Since its inception in 2002, the Evaluation Committee has worked to improve the credibility and transparency of Nippon Keidanren's Voluntary Action Plan on the Environment, issuing annual recommendations on a variety of issues including improvements to be made in follow-up study methodologies and in the items to be reported. It has also confirmed the status of the Voluntary Action Plan's implementation and the progress that has been made.
For the FY 2005 evaluation, the Committee scrutinized data submitted to the Secretariat by participating industries, held interviews with industry representatives and confirmed status for such traditional high-emissions industries as electric power and steel together with the offices/households and transportation sectors, where there is strong need for greater efforts to prevent global warming. Five additional industries were also included in the interviews: housing, non-life insurance, freight forwarding, chain stores, and construction.
Reported below are the evaluation results of the FY 2005 follow-up survey together with issues identified for the future.
The Evaluation Committee has highlighted a number of issues to date concerning the follow-up surveys of the industrial and energy-conversion sectors (participation of 35 industries), #1 and in the FY 2005 follow-up survey (summary <PDF> published on November 18, 2005, and industry-specific reports on March 29, 2006) the participating industries provided information on their efforts to address those issues.
The Committee acknowledges the efforts of participating industries to verify and publish the status of their activities to address the issues and is confident that doing so will aid in understanding points for further improvement. However, in the FY 2005 follow-up the participating industries merely confirmed whether there has been any action on issues identified. In some cases, no verification was made because certain industries judged that there was no need for action, but we consider it necessary to enhance status information disclosure in the future through such means as requiring verification in more detail.
Below is an outline of our evaluation of efforts to act on individual issues identified in previous reports.
As has been noted in the past, under the Voluntary Action Plan it is essential that boundary adjustments be made among participating industries to avoid the actions of one corporation being reflected in multiple industry follow-ups. Further, the scope of follow-ups should in principle be limited to those companies that are actually participating in the survey, because under the Voluntary Action Plan results should accurately reflect the real achievements of actual participants.
With respect to boundary adjustments, it was confirmed that 22 of the participating industries (23 last year #2) presented no cross-industry overlap problems. For the remaining industries, we look forward to more rigorous confirmations in the future, even if there are no companies falling under the scope of adjustment.
As for the scope of follow-ups, it was confirmed that in 32 of the industries (30 last year) the scope was limited to companies actually participating in the survey. There are cases in certain industries where stochastic methods must be used, but the Committee looks forward to further efforts to increase the number of samples, expand the number of participating companies, and improve the proportion of data based on actual measurements.
Some 33 industries provided explanations of the estimation methods and rationale underlying their CO2 emissions forecasts for FY 2010. Furthermore, 24 industries clearly stated their use either of the uniform economic indicators provided by the Secretariat or their own set of indicators (22 last year).
All participating industries should clarify which economic indicators they used, and if they do not adopt the uniform indicators they should provide their reasons for not doing so.
The Kyoto Mechanisms are expected to play a significant role in improving the probability of achievement of FY 2010 targets, and five industries reported on studies they had made regarding the use of the mechanisms. In the future, confirmations should be made of industries' intention to make use of the Kyoto Mechanisms to achieve targets, as well as their implementation efforts to date. Even if an industry-wide guideline has not been finalized, it is desirable to proactively disclose examples of participating companies' initiatives to make use of the Kyoto Mechanisms.
Thirty-four industries (33 last year) provided reasons for adopting certain target indicators and 26 industries (30 last year) explained the rationale for their numerical targets. The Committee hopes to see explanations of reasons and rationale from all industries as well as greater specificity in the explanations furnished.
Thirty-four industries offered some form of explanation of reasons for changes in CO2 emissions volumes (32 last year). Industries that only provided qualitative explanations are encouraged to conduct quantitative analyses.
The Evaluation Committee considers it important that emission intensity indicators be used and has noted the need for data disclosure on CO2 emissions intensity and energy intensity even for industries that have adopted absolute-value targets. The Committee applauds the fact that all 35 industries have published emission intensity figures. In the future, we hope to see these figures enhanced with further analysis of emission intensity indicators.
