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Results of the 4th Follow-up
to the Keidanren Voluntary Action Plan on the Environment

-- Section on Global Warming Measures --


Basic Thinking on the Problem of Global Warming

1. Industry's Measures on Global Warming

(1) Global warming should be dealt with principally through voluntary actions

Today 43 industries participate in the Keidanren Voluntary Action Plan on the Environment, engaging in vigorous efforts to deal with the problem of global warming. Of these, industries in the industrial and energy-converting sectors have established a unified goal of "endeavoring to reduce CO2 emissions from the industrial and energy-converting sectors in fiscal 2010 to below the levels of fiscal 1990." These efforts have been steadily paying off, shown as improvement in CO2 emissions intensity and energy intensity, and shift to less carbon intensive forms of energy, though CO2 emissions in the fiscal 2000 increased by 1.2% in comparison with fiscal 1990 mainly due to the expansion of the economy. Consequently, measures adopted by industry hereafter to deal with global warming should continue to be composed primarily of voluntary efforts.

(2) Mechanisms to ensure transparency

Each year Keidanren carries out detailed follow-up surveys by industry of the progress being made under voluntary action plans, and announces its findings widely through the Internet and other media. Related councils of government also review the results of these annual surveys, and report their conclusions to joint meetings of all such councils, which are called for the purpose of evaluating domestic measures on the problem of global warming.

To enable industry to continue to operate within the framework of a voluntary action plan over the medium-to-long term, while also establishing enhanced credibility for the voluntary approach hereafter, participating industries are evaluating the idea of creating a registration agency within Japan that would record the voluntary goals, emissions data, and other information of companies and industries which are participating in the voluntary action program. This scheme includes the possible adoption of a third-party certification procedure that would be carried out by the private sector.

(3) Contribution by Technological Development

Industry is going to contribute to dealing with global warming with technological development, which is key to solve the problem in the long run. Since the oil crisis Japanese industry has saved energy by more than 20%, much larger than foreign industries. In order to further reduce its CO2 emissions, drastic technological development is indispensable, together with fully utilizing existing technology including nuclear energy. The government is requested to determine anti-global warming technology as one of the axes of its strategy for technological development and give medium-to-long term supports to the private sector to facilitate their technological development.

(4) Promoting the Use of Nuclear Energy

Because it does not emit CO2, promoting the use of nuclear energy is also an issue of utmost importance from the standpoint of dealing with global warming. Industry must endeavor to the fullest extent to ensure the safety of nuclear power. In addition, national and local governments, having obtained the understanding of the nation, must carry out their respective roles in promoting the use of nuclear energy.

2. Measures by the Transportation, Offices and Households Sector on Global Warming

(1) Delays by the transportation, offices and households sector should not cause undue burdens to be placed on the industrial sector

According to CO2 emissions by sector in fiscal 1999 announced by the Ministry of Environment, despite the fact that the energy-converting and industrial sectors have kept CO2 emissions virtually unchanged since fiscal 1990, CO2 emissions in the transportation, offices and households sector have risen sharply, accounting for 46.4% of total CO2 emissions in Japan in the year. The delays in dealing with CO2 emissions in that sector should not become a reason for penalizing the sectors that take their own steps to deal with global warming by participating in the Voluntary Action Plan.

(2) The need for effective measures in the transportation, offices and households sector

The government must recognize that many of the measures required in the transportation, offices and household sector directly impact the everyday life of the nation. It must endeavor to educate and enlighten the people on the difficult tasks that will be required to achieve the nation's goals, and on the importance of the people's role in these tasks; in addition, it must formulate measures that will be effective in reducing CO2, including infrastructure improvements designed to eliminate traffic congestion.

3. Domestic Systems

(1) The advantages of a voluntary program are negated by use of agreements or mandatory plans

Britain and other countries are using agreements established between governments and industries or companies as a means of preventing global warming; some are arguing that the same approach should be adopted in Japan. However, as past examples show, there is a strong likelihood that such agreements would be inflexible and unilateral in Japan-and be very much in the nature of regulations or restrictions. So, executing global warming measures through such agreements risks undermining the flexibility that is the inherent advantage of voluntary efforts, and should not be adopted without adequate consideration.

Some also argue that the formulation of action plans should be made compulsory. However, efforts by industry to suppress emissions of greenhouse gases are most effective when the most knowledgeable parties about the operations involved-the industries themselves-voluntarily develop and execute such plans. Compelling businesses to develop and adopt action plans will seriously undermine the advantages of voluntary efforts, and thus are not desirable.

(2) Domestic emissions trading premised on compulsory emissions limits are inappropriate

Creating a system of domestic emissions trading premised on the establishment of compulsory emissions limits would be inappropriate because they amount to creating extremely tight economic controls, would be unsuitable to a market economy, and be difficult to administer fairly. Moreover, particularly in the case of Japan, the goals for energy conservation have been set at very high levels, which suggests that businesses may not generate sufficient leeway to enable them to release unused emission credits onto the domestic market.

(3) The need for cautious evaluation of environmental taxes

One line of thinking argues that environmental taxes (including carbon taxes and carbon and energy taxes) should be instituted as a means of constraining CO2 emissions. However, for the following reasons, we believe that this approach poses a number of problems, and that such taxes should be carefully evaluated.

  1. Judging from trends in energy prices before and after the oil shocks, and from trends in demand for gasoline and electric power over the same period, the ability of environmental taxes to suppress CO2 emissions appears problematic due to the low price elasticity of demand for energy.

  2. Not only would the imposition of new taxes cause a decline in industry's international competitiveness; it would also impede technological development and capital investments that are aimed at energy conservation. By also hastening the transfer of production to developing nations where environmental costs are low, it would foster the ironical situation in which CO2 emissions increased globally, contradicting the purpose of the new tax.

  3. Environmental taxes should be discussed in the context of a radical reexamination of the existing structure of governmental revenues and expenditures, including energy and motor vehicle-related taxes.

4. The Kyoto Mechanism

The Kyoto mechanism exists as an option for dealing effectively with global warming, and requires the rapid adoption of concrete international rules. In this, the voluntary participation of the private sector will be essential, so there is a need to construct a framework that facilitates its participation.

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