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Tuesday, April 27, 2010

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Officials from various industry groups discuss efforts to cut greenhouse gas emissions during the March 23 symposium at Keidanren Kaikan in Tokyo. SATOKO KAWASAKI PHOTOS

GLOBAL WARMING SYMPOSIUM

Japan needs green tech investment

Cap-and-trade system may do little to lower emissions while hurting domestic innovation


Staff writer

The government should focus more on promoting innovations and utilizing energy-efficient technologies of Japanese companies in the nation's efforts to combat global warming, officials of industry groups said at a recent symposium in Tokyo.

News photo
Masahiro Sakane, chairman of Komatsu Ltd., delivers an opening address at the event.

The introduction of a European-style carbon emissions trading system — being discussed as one of the policy options for cutting greenhouse gas emissions — could only result in Japan buying emissions rights from overseas in large volumes and thereby losing the financial resources needed for green technology breakthroughs, they said.

Representatives from various industry groups spoke at the symposium organized March 23 by the Japan Business Federation (Nippon Keidanren) and the Keizai Koho Center to discuss the industrial sector's efforts to achieve a low-carbon economy.

In an opening address, Masahiro Sakane, chairman of Komatsu Ltd. and head of Nippon Keidanren's Committee on Environment and Safety, stressed that the long-term international goal of halving greenhouse gas emissions by 2050 poses an enormous challenge — especially given the continuing rise in the global population.

The global population, which exploded from 1.7 billion at the beginning of the 20th century to 6.8 billion 110 years later, is estimated to hit 9.2 billion in 2050, Sakane noted.

Today, the 6.8 billion people worldwide emit a total of around 30 billion tons of carbon dioxide in a year — or about 4.5 tons per person. The average person in Japan emits about 10 tons, compared with about 20 tons in the United States and about 4.5 tons in China, Sakane said. The 50 percent reduction goal by 2050 would mean that 9.2 billion people will emit only up to 15 billion tons in a year — or roughly 1.5 tons per person, he pointed out.

Such radical cuts would require technological breakthroughs and any system to tackle global warming needs to ensure that sufficient money can be spent on new technologies and innovations, he said.

Sakane stressed that Japan's industrial sectors have done their job in reducing greenhouse gas emissions since Japan signed the Kyoto Protocol in 1997. Carbon dioxide emissions by the industrial and energy sectors in 2008 were down by 10 percent from 1990 levels, even though production by these sectors increased by 4.1 percent, he said.

Still, the target set by the Democratic Party of Japan-led government for reducing Japan's emissions by 25 percent by 2020 cannot be achieved unless there is a nationwide movement, rather than focusing solely on business sector efforts, Sakane said.

He noted that whenever efforts by the industrial sectors are discussed, attention is focused on what happens at the production phase — or how much carbon dioxide is emitted in making the products. In many sectors, however, much of the emissions come after the products are handed over to the users, he said, adding that the whole life cycle of a product should be taken into account when its environmental impact is considered.

As for his company's mainstay products, construction machines, 92 percent of carbon dioxide emissions are created when fuel is burned by the users to drive the machines after shipment — with the remaining 8 percent emitted in the production of steel and rubber, the machines' main components, and in the manufacture of the machines, he pointed out.

The world's first hybrid engine construction machine released by Komatsu in 2008 is 25 percent more fuel efficient than the existing models and is thereby able to cut that 92 percent portion by 25 percent, Sakane said.

A carbon emissions trading system, however, will focus on a company's emissions in the production phase, and Komatsu could face a financial burden if its fuel-efficient products prove popular and its production increases, thereby boosting the company's carbon dioxide emissions beyond a cap imposed on the firm, he said. This could mean that winners in the competition for technological innovation are punished for their achievements, he argued, adding that a system must be created to ensure that companies would be able to spend more on those innovations.

Before Japan introduces an emissions trading system of its own, the government should also take a close look at the system launched in Europe, Sakane said, noting that many of the participants in the emissions trading market focus on monetary gains from the trading, rather than cuts to greenhouse gas emissions.

Hiroshi Watanabe, head of the Siting and Environment Department of The Federation of Electric Power Companies of Japan, also expressed concern that emissions credits could become the target of speculative trading under the so-called cap-and-trade system, thereby enhancing investment risks for corporations.

Watanabe also argued that imposing short-term caps on carbon emissions on power companies will be inconsistent with the utility industry's needs to make long-term plans to build new facilities. Additional burdens under such a system could also eat into their resources to make those investments or spend on new technologies, he said.

Kenji Yamada, chairman of the Global Environment Committee of the Japan Iron and Steel Federation, said the introduction of an emissions trading system could harm Japan's national interests because room for further cuts in emissions through domestic measures is small given the already high energy efficiency in the country.

That would mean that Japan would ultimately have to buy large volumes of emissions rights from overseas, which would result in an additional financial burden for the public and could damage the international competitiveness of its industries, Yamada said.

The system could encourage companies to shift production more to countries where energy efficiency is low and has greater room for improvement, but that would only result in higher emissions on a global scale, he said.

Yamada also noted that it remains unclear whether the emissions trading system introduced in Europe is actually contributing to cuts in carbon dioxide emissions, citing an estimate that a majority of the expanding trade in the market is not based on real demand.

For companies, efforts against global warming can become an efficient tool to differentiate their products and services from those of their rivals, Yamada said. That would mean maximizing the energy efficiency in the production process and supplying energy-efficient products necessary for building a low-carbon economy, and Japanese companies are in a good position to provide these processes and products to other countries as a viable solution to the climate change problem, he said.

In its climate change policy, the government should support those private-sector efforts and push for green technology breakthroughs as national projects, he added.

Next-generation vehicles including hybrids and electric cars are considered a key to reducing carbon dioxide emissions in the transport sector, which today accounts for nearly one-fifth of Japan's total emissions.

But Hirotsugu Maruyama, a senior member of the Japan Automobile Manufacturers Association's study group for measures on global warming, said development of such vehicles requires huge amounts of investments, manpower and time for research and development, as well as involvement of parts and materials suppliers.

Development of Toyota Motor Corp.'s Prius hybrid vehicle initially took more than a decade from basic research to its 1997 debut, and its second-generation and third-generation models each took six years before they hit the market in 2003 and 2009, he said.

Given that it normally takes five to six years before fully remodeled versions of a passenger car are marketed, the auto industry would have only one or two opportunities to debut new-generation cars before 2020 — the year by which Japan aims to cut its greenhouse gas emissions by 25 percent from the 1990 levels, Maruyama said.

Sales of hybrid cars — mostly Toyota's Prius and Honda Motor Co.'s Insight — shot up after the government introduced a tax cuts and subsidy program to boost sales of fuel-efficient vehicles in April 2009, and their share of the passenger car market rose to about 10 percent, he said.

However, it is not clear whether the introduction of more hybrid models will result in a further increase in the share of next-generation vehicles in the market, Maruyama said, adding that the question ultimately rests with consumer decisions.

In Japan, minivehicles account for about one-third of passenger car sales and since many users of these low-cost vehicles choose them for economic reasons, it would not be easy for the next-generation cars to replace minivehicles in such segments of the market, he noted.

Before the market share of next-generation vehicles can reach 50 percent, one estimate shows that as much as ¥12 trillion would be needed in government incentives such as tax measures and subsidies as well as support for infrastructure development to facilitate investment in technologies and make such vehicles affordable for consumers, Maruyama said. Without any government support, the market share of these vehicles could remain slightly above the current level as of 2020, he added.



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