For the offices/households and transportation components of the industrial and energy-conversion sectors, 25 industries reported on efforts to reduce emissions and 22 industries reported on initiatives intended to lead to nation-wide efforts, and 22 reported on the contributions made through products and services. The Committee welcomes the fact that efforts were not limited to achieving the common targets of the industrial and energy-conversion sectors but encompassed broad-based progress that extends to the offices/households and transportation sectors. Explanations from a life cycle assessment (LCA) perspective were given in some form by 22 industries, but further improvements are desired.
This year, the Evaluation Committee held interviews focusing on efforts in the offices/households and transportation sectors. During these interviews, we confirmed a number of developments, including the supply of housing that will lead to reduced to CO2 emissions during use, general progress in office energy- and resource-saving programs, active modal shifts, and comprehensive energy-saving programs that extend from product procurement through distribution. For both sectors, the Committee encourages participating industries and companies to make further progress and to widely publish their activities to the general public.
This year, the Japan Paper Association, Japan Society of Industrial Machinery Manufacturers, Japan Machine Tool Builders' Association, Flour Millers Association, and the Japan Soft Drinks Association revised their targets.
The Committee highly values the consistent efforts that have been made by the Japan Paper Association and its announcement of even more challenging targets for the future. This revision has substantially increased the credibility of voluntary efforts because it demonstrates that companies can use their insight and creativity to create and implement detailed and effective measures and that when they achieve their initial targets there is then momentum to strive for even higher goals in the future. Indeed, this is the core strength of voluntary efforts. The Committee encourages other participating industries to respond in a similar manner.
The Flour Millers Association and the Japan Soft Drinks Association previously employed two indicators, CO2 emissions intensity and energy intensity, #3 but have decided to focus on CO2 emissions intensity. Targets for CO2 emissions intensity remain at the same levels, so this is not considered a downward revision.
The Japan Society of Industrial Machinery Manufacturers and the Japan Machine Tool Builders' Association had adopted emission intensity targets as an indicator, #4 but had been using nominal production values as the denominator for the intensity and therefore reviewed targets to take account of substantial declines in prices that were not envisioned at the time plans were formulated. Reviews such as this can potentially turn into downward revisions of targets and should be approached with caution. Going forward, both industries need to clearly articulate the process by which they plan to achieve their targets as well as the policies and programs to strengthen these efforts, and it is vital that they do indeed achieve the targets that they have set.
The Voluntary Action Plan seeks to achieve targets for the entire industrial and energy-conversion sectors. There may, however, be cases in which specific industries are unable to achieve their targets for justifiable reasons, for example, changes in the industrial structure.
The Committee does not reject the idea of reviewing targets for the purpose of eliminating factors that were not initially envisioned and factors beyond the control of the individual industry so long as this is done within a scope that does not impact achievement of the overall targets. However, as stated in last year's report, the Committee is also aware that the credibility of the Voluntary Action Plan as a whole may be harmed if targets are revised too readily. When it is absolutely necessary to change targets, full explanations must be provided of the reasons for change and the justifications for the new indicators and targets.
It is also urgent for Nippon Keidanren to consider setting basic guidelines on the review of individual targets.
To measure the probability with which the overall targets for the industrial and energy-conversion sectors will be achieved, expected CO2 emissions in FY 2010 were calculated on the basis of projections by seven major industries that account for approximately 90 percent of the emissions total in the two sectors. As in the previous year, this year's forecast indicates that targets are very achievable, a finding that we applaud, but at the same time we caution that participants cannot rest on these findings but must continue to strengthen their efforts so as to ensure achievement.
It is inevitable that there will be changes in CO2 emissions and energy consumption volumes depending on economic conditions in the target year. Nevertheless, inasmuch as Nippon Keidanren has adopted targets for total CO2 emissions, it must convincingly articulate the processes by which these targets will be achieved.
