On March 4, 2020, the Munk School of Global Affairs hosted a panel presentation entitled “Japan: Leader in Climate Change?” on the topic of Japan’s contemporary climate change policy challenges and possible solutions. This event was sponsored by the Centre for the Study of Global Japan and the Consulate General of Japan in Toronto, and it was co-sponsored by the Munk School’s Environmental Governance Lab. The event was moderated by Professor Matthew Hoffman, a professor of political science at the University of Toronto, and the panellists were Professor Philip Y. Lipscy and Mari Yoshitaka.
Professor Lipscy is an Associate Professor at the University of Toronto and director for the Centre for Studies of Global Japan. His research focuses on international cooperation, international organizations, politics of energy and climate change, international relations of East Asia and the politics of financial crises. He has also published extensively on Japanese politics and foreign policy.
Mari Yoshitaka is the chief consultant on clean energy finance at Mitsubishi and Morgan Stanley Securities. She is a leading expert in environmental business and finance. At the international finance group at the World Bank Group, she worked on impact studies from environmental projects in developing nations. She now serves as a member of numerous policy divisions within the government of Japan and is a lecturer at Keio University.
The event began with Professor Phillip Lipscy’s presentation, which provided an overview of climate change politics in Japan and explained why Japan has struggled to reduce its emissions in recent years. He started by pointing out that Japan had been a leader in energy conservation from the 1970s through the 1990s. This was made evident when it hosted the Kyoto Protocol in 1992, where it tried to highlight its energy conservation efforts and significant advances in reducing emissions. However, he notes, within recent years, Japan’s performance in the sector of energy conservation has been dismal. For example, by 2008, Japan was the worst performer in absolute terms for average annual domestic emissions according to its Kyoto Protocol target.
The question Professor Lipscy poses is “How did Japan go from being an energy conservation leader prior to the 1990s to becoming a laggard in the field today?”
First, Professor Lipscy explained the reasons why Japan had performed well in the past. The short answer is that, prior to the 1990s, Japan’s energy policies purposely imposed high prices on various forms of energy (electricity, gas, and transportation), which discouraged Japan’s population from high energy consumption, allowing Japan to appear as a world leader in energy conservation.
He used Japan’s transportation and household energy consumption behaviours as examples.
Compared to other advanced, industrialized nations in the world, the average Japanese person travels less in total, and travels disproportionately more by train and less by automobile. In terms of household energy consumption, Japanese households generally do not use central heating systems but instead use space heaters, which consume significantly less energy. Professor Lipscy explained, “these kinds of behaviours were attributed to policy measures that made consuming energy very expensive in terms of electricity, natural gas, and automobile use.” He also noted that these energy consumption costs were also some of the world’s highest at the time.
But why were such policies implemented in the first place? The answer is politics.
The ruling government at the time, the Liberal Democratic Party (LDP), devised a tax-redistribution system wherein taxes accrued from energy consumption policies (like highway tolls systems, automobile use taxes, electricity taxes, etc.) would enter a complicated mechanism that would then “redistribute the money to political supporters and interest groups of the ruling LDP,” namely members of Japan’s infrastructure and construction sectors.
This practice is what Professor Lipscy calls “efficiency clientelism,” suggesting that although the policies led to energy efficiency, this was merely collateral; they were in fact primarily clientelist, as their purpose was to reward interest groups for supporting the ruling party. He said, “these were political bargains made among politicians who were interested in redistribution to supporters and bureaucrats who were interested in energy efficiency.”
As a result of these policies, the Japanese population as a whole opted to consume less energy so as to reduce personal costs, and Japan was able to hold the title as a world leader in energy conservation. However, as previously noted, Japan is no longer at the forefront of energy conservation—in fact, it is considered one of the poorest performers in this area today.
So, what led to this change in energy consumption behaviour? According to Professor Lipscy, the answer lies in the electoral and administrative reforms that Japan underwent in the 1990s.
In 1994, Japan experienced electoral reforms that changed Japan’s electoral system from one that enabled politicians to win elections with only a small section of the population to one where politicians need to win nearly 50 percent of the vote within their district. As well, Japan underwent administrative reforms between 1998 and 2001 that elevated the role of Japanese politicians over bureaucrats.
The combination of these two sets of reforms fundamentally changed the way energy policies were created in Japan. Under these circumstances, Professor Lipscy noted, “not only do you have politicians caring about appealing to the broader public, but they are much more empowered than they used to be.”
This changed the style of policy-making in Japan from sectoral to majoritarian. As a result, politicians have endeavoured to reduce or eliminate high energy consumption charges in order to appeal to more voters, who disliked the policies.
Professor Lipscy exemplified this trend by demonstrating how all of Japan’s successive governments since 1994 have each contributed to increasing Japan’s energy consumption through methods such as freezing increases on energy costs, reducing fees on electricity and gas, targeting the old tax-redistribution schemes for LDP supporters, and reducing feed-in tariff schemes that encouraged the adoption of renewable energy.
Japan’s current political arrangement is why the country has performed so poorly in terms of energy conservation. However, Professor Lipscy believes there is hope yet for Japan to improve in this area.
