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Keidanren Voluntary Action Plan Evaluation Report
Fiscal 2004

April 18, 2005

Evaluation Committee for the Voluntary Action Plan on the Environment

1. Introduction

In an effort to improve the credibility and transparency of Nippon Keidanren's Voluntary Action Plan on the Environment, the Evaluation Committee has to date focused its attention on a variety of issues. That focus centered on methods of collecting and aggregating data for different industries in FY 2002, and on extending the scope of reporting in FY 2003.

For its evaluation work this fiscal year, in September 2004--just prior to adoption of the European Union Emissions Trading Scheme (EUETS)--the Committee implemented field studies in the United Kingdom, the Netherlands, and Germany, and exchanged views and ideas with each country's interested organizations primarily on the relationship between the Voluntary Action Plan and the EUETS.

Additionally, it scrutinized data submitted to the Secretariat by participating industries and held direct hearings with representatives for six industries (electric power, cement, maritime shipping, steel, electrical machinery and electronics, and paper).

Drawing from the above, the Committee highlighted areas for further improvements in the transparency and credibility of the Voluntary Action Plan on the Environment.

2. Efforts by Participating Industries

A total of 34 industries from the industrial and energy-converting sectors covered by the evaluation report participated in the FY 2004 follow-up.

(1) Adjustments in scope of follow-up

It was confirmed that 23 of the industries participating in this year's follow-up survey (two industries last year) presented no problems in terms of boundary adjustments, a step recommended in the interest of avoiding cross-industry overlap. Nonetheless, more thorough studies are called for because the issue of overlap has not been completely ruled out for certain industries including those that are not subject to boundary adjustments.

Further, with regard to the recommendation that the scope of follow-ups be limited in principle only to companies actually participating in the survey, 30 of the industries were found not to present any problems (compared to 29 industries in FY 2003). Nonetheless, improvements are called for because four industries are still performing expanded estimates.

(2) Statistical basis for FY 2010 projections

Fourteen participating industries adopted or referenced the set of economic indicators #1 recommended by the Secretariat for uniform use in the interest of improving the validity of the FY 2010 CO2 emission projections by each industry. That is a significant increase from the two industries that adopted the indicators last fiscal year. Of the 20 industries that did not adopt the uniform set of indicators, eight provided explanations regarding the indicators they did use, their reasons for using them, as well as the correlations and consistencies between uniform macroeconomic indicators and microeconomic targets. Although the remaining 12 industries provided no explanations on these matters, if they do not adopt the uniform indicators next fiscal year or thereafter, they should at least provide reasons for relying on the indicators used by their own, respective industries.

As called for in the FY 2003 evaluation report, all industries have provided estimates of production value and volume as a basis for their projections of CO2 emission volume. Starting as early as next fiscal year, they should clarify the basis for these statistics as well.

Additionally, it is advisable that each industry, including those that have adopted the uniform economic indicators, also provide persuasive explanations of their projections for FY 2010 output and CO2 emissions with attention to conditions specific to their own industry.

(3) Elucidation of reasons for adoption of industry-specific targets and indicators

Thirty-three participating industries this fiscal year have detailed their justifications for the indicators they opted to utilize as targets, and 30 have explained their reasons for setting specific numerical targets. This indicates they are making an effort to review, revise, and improve the content of their explanations.

(4) Explanations of reasons for changes in emission volume

Continuing the trend from FY 2003, virtually all participating industries offered some form of explanation for changes in emission volume, with 29 citing direct reasons for the change itself and 32 providing factor analysis-based explanations. Nonetheless, certain industries still provided no explanations or factor analyses of any kind; we are hopeful they will fulfill their accountability obligations in the years ahead. Furthermore, all industries are urged to review their analytical methods and improve the precision of assessments, including their explanations of the influence from changes in industrial structure.

(5) Pursuing evaluations from a life-cycle assessment perspective

Efforts within the industrial sector should not stop with assessments of CO2 emission volume at the manufacturing stage, but also include active evaluations of emissions during product utilization stages that can facilitate reductions in emissions from the offices/households and transportation sectors. Twenty-two participating industries (compared to 16 in FY 2003) have provided such explanations from a life-cycle assessment (LCA) perspective, and of those, nine have provided quantitative evaluations.