It was from this perspective that in last year's report the Committee proposed the disclosure of expected credit eligibility under the Kyoto Mechanisms as a means of improving the probability of achievement. In this year's follow-up, we are pleased to see that some industries, albeit limited in number, published the status of their studies at the current time. There are still many issues to be addressed in the utilization of the Kyoto Mechanisms, including the uncertainty of supply-and-demand forecasts, and this makes it difficult for companies and industries to formulate utilization policies. Nonetheless, utilization of the Kyoto Mechanisms will increase the probability of target achievement and will ultimately improve the credibility of the Voluntary Action Plan. Therefore, as already stated, the Committee advises that the content of reporting be enhanced.
The Voluntary Action Plan contains overall targets for the industrial and energy-conversion sectors; it does not require that all participating industries and companies achieve their individual targets. However, there are no explicit rules for how other industries should cover shortfalls in the event that an industry finds it difficult to meet its targets, and from the perspective of increasing the credibility and transparency of overall target achievement, it is advisable that participating industries publish information on the status and prospects for target achievement in a manner that is as specific and quantitative as possible. It is especially important for industries to provide quantitative analysis of the effects of measures they will be implementing in the future.
From the offices/households and transportation sectors, 23 industries and companies are participating in the Voluntary Action Plan. Currently, the sectors do not have their own unified targets under the Voluntary Action Plan, but it is nonetheless urgent that they take stronger, more self-directed measures to reduce emissions. For example, it is desirable for services, retail, finance, insurance, and similar industries to enhance specific measures to conserve energy at their offices and stores with the understanding and support of the customers and consumers who use these facilities. Some industries have yet to provide reference indicators that would serve as targets, and the Committee encourages them to study this matter as early as possible. It is also important to continue to actively recruit participation among those industries not yet involved.
For industries belonging to the industrial and energy-conversion sectors, there is a strong need for better policies and programs in internal office and transportation operations, for example, the operations of their head office buildings and logistics services. For instance, the Petroleum Association of Japan has set numerical targets for reducing fuel consumption in conjunction with the transport of petroleum products, implemented measures to reduce fuel consumption with more efficient in-house logistics, and published the quantitative effects of these programs. Other industries provide a large number of qualitative reports describing examples of practices, but in the future they will need to capture the effects quantitatively and share and disseminate best practices so as to raise the level of efforts for all participating industries. Last year saw many industries begin to encourage "casual business attire," and it is hoped that these activities spread and become established as nation-wide efforts.
The offices/households and transportation sectors cover a wide variety of industries and business activities, so follow-ups are being conducted based on indicators chosen freely by participating industries. While this enables the use of realistic data that reflects conditions in the industry, it also makes it difficult to compare achievements against other industries.
While the first step is to move forward toward achievement of the industry-specific targets that are currently in place, the offices/households and transportation sectors should consider formulating overall targets like those in the industrial and energy-conversion sectors so as to further improve the credibility of the voluntary efforts of industry to deal with global warming issues. #5
Obviously, this requires that industries which have not yet captured energy consumption or CO2 emissions or have not yet studied suitable indicators (what to use as the denominator in emission intensity calculations, for example, floor space) make the effort to build up this basic information.
In doing this, the reports on energy consumption, formulation of energy-conservation plans, and energy consumption calculation methods that have been made obligatory for transport carriers and shippers under the revised Law concerning the Rationalization of Energy Use will provide useful reference materials.
To accurately evaluate the effects of the Voluntary Action Plan it is necessary to provide a comprehensive valuation of the CO2-reduction effects for society as a whole. From this standpoint, it is hoped that better explanations of evaluations from an LCA perspective will be provided. #6
Enhancing explanations of the emissions-reduction effects in the product/service use stage will be particularly useful in obtaining the understanding and support of the general public at all levels for the efforts undertaken by industry and will also be significant from the perspective of providing consumers with the information required to take account of environmental concerns in their selection of products and services. Industries producing consumer goods should actively furnish information to consumers, even if only the results of simplified calculations.
The programs undertaken by individual industries and their effects have been published in the industry-specific reports of the follow-ups to the Voluntary Action Plan, the Report on Global Warming Prevention Measures: 600 Hints on Reducing CO2 Emissions (October 20, 2005), and in other documents. Furnishing this information is effective in spreading best practices by allowing participating industries and companies to share a wide range of examples.