To end his presentation, he suggested that although Japan’s electoral reform led to the current problem, it can also be used to rectify it: “Administrative reforms have given politicians greater authority. If the prime minister says climate change is a number one priority, the Japanese government is now organized in such a way that big movements are possible.” He therefore also suggested that public opinion will play a crucial role in influencing politician’s policy decisions: raising general awareness of Japan’s recent poor performance could contribute to increasing general desire for environmentally friendly policies.
Professor Lipscy’s presentation was followed by Mari Yoshitaka’s presentation, which focused on efforts from Japan’s industry sector and the Japanese government to improve the nation’s performance in energy conservation within recent years.
Mari Yoshitaka acknowledged that the Japanese government has been slow to implement policies to advance the nation’s efforts to conserve energy, but she stated that this has not stopped Japan’s industry sector from taking initiative in this area on its own.
“Japanese industry has realized that it must do something to address the issue of climate change even though the government itself has not taken great steps towards new policies,” she said.
One example of Japanese industry initiatives in energy conservation was related to Japanese membership in ‘RE100’ (Renewable Energy 100), a global initiative where member companies aim to procure 100 percent renewable energy for their business operations.
She stated that Japan currently has the third-largest number of members; however, this is due to companies going to the government on their own volition to request membership in the group—not the other way around. According to Ms. Yoshitaka, the companies believed that “because the global market is changing, if they cannot be involved in that kind of trend, they may be kicked out of the global supply chain. This is their main concern and why they want to take part in the initiative.”
These concerns have also pushed companies within Japan’s industry sector to independently implement their own policies related to climate change and energy efficiency. She proceeded to give examples of companies that have already begun to implement such policies.
Hitachi Ltd., an electrical equipment company, established long-term environmental targets to reduce the CO2 emissions of its entire value chain by 50 percent by 2030 and 80 percent by 2050, compared to 2010. The company has also introduced its own ‘Internal Carbon Pricing’ framework, which incorporates climate-related risks (like carbon taxes and trading costs) into its equipment investment decisions. This has made investing in low-carbon equipment a higher priority for the company.
The CEO of Idemitsu, an oil company, is coping with external pressure from international investors regarding climate change by proposing to ensure that half of its business will be involved in the non-oil industry by 2030. Lastly, the leaders of Toyota have stated that the company intends to decarbonize its entire supply chain by 2050.
“So, as we can see,” said Ms. Yoshitaka, “even though the government has had a hard time introducing environmentally-friendly policies like internal carbon pricing, the Japanese industry [sector] has had to introduce it itself to convince overseas investors that all the risks involved in climate change that can inform business decisions have been evaluated.”
Ms. Yoshitaka also informed the audience of the various climate change initiatives that the Japanese government has openly endorsed. These include Japan’s emissions reduction initiative, which was submitted to the UN in 2013 and set a target of 26% reduction by 2030, with a long-term target of 80% reductions in greenhouse gas emissions by 2050. Japan’s government has also prepared a medium- and long-term action plan to significantly reduce CO2 emissions through innovation and global cooperation. This action plan involves “decarbonizing power and heat with carbon-free hydrogen, “contributing to global reduction in emissions through international private sector-led initiatives such as a ‘global deployment of low-carbon products and services,’” and “network reconstruction focused on the introduction of large-scale renewable energy on the supply side.”
Another international climate change initiative in which the Japanese government has recently become highly engaged is the ‘Task Force on Climate-related Financial Disclosures’ (TCFD). Established by the Financial Stability Board (FSB) in 2015 in New York, it’s purpose is to “develop voluntary, consistent climate-related financial risk disclosures for companies to use when providing information to investors, lenders, insurers and other stakeholders.”[1] Under the TCFD, member companies have to disclose all climate-related information in terms of risks and opportunities in the future as related to their impacts on climate change and the financial industry.
Ms. Yoshitaka stated that prior to the 2019 G20 TCFD Osaka Summit, Japan was below the UK and the US in terms of member entities within the TCFD; however, following the Summit, it superseded both the US and UK, and now has the highest number of member entities in the TCFD in the world.
“So, why did the Japanese government encourage Japanese industries to support the TCFD?” she asked. “Because Japan is aware that it is widely criticized for lagging in active involvement in climate change issues, but [it knows] the industry itself is doing well in this sector, as they have already been actively implementing climate change measurements themselves. Japan wanted to showcase [these efforts] by asking them to support the TCFD.”
In summary, Mari Yoshitaka’s presentation showed that the pressures for Japan to become more proactive in domestic and global climate change efforts flow both ways: between Japan’s industry sector, which wants to stay competitive within the global economy, and the Japanese government itself, which feels international pressure to prove its commitment to climate change initiatives.
Mari Yoshitaka also ended her presentation on an optimistic note, stating that “there are so many available technologies to combat climate change risks in Japan, so I hope that the Japanese industry [sector] can contribute to this type of risk mitigation in the world.”
Paulina Chan is the Event Reporter for Synergy Journal – East Asia section.
References
Chartered Professional Accountants Canada, “Task force on climate-related financial disclosures (TCFD): Overview”, 2019. Accessed April 2nd, 2020. https://www.cpacanada.ca/en/business-and-accounting-resources/financial-and-non-financial-reporting/mdanda-and-other-financial-reporting/publications/tcfd-overview
[1] Chartered Professional Accountants Canada, “Task force on climate-related financial disclosures (TCFD): Overview”, 2019
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