September 26, 1997
Keidanren
Inter-governmental negotiations to determine targets for the reduction of greenhouse gases after the year 2000 are entering their final phase as preparations proceed on the 3rd Conference of the Parties (COP3) of the U.N. Framework Convention on Climate Change that will convene in Kyoto in December. Debate has begun in earnest on measures to be taken domestically as well. Adhering to the spirit of the Keidanren Global Environment Charter announced in 1991, Japan's business and industrial community has pursued voluntary efforts. Also, in June of this year, it developed and adopted the Keidanren Voluntary Action Plan on the Environment, participated in by 36 industries, as a way of concretizing the Keidanren Appeal on the Environment announced in July 1996. In announcing the action plan, the business community also declared that, as a goal, it would endeavor to bring the amount of CO2 emissions generated by the industrial sector (through manufacturing processes) down to below the level of 1990 by the year 2010. Based on such efforts, we clarify the views of the business and industrial community regarding COP3 and measures to cope with global warming.
We in the Japanese business and industrial community consider the scientific knowledge presented in the 2nd Report of the Intergovernmental Panel on Climate Change to be the most authoritative judgment available at the present time, despite remaining uncertainties. We believe, therefore, that worldwide efforts based on this report should be carried out as swiftly as possible with regard to measures coping with global warming.
At the same time, it is also true that global warming is a problem whose effects will be in evidence 50 to 100 years later, and that a radical solution will be difficult without technological breakthroughs that decouple CO2 from the activities of mankind. Although it is obvious that we must expedite to the greatest extent possible all measures that are feasible and practicable over the short term, we must also take a medium-to-long-term perspective, and devise measures that have real effect by steadily advancing the development of relevant technologies.
We must also not forget that measures to cope with global warming entail an obligation to reduce greenhouse gases on a global scale. In other words, measures that merely shift the sources of emissions from the industrial economies to the developing nations are meaningless. As a way too of dealing with the tremendous growth in CO2 emissions projected hereafter for the developing nations, there is a need to go beyond separate measures taken by individual industrialized nations, and to engage in efforts that are paralleled by steps to enhance cooperation with developing nations and other advanced nations, including promotion of technology transfer relating to energy conservation, further enhancement ODA programs relating to the environment.
Considering that the problem of global warming is a long-term problem, and that efforts will be meaningless unless they lead to reduction on a global scale, the goals for reduction and target years must also be flexible and effective. Measures aimed at reduction must also be devised flexibly while weighing the effectiveness of structural change and various other measures.
From this perspective, the idea of Joint Implementation and The emissions trading scheme among governments and so on, while containing many points that need to be put into final form, deserve consideration as approaches that provide flexibility. In particular, we believe that the implementation of greenhouse gas reductions in the developing nations through Joint Implementation would be extremely effective from the standpoint of costs versus benefits in suppressing emissions on a global scale.
While Japanese industry has taken voluntary and vigorous steps to cope with the problem of global warming, emissions of CO2, the most representative of the greenhouse gases, are profoundly related to energy use, which forms the very foundation of everyday life and economic activity. Therefore, reducing those emissions will require that governments, citizens and industries each respond correctly to the problem, and that they each engage in independently initiated and cooperative efforts premised on the realization that their own actions hold the key to the problem's solution. In addition to urging the development and dissemination of new energy sources which do not emit CO2, there is a need to foster a consensus also on nuclear power generation, and for governments to parallel this with strong support and active promotion of the development and use of that technology. Finally, there is a need to expedite the development of social and economic infrastructure, such as transportation systems and the like.
The business and industrial community intends to work toward achieving its goals through the steady implementation of the Keidanren Voluntary Action Plan on the Environment , and through annual reviews of its progress. In particular, there is a need to recognize the importance of extending efforts beyond manufacturing processes alone to themes that transcend industry and sectoral lines, as the utilization of waste heat and other unused energy sources, and the recycling of wastes. From this perspective, industry will put the ISO 14001 system of certification and life cycle assessments to good use as effective tools.
As a way of dealing with the problem of global warming, the tendency has frequently been to stress hardware-oriented measures based on regulations that impel energy conservation in manufacturing processes and that require the development and propagation of energy-efficient products and technologies. However, as a result of the oil crises, Japanese industry has nearly doubled the efficiency of its energy use and has held CO2 emissions constant over the past 20 years by achieving the world's highest level of technology. If even steeper reductions were attempted by compelling industry to make uneconomical investments through either regulatory or economic instrument. Japanese companies would be forced to cut back production or shift it overseas. This would cause a severe impact on employment, and could even threaten the viability of the national economy.
