As other countries including the US, China, UK, Germany and Mexico lead on climate action, the lack of effort from the world’s third largest economy and fifth largest emitter has left Japan isolated in a debate that is increasingly central to trade, investment, security and foreign policy, write Taylor Dimsale, Liz Gallagher and Camilla Born in a new report from the London-based consultancy E3G. The authors explain the reasons behind Japan’s increasing disengagement from climate policy, but note that it is is not too late yet for Japan to change course. “A Japan that is more pro-active in its climate diplomacy could tip the scales in favour of an international agreement while ensuring Japan’s industries will be competitive in the green markets in the future.” We publish the report’s highlights here.

With just months remaining before the next international climate agreement in Paris, countries have begun stepping forward with their pledges for action. The contributions that have been announced by the world’s largest economies illustrate the emerging consensus betting on a low carbon future. They also show a growing understanding of the reinforcing self-destructive dynamic whereby fossil fuelled growth eats the climate, and climate change then further eats into growth. The latest announcements by the EU, US, and China are more ambitious than previous commitments, and taken together they will significantly lower the global GHG emissions trajectory and reduce the projected level of warming. Achieving these targets will bring other benefits, creating 470,000 additional jobs in the US, saving the EU US$33bn in avoided fossil fuel imports annually, and reducing China’s reliance on domestically produced coal by 21%.

The emission reduction target Japan is considering is reported to be in the range of 24-26% below either 2005 or 2013 levels by 2030. This target is less ambitious than the pledges from either the US or the EU

As other OECD member countries including the US, UK, Germany and Mexico have made climate action a pillar of their economic policy and diplomacy, the lack of effort from the world’s third largest economy and fifth largest emitter means that Japan increasingly finds itself isolated. The ambitious greenhouse gas reduction target Japan announced in 2010 has been severely weakened. The emission reduction target Japan is considering is reported to be in the range of 24-26% below either 2005 or 2013 levels by 2030. This target is less ambitious than the pledges from either the US or the EU, and is also not consistent with Japan’s own long term objective to reduce emissions by 80% by 2050. Japan’s population will decrease by 30m by 2050 which should make greater emissions reductions easily achievable. While the US and EU targets could be strengthened, they are both broadly consistent with their long term goals.

(…)

Political context

Japan played an integral role as host of the world’s first international climate change agreement in Kyoto in 1997. And despite the US deciding not to ratify the agreement in 2001 under President Bush, Japan ultimately agreed to a 6% emission reduction target under the Kyoto Protocol which officially came into force in 2005.

Japan’s membership in the Kyoto Protocol was strongly opposed by the country’s most influential business and industry associations, and at the climate conference in Cancun in 2010 Japan decided not to sign up to a second commitment period. The Ministry of Foreign Affairs reasoned that it was unfair and ineffective as many of the world’s major emitters were not subject to legally binding commitments. The decision took many by surprise and set the tone for what became a difficult, but eventually successful, negotiating session.

Prior to its decision not to sign up to the second commitment period of Kyoto, in 2009 Japan announced a target to reduce its emissions by 25% below 1990 levels by 2020 – a serious pledge that would have required effort above and beyond existing policies. Importantly, the target was based in part on a government energy plan to increase the share of nuclear energy from roughly 30% to around 50% by 2030.

The meltdown of the Fukushima Daiichi reactors following an earthquake and tsunami in March 2011 was the second largest nuclear disaster in history and led to Japan losing almost one-third of its electricity supply virtually overnight. This event had a major impact on Japanese energy policy which persists today. At the same time, nuclear power provided around one-third of electricity supply which in turn accounted for around one-third of Japan’s emissions. So in terms of emissions, nuclear was important but, at 2010 levels, it delivered only around 10% of Japan’s total emissions abatement.

The Keidanren (Japan Business Federation) lobbied strongly against the DPJ’s target of a 25% reduction below 1990 levels by 2020, claiming it would be impossible to meet and would threaten economic recovery

In 2012 Shinzo Abe was re-elected as the seventh Prime Minister in six years, and the Liberal Democratic Party (LDP) took over power from the Democratic Party of Japan (DPJ). Abe won stressing the need to restore the country’s economic growth, strengthen its international diplomacy, and counter growing national security threats by revising parts of the country’s war-renouncing constitution.