For example, four participating organizations from the electric machinery and electronics industry provided in-depth quantitative analyses of CO2 emissions from electric refrigerators during the manufacturing, shipment, service life, and recycling stages. We strongly applaud these efforts in information disclosure and look forward to similar efforts by other participating industries. As noted in our report last year, through the medium term there is a need to establish and share a set of uniform, quantitative evaluation methodologies, and all participating industries will be expected to disclose information.

(6) International comparisons of energy efficiency

Nine participating industries provided explanations pertaining to international comparisons of energy efficiency within their respective industries. International comparisons are indispensable in terms of identifying levels of energy efficiency within a given industry as well as accurately assessing industrial efforts to boost energy efficiency. From the perspective of ensuring reliability and objectivity, international comparisons from independent and impartial research institutions are especially necessary. Substantive studies in these areas are making progress, as demonstrated by the Cement Association of Japan's disclosure of data based on Battelle Memorial Institute's report, and the Federation of Electric Power Companies' verification of the data used with the company Ecofys. Nonetheless, it is advisable that other participating industries also pursue efforts of this kind.

The Evaluation Committee has compiled in a separate document the findings of its investigation into efforts by participating industries to act on past Committee recommendations. Starting as early as next fiscal year, it is strongly advisable that all industries participating in follow-up surveys voluntarily report their efforts to address recommendations, and that Nippon Keidanren compile and disclose that information in a synoptic format.

3. Hurdles for Further Improvement of the Voluntary Action Plan

To bolster the transparency and reliability of the Voluntary Action Plan, it is hoped that participating industries will address the aforementioned issues as well as tackle a variety of hurdles detailed below.

(1) Efforts to revise industry-specific targets

This year's follow-up survey report articulates revisions that the four electric machinery and electronics organizations made to their targets with attention to changes in business structure. #2 From the vantage point of improving the probability of achieving established targets, there is a recognized need for industries to implement revisions that make their targets more realistic. However, to ensure that targets are not revised downward too readily, it is essential that participating industries exploring revisions show adequate accountability with regard to explaining the reasons for any changes as well as the suitability of their new indicators or targets.

Furthermore, as a matter for future study, Nippon Keidanren needs to explore the idea of setting uniform policies on procedures for target revisions.

(2) Having factor analysis reflect changes in industrial structure

As noted earlier, it is anticipated that "changes in industrial structure" stemming from offshore relocation by elements of the manufacturing sector, etc., will be included within the scope of factor analysis under the Voluntary Action Plan as a whole, along with "change in CO2 emission coefficient," "change in production activity," and "change in emission volume per unit of production activity."

(3) Elucidation of the correlations between individual targets and overall targets, improvements in the probability of meeting targets

From a choice of four indicators, each participating industry has selected an indicator believed to suit its own circumstances the best, and has set reduction targets accordingly. For this reason, as indicated in last year's report, Nippon Keidanren will be expected to explain correlations between the total reduction target and industry-specific targets as well as the likelihood that the total reduction target can be met.

For the FY 2004 follow-up survey, expected CO2 emissions in FY 2010 were calculated and the probability of meeting reduction targets assessed on the basis of projections by seven major industries that account for approx. 90 percent of the emissions total covered by the Voluntary Action Plan. Further steps should be taken to refine and improve the methods enlisted to test the probability of future target achievement. Additionally, if possible, public disclosure of expected credit eligibility under the Kyoto Mechanism should also be considered.

(4) Refinement of intensity target

Last year's evaluation report also underlined the importance of intensity targets as indicators that members of industry could responsibly adopt regardless of prevailing economic conditions. Currently, to measure changes in CO2 emissions, factor analyses are being performed under the Voluntary Action Plan as a whole as well as for individual participating industries. However, the analytical findings concerning changes in intensity indicators enlisted by individual industries should be better-explained on an industry-by-industry basis.