We strongly desire that, in light of these facts, the government avoid blanket regulations and that instead it support and encourage voluntary efforts through a reassessment of existing regulations.
Emissions from the residential and commercial / transportation sectors have doubled over the past 20 years, with both sectors generating an approximately 16% increase in emissions during the period from 1990 to 1995. Measures to deal with the problem in these two sectors are urgently required, and it is important for each citizen to re-examine his or her activities in the context of daily life for areas where waste can be eliminated and lifestyles changed. Clearly, corporations and businesses will contribute too by fostering greater energy conservation in buildings and stores, greater efficiency in freight transportation and delivery, and so on. By developing products and services that emit minimal amounts of CO2, such as fuel-efficient automobiles, energy-conserving home electric appliances, insulated buildings and homes, etc., industry will also cooperate in reducing emissions in these two sectors. However, because these measures will entail higher costs, the expectation is that widespread acceptance will be hard to come by. While corporations must do their part to reduce costs, we strongly hope that consumers and users will take the initiative to select and purchase energy-conserving products and services in their roles as "green consumers." And, while giving priority to the purchase of energy-efficient products in its own procurement activity, the government too can play a major role in fostering improvements in the environment, such as those that would make access to information easier, so that consumers and users can exercise choice at the time of purchase.
One view holds that a carbon tax (or a carbon and energy tax) would be a feasible means of suppressing CO2. But measures to reduce CO2 must not only be valid theoretically; they must also be effective without prompting a negative impact on the economy upon implementation. The carbon tax has the following shortcomings, and should be cautiously evaluated.
First, although the carbon tax is designed to suppress consumption by raising prices on fossil fuels, the impact of higher prices on demand in the residential and commercial / transportation sectors is questionable. This can seen from the fact that even when the price of gasoline rose to around 170 yen per liter for a period of time after the oil shock, demand did not fall. And, even if an announcement impact was provoked that caused consumers to become aware of measures against global warming, we are skeptical that the impact would continue.
Secondly, in the event that a tax rate high enough to suppress CO2 were established, a country such as Japan would be severely affected because it has already made significant improvements in terms of fuel conversion to natural gas, nuclear power, etc. and in terms of the energy efficiency of its production processes. Japan would thus experience a shift of production overseas and a shrinkage of employment due to the resulting decline in international competitiveness. While causing a serious impact on the domestic economy, this development would mean, not just that emissions on a worldwide basis would not fall, but that it was very likely that they would rise. While some contend that this problem could be solved by adjustments to taxes at national borders, this solution would be totally unrealistic given the major technical and political obstacles involved. For a carbon tax would require as its major premise its simultaneous implementation by the entire world, including the developing nations, and an international harmonization of existing energy and other taxes.
Thirdly, there is the proposal to establish a carbon tax at a low rate and to apply the revenues to subsidies aimed at assisting efforts to suppress CO2. Given the likelihood that a low tax rate would have little impact in suppressing CO2, it is hard to deny the feeling that this is just another way of trying to create a source of revenues under the banner of the environment. If the nation intends to come to grips with the environmental problem, then the source of the money required for environmental measures should be adjustments and reductions in other expenditures.
As discussed above, the business and industrial community would like to see the following achieved in relation to COP3: (1) that the goals, policies and measures that are adopted be those backed up by realistic measures which are capable of being implemented; (2) that past achievements be fairly evaluated and that a balance be maintained so that countries which are already pursuing their own efforts not be penalized; (3) that the voluntary efforts by the industrial community be respected; and (4) that a new framework be ensured that allows the Kyoto agreement to be continually re-examined from a medium-to-long-term perspective.
In this regard, Europe under the special circumstances has announced high quantitative targets. Because of this, there are those in Japan as well who are declaring figures that are totally divorced from the realm of technical possibility and economic reality, and advocating them as if they were attainable. However, from the standpoint of Japan, which has already achieved a high degree of energy efficiency, even the target of bringing CO2 emissions down to the level of 1990 by the year 2010 is thought to require a degree of restraint in energy consumption equivalent to that following the oil shocks. The government should specify the kinds of effects that CO2 reduction will have on the future of the Japanese economy, including on employment, production activity, and so on, and spell out the effects that are likely to be felt in the everyday life of its citizens, including the impact on incomes, prices and so on. It should enter the negotiations after achieving a national consensus on an appropriate target.