Since Abe’s return to power, most of the Government’s resources have been devoted to Abe’s economic reform program. Often called “Abenomics”, this has aimed at boosting domestic demand and jump-starting Japan’s faltering economic growth. Climate change has fallen off the political agenda, and in 2013 the government significantly weakened its emissions reduction commitment to allow a 3% increase in emissions above 1990 levels. It has been reported that Japan will announce a 2030 target ahead of the G7 Summit in June, of around 25% below 2005 or 2013 levels by 2030 – roughly equivalent to an 18% decrease below 1990 levels.

The Keidanren (Japan Business Federation) lobbied strongly against the DPJ’s target of a 25% reduction below 1990 levels by 2020, claiming it would be impossible to meet and would threaten economic recovery. But the 25% target was based on the most ambitious of three possible pathways put forward by the Ministry of Economy, Trade and Industry (METI) and, though ambitious, was realistic. In general, industry and business associations have long enjoyed close ties to the LDP and strong influence with METI. Preferential treatment for business combined with the instability caused by frequent government turnover has contributed to the lack of longer term strategic planning that would favor a more ambitious low carbon agenda.

Japan’s turn to coal

The energy shortfall caused by the Fukushima disaster has been addressed primarily through an increase in fossil fuel imports. Japan has always had very low energy self-sufficiency, but is now the world’s largest liquefied natural gas importer, second largest coal importer, and third largest net importer of crude oil and oil products. It is reliant on supply from areas of growing instability; almost all of its crude oil and over a quarter of its gas come from the Middle East. Japan’s GHG emissions rose to the second-highest level on record in FY2013, while its CO2 emissions intensity has increased by 17% from 1990 levels.

Japan currently has over forty coal plants in the development pipeline which would account for half of what the country could emit under the government’s target emissions budget in 2050. These are likely to become stranded assets that will struggle to attract private investment without government guarantees and subsidies – which Japan, as a member of the G20, has agreed to phase out.

While the use of solar and other clean energy resources also initially increased thanks to the availability of feed-in tariffs, this trend has stalled. Japan’s powerful utilities, which have a monopoly on the market, have blocked renewables’ access to the grid, claiming this would present a risk to grid stability. METI claims renewable energy is too costly and has repeatedly cut the incentives in place for solar power, most recently by 16% in March 2015. The government had approved 71 GW of renewable energy through November of 2014, with solar energy accounting for more than 90% of the total. But only 14% of those projects are actually connected to the grid. Instead, the government’s Strategic Energy Plan from 2014 prioritises coal and nuclear as important sources of base-load power and energy security.

In Japan electricity market reform is leading to further expansion of coal generation. New entrants are finding coal easiest and cheapest to build and a lack of low carbon generation policy support could push coal generation levels dangerously high

Japan’s turn to coal is also driven by its export policy strategy and objectives. Several of the world’s largest manufacturers of coal technology including Toshiba, JGC, Mitsubishi Heavy Industries (MHI), and Hitachi are Japanese companies. The government has provided generous support to the coal technology manufacturing industry through export credits and other development finance via the Japan Bank for International Cooperation (JBIC) and Nippon Export and Investment Insurance (NEXI).

Between 2007 and 2013, Japan provided US$16.8bn in financing for overseas coal projects – more than double that of any other OECD country. Some of the funds Japan has designated for climate finance have gone to coal projects. Despite claims that this benefits the environment by offsetting the use of inefficient coal, the vast majority of Japanese financing has gone to coal plants that are less efficient than the global average. Between 2003 and 2015, over 40% of coal plants financed by the JBIC used subcritical combustion technology, with 52% using supercritical and only 6% using ultra-supercritical. As recently as March 2015 Japan has proposed continuation of funding for coal plants by Export Credit Agencies, including incentives for slightly higher-efficiency plants. Meanwhile, the share of subcritical plants in Chinese capacity exports has been falling rapidly.

As Japan’s international support for coal has increased, the US, UK, France, Netherlands, Sweden, Germany and other OECD countries have committed to stop financing coal plants, except under very special circumstances. And despite its growing power needs, China has acknowledged that there is a need to move beyond the use of coal. China’s latest Energy Development Strategy Action Plan includes limits on the growth of coal consumption, which fell in 2014. China has also implemented policies to ensure that most of new coal build uses best available technology.

