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Policy Proposals  Environment and Energy Proposal for COP26

(Provisional Translation)
21 October 2021
Committee on Environment and Safety

From the end of this month, the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change will be convened in Glasgow, United Kingdom roughly two years after the previous COP. Climate change is a global challenge and cannot be addressed by any single country or region. At COP26, countries and regions are expected to work as one, sharing awareness of the urgency of the climate change issue and the necessary actions, and setting forth appropriate measures.

In October last year, the government of Japan declared that Japan would realize carbon neutrality by 2050, and, in April this year, set a very ambitious target of reducing greenhouse gas emissions by 46% (compared to fiscal 2013 levels) in fiscal 2030. Leveraging these ambitions, we urge the Japanese government to make use of its diplomatic power in COP26 negotiations and achieve the maximum results toward the realization of global carbon neutrality.

Recognizing that the environment is a prerequisite for business activities and that addressing climate change is a managerial issue of the greatest priority, the Japanese business community is determined to contribute to the realization of global carbon neutrality, continuing to strongly promote proactive initiatives centered around the "Carbon Neutrality Action Plan" and "Challenge Zero" to actively address emission reductions not only in Japan but also overseas.

Taking this opportunity, we request concrete progress on and realization of the following points.

1. More proactive efforts in developing and emerging countries

Dedicated efforts from all countries are indispensable to resolve climate change. Above all, if only developed countries set high targets and promote measures, there will be no progress on global emission reductions without more proactive efforts by developing and emerging countries, whose share of emissions is rising.

COP26 President Alok Sharma has called on major emitters to set ambitious targets. Countries and regions including Japan, the United States, and the European Union have already declared 2050 carbon neutrality and are raising their 2030 targets to the extent possible.

In this context, Japan is expected to advance proactive climate diplomacy, closely collaborating with developed countries such as the United States and the EU, and acting as a bridge between developed and developing or emerging countries. In this way, Japan should encourage developing and emerging countries to set more proactive emission reduction targets and make reduction efforts to the extent possible through appropriate means based on respective capabilities and circumstances including economic, energy, and geographic conditions. Japan should also collaborate with other developed countries to support such efforts.

The issue of appropriate reduction efforts by other countries, particularly emerging countries, is also critically important from the viewpoint of creating a level playing field for the international competitiveness of Japanese industry.

2. Japan's contributions to emission reductions overseas

(1) Concluding negotiations regarding the detailed rules of Article 6 under the Paris Agreement

Given that about 3% of global greenhouse gas emissions come from Japan, Japan is naturally obliged to promote reduction efforts to the extent possible domestically. At the same time, since climate change is a global challenge, Japan must also proactively contribute to emission reductions overseas. Going forward, it is also vital that Japan seeks to serve as a game changer in the global emission reductions race so that countries will compete over globally avoided emissions, in addition to domestic emissions reductions.

It is "market mechanisms" that will play an important role to incentivize Japanese businesses to engage in emission reduction projects abroad. From the perspective of ensuring that these mechanisms function properly, efforts should be made at COP26 in seeking a conclusion on the detailed rules regarding market mechanisms under the Paris Agreement (Article 6), whose negotiations were left unfinished at COP25 two years ago.

(2) More extensive use of JCM

In addition to the negotiations regarding the rules of Article 6 under the Paris Agreement, the Japanese government should develop an environment for more extensive use of the JCM (Joint Crediting Mechanism), which is one type of market mechanism (cooperative approach), in order to pursue both international contributions by Japanese businesses and the achievement of Japan's emission target.

The number of JCM partner countries has not increased since 2017, remaining at 17 countries. Moreover, it cannot be said that the amount of credits issued is sufficient to incentivize businesses. On top of this, issues regarding the budget scale and the acceleration of project formulation have also been pointed out.

In order to overcome these challenges, we request the Japanese government to strategically expand JCM partner countries, increase related budgets, implement large-scale projects where massive emissions reductions can be expected, and improve institutional operations.

(3) Supporting the transition toward decarbonization in Asia

To make international contributions in the field of climate change, Japan should proactively promote the overseas dissemination of its advanced energy-efficient, low-carbon, and decarbonizing technologies, products, services, and infrastructure systems. At the same time, it is also important to link these efforts to expanded opportunities for Japanese businesses.

Going forward, countries across Asia, whose energy demand is expected to grow significantly, will play a particularly critical role. As such, through the Asia Energy Transition Initiative (AETI) led by the Japanese government, Japan should support effective transition to decarbonization (energy transition) that considers diverse conditions of Asian countries, including differences in industrial, energy, and social structures, as well as geographical conditions.

To do so, it is necessary to utilize frameworks such as the Cleaner Energy Future Initiative for ASEAN (CEFIA) to develop a business environment including establishing realistic and effective policies and institutions together with governments and business communities in partner countries under public-private partnership for the deployment of low-carbon and decarbonizing technologies in Asia. Based on this, Japan should promote the deployment of its advanced technologies and products, and thereby realize green growth in Japan, as well as contribute to greenhouse gas emission reductions across the whole of Asia.

Furthermore, Japan should quantify its contributions to emission reductions through such activities and communicate such information widely to the rest of the world. This will ultimately strengthen its soft power in climate diplomacy.

3. Efforts to address relevant global challenges

(1) Diffusion of transition finance

Demands for climate funds are expected to increase enormously around the world. Therefore, it is necessary to promote sustainable finance and seek to mobilize funds globally. In particular, since carbon neutrality cannot be achieved in a single step, the role that transition finance plays during the transition period is extremely important. As industrial and energy structures differ between countries and between regions, Japan should aim to promote the global diffusion of transition finance by disseminating its basic approach internationally to earn the trust and empathy of other countries.

(2) Addressing carbon border adjustment mechanisms

Regarding carbon border adjustment mechanisms (CBAM) considered by the EU and others, as indicated in Japanese government's "Basic Approach to Carbon Border Adjustment Measures"#1, such mechanisms are required to be consistent with the WTO rules and must motivate all countries, including developing and emerging countries, to engage in effective climate action, while avoiding adverse impacts on trade. In addition, considering the original objective of preventing carbon leakage, it is important to objectively evaluate not only explicit carbon pricing (such as carbon taxes and emissions trading systems) in importing countries or regions, but also other emission reduction efforts. From the viewpoint of securing fair competitive conditions, Japan should collaborate with like-minded countries to address this issue.

  1. Green Growth Strategy Through Achieving Carbon Neutrality in 2050 (June 2021) p.23-24

Environment and Energy