[ Nippon Keidanren ] [ Policy ]
<tentative translation>

The Need to Develop a New International Framework to Prevent Climate Change

-- Basic View of Japanese Industry to Achieve Ultimate Objective of UNFCCC --

October 18, 2005

Nippon Keidanren
(Japan Business Federation)

1. Introduction

The international community faces the extremely serious issue of climate change. Solving this problem requires a global effort by all countries over the long term.

The United Nations Framework Convention on Climate Change states that the ultimate objective to prevent climate change is the "stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system." However, greenhouse gases are the inevitable consequence of a wide range of human activity, and limiting greenhouse gas emissions could influence on current living standards and future economic growth, making the task even more difficult.

The Kyoto Protocol, which came into force in February 2005, represents a first step on the long pathway toward achieving the ultimate objective of the Convention. It apparently has a limitation, with a primary objective of reducing greenhouse gases in developed countries during its first commitment period (2008-2012).

Based on the provisions of the Kyoto Protocol, reviews of the numerical targets of developed countries after the first commitment period (2013 onward) will begin at the end of 2005. A new international framework through engagement of all countries is required to achieve ultimate objectives.

Japan's efforts to date have made it a global leader in energy efficiency, and we are confident that by drawing on its past experience, Japan can play a major role in formulating international framework. Industry can also contribute to preventing climate change by continuing to reduce the amount of greenhouse gases emitted through business activities and by developing and disseminating energy efficient products and services. We would therefore like to express our views about international framework beyond 2012.

2. Importance of Scientific Knowledge

A variety of institutions are working on climate science, including the Intergovernmental Panel on Climate Change (IPCC), in order to acquire the latest scientific knowledge. However, a large number of questions are remaining.

International community needs to enhance efforts to prevent climate change while continuing to accumulate more precise scientific knowledge through IPCC Assessment Reports and other means about the level of greenhouse gases needed to achieve the ultimate objective in the Framework Convention on Climate Change as well as detailed scenarios for achieving this level.

Japan makes international contribution through cooperation among industry, academia, and government, for example, the use of the world's most advanced earth simulator. Industry should continue its active cooperation, starting with supplying the IPCC with a variety of information related to climate change prevention technologies.

3. Elements required for an International Framework beyond 2012

In a new framework beyond 2012, apart from the approach of the Kyoto Protocol, we need to consider the following elements while developing a sustainable and more effective framework to achieve a balance between the environment and economy.

(1) Engagement of All Countries and Utilization of the Characteristics of Each Country

CO2 emissions of Annex I Parties, who are obligated to reduce greenhouse gases under the Kyoto Protocol, accounted for only about 30% of global emissions in 2002. This percentage is expected to decrease further because global emissions are forecast to increase significantly especially among developing countries.#1

Under these circumstances, it certainly appears that the ultimate objective of the Framework Convention will not be achieved using the current approach which only obliges developed countries to reduce emissions. All countries and regions, regardless of whether they are developed or developing, need to participate in efforts to reduce global greenhouse gas emissions. In particular, these efforts require the participation of the United States, the world's largest emitter of greenhouse gases, as well as the major developing countries such as China and India.

Encouraging the active engagement of many countries and regions requires a framework that utilizes their unique characteristics and ensures incentives for taking more efficient and effective measures to reduce emissions, centering around the areas where they have expertise and cost effectiveness. A framework that requires only certain countries to reduce emissions and uses punitive measures will, in fact, limit growth. It will also hinder the achievement of the ultimate objective as a result of each country seeking to limit its own commitment to the extent possible.

In particular, developing countries, for which energy use is forecast to increase significantly, need to ensure the energy required for sustainable development while limiting the emission of greenhouse gases. A framework is needed to enable the active cooperation of developed countries in improving energy efficiency and expanding the supply of low carbon energy.

(2) Encouraging the Dissemination and Advancement of Existing Technologies and Development of Innovative Technologies

Technology is the most important key in preventing climate change. A new framework requires stronger mechanisms to specifically promote the dissemination and development of technology.

As a short-term measure, it is essential to pursue the reduction of greenhouse gases through the dissemination and improvement of current best available technologies while taking the circumstances and regional characteristics of each country into account. Japan has become a leading country in energy efficiency and reducing CO2 due to the combined efforts of the public and private sectors, and it has an extremely important role to play in this area.#2 #3

At the same time, significantly reducing greenhouse gases over the medium to long term requires stronger international cooperation in the areas of utilizing new types of energy, especially renewable energy, and developing innovative technology, including techniques for the carbon capture and storage of CO2, hydrogen energy, Generation IV nuclear energy, and nuclear fusion.#4

Clean Development Mechanism (CDM) introduced under the Kyoto Protocol is an important tool for pursuing technological cooperation between developed and developing countries. Despite its expectation, this mechanism has not been utilized well for a variety of reasons, including procedural complexities. As the first commitment period is approaching closer, there is an urgent need to revise current mechanism easier to use, including faster validation and the flexible approval of highly needed energy efficiency projects.

To encourage participation of developing countries, a new international framework needs to expand the mechanisms by which developed countries provide support for their efforts to tackle climate change.

(3) Importance of a Medium to Long-Term Target Period

The Kyoto Protocol set emission reduction targets for each country during the five-year commitment period from 2008 to 2012. Setting such short-term absolute targets has made it difficult to gain the active emgagement of the United States and developing countries because of potential influence on economic activity.

Additionally, short-term targets are not likely to produce sustained effects due to the long time required for developing and commercializing technologies and of various investment cycles of industries. A situation must be avoided that more medium/long-term cost-effective measures are not taken by emphasis on meeting short-term emission reduction targets and the resources are not allocated for technological innovation.