Going forward, it will be necessary to enhance quantitative evaluation so as to promote greater understanding and support. For example, the electrical and electronic equipment industry endeavored to perform cost-benefit analyses for individual programs so as to elucidate the amounts that have been invested in combating global warming and the effects that they have had. Such studies will be instrumental in making a convincing case for the effectiveness of the Voluntary Action Plan.
Better quantitative analysis and evaluation of cost-benefits in a large number of industries will be instrumental in demonstrating the validity and effectiveness of the Voluntary Action Plan as a whole.
It is vital that we communicate the status and effects of the Voluntary Action Plan not only to domestic audiences but to people overseas as well.
The Evaluation Committee has long advocated the need for international comparisons on energy efficiency in individual industries. In this follow-up progress was made in the efforts made by participating industries, with eight industries publishing relevant data. In addition, if such comparisons and research are carried out by third-party institutions that are public in nature, it can be expected to provide strong proof of the high degree of efficiency achieved by Japanese industry. It is advisable for industry to actively cooperate with the national energy efficiency evaluations to be conducted by the International Energy Agency (IEA) at the behest of the G8 Gleneagles Summit held in the summer of 2005 and the energy efficiency benchmarking studies to be performed by the Asia-Pacific Partnership on Clean Development and Climate.
Other countries are also enacting programs similar to the Voluntary Action Plan, and we should refer to their experiences as we endeavor to enhance the Plan. At the same time, it is also necessary to promote greater understanding of the effectiveness of Japan's Voluntary Action Plan. For example, the Third Assessment Report issued by the Intergovernmental Panel on Climate Change (IPCC) positions the Voluntary Action Plan within the broadly defined category of "voluntary agreements." While voluntary methods have the benefits of enabling actors to use their creativity and innovation to select the best programs and not imposing procedural costs on governments or actors, #7 it is also a fact that they are often viewed skeptically because the rationale for their targets is unclear and their effectiveness is unknown.
While the Voluntary Action Plan deserves praise for the effect that it has had on Japan's efforts to combat global warming, there is a need to earn the understanding and support of people in Japan and other countries regarding its effectiveness by furnishing specific, quantitative analyses of measures implemented that can withstand academic scrutiny.
Industry also needs to proactively provide information that demonstrates the enormous potential of voluntary actions, which enable achievement of both environmental and economic objectives, as methods by which developing countries can deal with global warming while avoiding the adverse economic impact that regulation would have. An example of this is the voluntary agreement that was announced by South Korean industry last year.
As FY 2010, the target year for the Voluntary Action Plan, comes into view, participating industries and companies must commit themselves to implementing various programs and continue to steadily achieve their goals. We should emphasize, however, that the Voluntary Action Plan was not formulated in response to the Kyoto Protocol. Nonetheless, inasmuch as the Kyoto Protocol Target Achievement Plan approved by the Cabinet last year once again identified the Voluntary Action Plan as central to the efforts by the industrial and energy-conversion sectors, it is advisable that both sectors take stock of the debate on programs and policies for the five-year period between FY 2008 and FY 2012, the first commitment period under the Kyoto Protocol.
Nippon Keidanren should also move forward with a general study of policies and programs to combat global warming after 2010, the year in which the current plan concludes. If the Voluntary Action Plan is continued, it will be necessary to discuss intensity targets that facilitate accurate measurement of industry efforts, what indicators and targets shall be adopted, and measures to be taken in the event that targets cannot be achieved through domestic efforts alone.
Any such discussions need to take full account of the domestic and international debate regarding the international framework to be put in place after the first commitment period under the Kyoto Protocol. Nippon Keidanren has expressed its ideas about a future framework in the October 18, 2005 opinion paper entitled "The Need to Develop a New International Framework to Prevent Climate Change." It is anticipated that Nippon Keidanren will actively communicate and discuss its ideas on the role to be played by industry with counterparts in Japan and foreign countries based on its experiences of the Voluntary Action Plan.