great Eastern Japan Quake and Tsunami in March 2011. Therefore, it should have been subjected to cautious and meticulous review in consideration of the post-Quake energy issues Japan faced. For the review of long-term strategy, this time, the Japanese government should have thorough and detailed discussion on the need of a quantitative target, its appropriateness, how to position such strategy, etc.

The long-term target in the "Global Warming Prevention Plan" should be reconsidered through extensive discussion on the long term projection of Japan's energy mix and the possible review of the "Basic Energy Plan," while robustly examining and constantly reviewing how the target affects economy, employment, and industrial competitiveness of Japan.

Measures for drastic and long-term reduction of GHG do not stand on the same stage as the achievement of mid-term target, which has been developed through the bottom-up approach of aggregating concrete measures. For the mid-term target, existing technologies have been assumed to have fully disseminated in the society as a whole. For the long-term strategy, on the other hand, the full dissemination of existing measures is not sufficient to realize drastic GHG reduction without hindering economic growth. For that purpose, "innovation," i.e. the development of innovative technology and its deployment and dissemination throughout the society, is essential. As the major driving force of innovation, business will continue to proactively exert efforts to promote innovation. What the Japanese government needs to do is to exert much effort in the expansion and increase in research and development investment into the areas where private sector may find difficulty in entering. Moreover, it is the government's role to develop favorable environment to promote innovation.

As the regulatory measures, such as national emissions trading scheme, will hinder innovation, impede incentives and restrict expenditure for innovation technology development, and therefore have no effectiveness as long-term global warming countermeasures, the Japanese business continues to oppose their introduction to Japan at any time.

Japan faces considerable challenges to overcome, including a decreasing and aging population. As mentioned before, to promote global warming countermeasures requires the sustainable economic growth. Long-term global warming countermeasures compatible with economic growth should be promoted through considering a link with other policies and measures to solve problems related to the economic growth.

Japanese business community in determined to promote "Keidanren's Commitment to a Low Carbon Society" through the PDCA cycle. Moreover, we intend to advance long-term global warming countermeasures through the 4 pillars of "emission reduction from domestic business operation" "contribution through low carbon products", "international contribution" and "development of innovative technology".

Environment and Energy