The effective reduction of greenhouse gases should be pursued based on the P-D-C-A cycle with medium to long-term targets combined with international reviews conducted at regular intervals to assess progress.

(4) Ensuring Equity and Diversified Targets

In pursuing international negotiations, equity and incentives for active engagement are necessary to gain wider participation of many countries.

The numerical targets assigned to each country under the Kyoto Protocol were the result of political negotiation, and lack of equity among countries remains. Continuing this approach could result in lack of reliability of the framework and hinder widespread participation, and raise concerns of needlessly prolong international negotiations.

Accordingly, rather than setting absolute targets for each country and region, it is necessary to accommodate diversified targets reflecting the circumstances of each country. For example, using intensity targets for energy efficiency and greenhouse gas emissions should be considered seriously, because specific targets better fit in the situation without hampering economic activities. As improvement in intensity target is linked to an advantage in productivity and competitiveness, it is possible to provide incentives for participation not only for developed but also developing countries.

Additionally, in the Kyoto Protocol, climate change prevention measures taken in other countries through CDM or other mechanisms merely serves to supplement domestic actions. Consideration should be given to allow developed countries to commit directly to activities to support climate change prevention measures in developing countries, which have significant potential for reducing greenhouse gases.

A new framework should allow each country to pledge ambitious targets that take full advantage of the country's unique characteristics and to review progress at regular intervals. On this basis, it is important that other countries actively provide support rather than penalizing countries having difficulty in achieving targets. This process would enable the reduction of greenhouse gases by ensuring a certain level of binding force while encouraging efforts of all countries.

(5) Approach to International Negotiations

A new international framework should also be stimulated through a variety of initiatives, and be reflected in the discussions of the Conference of the Parties to the United Nations Framework Convention on Climate Change.

For example, the Dialogue on Climate Change, Clean Energy and Sustainable Development, agreed upon at the G8 Gleneagles Summit, is expected to lead to future initiatives as a discussion between G8 countries and major emitter developing countries such as China, India, Brazil, Mexico and South Africa.

Additionally, the Asia-Pacific Partnership for Clean Development and Climate, in which the United States, Australia, China, India, South Korea and Japan participate, seeks to develop and disseminate specific technologies. The outcome of this attempt is also anticipated to promote further regional cooperation focusing on technology.

4. Role of Industry

Industry has the important responsibility of supplementing and bolstering the separated efforts of individual countries and regions to address climate challenge. Industry should play a major role in disseminating and advancing existing technologies as the only responsible sector dealing with technology from research and development to utilization for various products and services. In the development of innovative technology, industry should become more actively involved in international cooperation.

Furthermore, companies operating internationally should work to reduce greenhouse gases on a global scale by improving the level of technology and energy efficiency both in their home and abroad and by implementing climate change prevention measures on a global consolidated basis. In promoting these activities, collaboration between business and civil society should be considered.

Cooperation among different industries is essential. For example, using waste material as fuel can contribute to preventing climate change as well as creating a recycling-based society.

Additionally, further cooperation among business communities in various counties and regions is required to raise the effectiveness of climate change prevention measures. Discussion in international forums comprised of business both from developed and developing countries should be promoted, and global-scale proposals and information sharing should be encouraged. For example, with a view to introducing more effective technology and promoting the dissemination of technology, the international business community would benefit from developing and sharing benchmarks for best available technology and best practices in a variety of industrial sectors. International business community considers the possibilities of "sectoral approach" in which various industrial sectors cooperate across national boarders to leverage their respective strengths to prevent climate change. Industry should also enhance voluntary efforts similar to the Voluntary Action Plan on the Environment pursued by Keidanren (Japan Business Federation).

In promoting climate change prevention measures in developing countries, which have become more significant, require the transfer of technology from companies possessing advanced technology; thus, quick improvement in the investment environment in receiving countries, including the protection of intellectual property, is indispensable. When this type of cooperation cannot be achieved through the market, then international institutions and funds such as the Global Environment Facility should provide support and cooperation in the initial stages. Moreover, cooperative measures for developing countries through official development assistance and public funds from developed countries should also be promoted. On the other hand, government sector is expected to encourage investment in research and development, pursue deregulation, and develop infrastructure to encourage initiatives of the private sector.

5. Conclusion

Japanese industry has taken the lead in pursuing energy conservation measures since the oil shocks of the 1970s. Moreover, Keidanren's Voluntary Action Plan on the Environment since 1997 has been successfully reduced CO2 emissions in industrial and energy converting sectors and contributed in implementing climate change measures by Japanese government.

As a result of these efforts, advanced technologies have been created in a wide range of industries and disseminated around the world. In developing innovative technology through cooperation between industry, academia, and government, Japan has a great potential for leading the world and contributing to the prevention of climate change.

Japanese industry should continue to strengthen its voluntary efforts, pursue technological innovation, strengthen cooperation with industrial communities around the world, and contribute to achieving the ultimate objective of preventing climate change.

  1. The International Energy Outlook forecasts this percentage to decrease to about 25% by 2020 and about 20% by 2050.
  2. The Institute of Energy Economics, Japan estimates that global CO2 emissions can be reduced to 3.7 billion t-CO2/year through the introduction of current best available technology by 2020 and efforts to enhance efficiency. However, it should be noted that the dissemination of best available technology is not uniform across all regions and industries.
  3. Assessments of energy efficiency and reviews of standards in countries examined by the International Energy Agency in response to the G8 Gleneagles Summit are expected to contribute to disseminating best available technology and best practices.
  4. The DNE21+ model developed by the Research Institute of Innovative Technology for the Earth (RITE) indicates that the promotion of energy conservation and other such activities is not enough to significantly reduce the emission of greenhouse gases over the medium term. What is required is the development of CO2 sequestration and other technologies that are not yet commercially viable, and the widespread dissemination of these technologies.

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