(5) Assessing the cost of the Voluntary Action Plan

As a policy measure, it is essential that the benefits of the Voluntary Action Plan be underscored and--in terms of striving for the cost-effective reduction of greenhouse gases--that its cost-effectiveness also be made clear-cut. As one step to this end, it will be necessary for members of industry to perform their own cost appraisals of the Voluntary Action Plan. #3, #4

(6) Utilization of professional organizations and the compilation of databases

A variety of issues will demand the services of professional organizations and the compilation of databases. They include checks for consistency between government statistics and numerical data supplied by members of industry; checks for consistency between overall targets of the Voluntary Action Plan and the individual targets for specific industries; reviews of the suitability of industry-specific targets; the establishment of methodologies for the appraisal of Voluntary Action Plan benefits; the public disclosure of monitoring reports; international comparisons of energy efficiency; and appraisals of the cost of the Voluntary Action Plan. These steps can be expected to improve the transparency and credibility of the Voluntary Action Plan. #5

(7) The promotion of efforts in the offices/households and transportation sectors

(i) Increasing the participation of industries from the offices/households and transportation sectors The expansion of financial services, information services, and other industries within the service sector has subjected Japanese industrial structure to sweeping changes in recent years. In the process, strengthened emissions countermeasures have grown into a serious issue for industries in the offices/households (commercial) and transportation trades, whose CO2 emissions are increasing. As was the case last year, 23 industries and companies from the offices/households and transportation sectors participated in the follow-up survey this year. Currently, though, those participants account for only a small fraction of the emissions from either sector. It is hoped that the number of participants from these sectors will increase in the future.

(ii) The promotion of countermeasures in the industrial and energy-converting sectors Concurrent efforts to quantitatively measure and cut emission levels within the offices/households and transportation-related operations of companies of the industrial and energy-converting sectors will also be expected.

As a challenge in common to the goals of (i) and (ii) above, it is advisable that steps be taken to accurately assess emission levels from these sectors, set rational reduction targets, and implement emission reduction measures. As a future undertaking, it will presumably be necessary to adopt uniform indicators, e.g., intensity per unit floor area or per employee at commercial enterprises, and set commonly shared reduction targets.

4. Conclusion

With the enforcement of the Kyoto Protocol, plans for the achievement of reduction targets will be formulated at the government level to promote countermeasures against global warming. #6 Although achieving the targets of the Kyoto Protocol will not be easy, it is hoped that industry will become more proactive in that endeavor. For now, it is imperative that the existing Voluntary Action Plan be steadily phased in as the foundation of reduction measures for the industrial and energy-converting sectors, and that the offices/households and transportation sectors creatively endeavor to hammer out effective reduction measures of their own. We are hopeful, moreover, that through active information sharing and close communication and collaboration with consumers, workers, NGOs, and other stakeholders, these efforts will contribute to the promotion of measures against global warming as a national drive.

  1. The Secretariat has recommended the use of data in reference documentation released by the Council on Economic and Fiscal Policy (January 16, 2004) for economic growth rates, nominal GDP, price inflation, the absolute unemployment rate, and other indicators as the statistical basis for business-as-usual (BAU) FY 2010 targets and projections.
  2. The electrical machinery and electronics industries have undergone significant changes in operating structure compared to the point in time when their targets were set. In view of that development, to bring their target indicators more closely in line with quantitative intensity, starting next fiscal year the four electrical machinery and electronics organizations will replace the current "CO2 emission intensity associated with nominal output value" with "CO2 emission intensity associated with real output value" as their indicator for evaluation.
  3. In its Results of the Fiscal 2004 Follow-up to the Keidanren Voluntary Action Plan on the Environment: Policy Recommendations, the Joint Subcommittee for Voluntary Action Plan Follow-up under the Industrial Structure Council points out that cost-benefit analyses should be performed by members of industry themselves.
  4. Through environmental reports and other channels, some companies already publicly disclose the cost of their measures against global warming. It would conceivably be useful to provide specific examples in the industry-specific reports of the Results of the Follow-up to the Keidanren Voluntary Action Plan on the Environment.
  5. The Joint Subcommittee for Voluntary Action Plan Follow-up of the Advisory Committee for Natural Resources and Energy under the Industrial Structure Council has pointed out to policymakers that the compilation of databases will be essential.
  6. "Steady implementation of the Voluntary Action Plan" was again included in the draft plan (announced at the end of March) for the achievement of targets under the Kyoto Protocol.

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