In Japan however, electricity market reform is leading to further expansion of coal generation domestically. New entrants to the market are finding coal easiest and cheapest to build and a lack of low carbon generation policy support could push coal generation levels dangerously high. Japan’s Environmental Impact Assessment process for small coal (below 112MW) is less onerous than for wind farms.

(…)

Japan’s leadership in cleantech innovation undermined

As one of the world’s largest international investors and exporters Japan has a great deal to gain from growth in global low carbon markets, which now stands at a value of US$4-5 trillion. Along with the US and Germany, Japan is one of the leaders in innovation of energy technologies, including wind, solar photovoltaic (PV), concentrated solar power (CSP), and biomass. Japan holds more patents in wind and solar PV than any country outside of the US. Solar power is set to become profitable in Japan before the end of this year, at which point it will be commercially viable in every G7 country.

China has pledged to increase the share of non-fossil energy in its primary energy supply to about 20% by 2030. That would require an additional 800-1,000 gigawatts of zero emissions generation capacity, roughly the total capacity of the current US electricity system

The policies and targets being put in place in both developed and developing countries will significantly alter the shape of Japan’s major export markets. Europe’s climate and energy policies over the past two decades for example have helped the EU reduce its energy intensity by 28% since 1990. Over the same period Japan’s energy intensity has flat-lined, and several European countries now consume more energy per dollar of GDP than Japan. The EU has a rising population and lower per capita emissions than Japan, but has committed to deeper and faster emission reductions. It is also worth noting that there are increasing trade tensions over low carbon markets and pressures will grow for countries to have comparable commitments to carbon reduction.

Outside Europe, China is also in the process of restructuring its economy to make future growth more sustainable. Since 2012 it has been the world’s largest investor in clean energy by a wide margin and is on track to meet its pledge to reduce the carbon intensity of its economy by 40-45% by 2020. As part of its agreement with the US last year, China has pledged to increase the share of non-fossil energy in its total primary energy supply to about 20% by 2030. That would require an additional 800-1,000 gigawatts of zero emissions generation capacity, roughly the total capacity of the current US electricity system. If it can improve on this target modestly, it could become the largest renewable energy market in the world. China is planning to implement a national carbon market by 2016, and has also placed a cap on coal consumption, which fell in 2014.

(…)

Conclusion

Japan faces critical decisions about its energy and economic future that will also have implications for its role in the world and how it is perceived by its international partners. Upon returning to office in 2012, Prime Minister Abe promised a proactive approach and new era of Japanese diplomacy. But abandoning its responsibilities on climate change as others step forward is likely to leave Japan isolated, and will create challenges for Japanese diplomats, not just in the United Nations Framework Convention on Climate Change (UNFCCC) but in other multilateral fora as well.

Japan can avoid this outcome. It has experience as a leader in climate diplomacy via its role in driving the international negotiations towards agreement of the Kyoto Protocol. And according to the Japan Center for Economic Research a 30% reduction below 2005 levels by 2030 is achievable. The Climate Action Network of Japan has recommended an even stronger reduction target of 40-50% compared with 1990 levels by 2030.

Japan has the advantage of decades of leadership in technological innovation and its strength in the fields of engineering and scientific research

Abe’s popularity could be used to reduce the outsized influence of incumbent industries and focus on reforms that will benefit all Japanese citizens, aligning Japan’s interests with those of its international peers. While transitioning to a low carbon economy does not come without its challenges, Japan has the advantage of decades of leadership in technological innovation and its strength in the fields of engineering and scientific research.

A Japan that is more proactive in its climate diplomacy could tip the scales in favor of an international agreement that successfully reduces climate risk, and help to ensure Japan’s industries are competitive in the green markets of the future.

Editor’s Note

The above excerpts are taken from the report, “Rising Sun, Sinking Influence? Japan’s Self-Marginalisation from Global Climate Politics”, written by Taylor Dimsdale, Liz Gallagher and Camilla Born, published on 1 May 2015 by E3G. The full annotated report can be viewed here.