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The Japanese Background

The Japanese Background. Ken Yamaguchi Mitsubishi Research Institute Inc. Sustainable Development Research Dept. SB18 Bonn, June, 2003. What is MRI?. A Japanese private think tank established in 1970, with a wide variety of activities

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The Japanese Background

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  1. The Japanese Background Ken Yamaguchi Mitsubishi Research Institute Inc. Sustainable Development Research Dept. SB18 Bonn, June, 2003 Mitsubishi Research Institute Inc. Sustainable Development Research Dept.

  2. What is MRI? • A Japanese private think tank established in 1970, with a wide variety of activities • Has 14 years’ experience on climate-related research, since 1988 Toronto conference • Has the largest research staff among the Japanese think tanks • Has worked closely with both the Japanese government and industry on this issue • Is involved in the internal discussions within Keidanren, and has wide network in Japanese business • Able to introduce suitable contacts to foreign counterparts Mitsubishi Research Institute Inc. Sustainable Development Research Dept.

  3. MRI’s recent climate-related activities • Activities to explore and forecast the “carbon-constrained world” • Carbon Offset Initiative • JEMS (Japan Emissions Management Simulation) • Cooperation with UNIDO • Strategic consulting on corporate climate policy Mitsubishi Research Institute Inc. Sustainable Development Research Dept.

  4. Overview of presentation • Kyoto Protocol and Japan • Domestic emissions trading • Post-2012 Mitsubishi Research Institute Inc. Sustainable Development Research Dept.

  5. Kyoto Protocol and Japan • Formulated the outline of measures in March, 2002 • National communication on May, 2002 • Ratified KP on June, 4, 2002 • JI/CDM Application finalized October, 2003 • Two projects approved (gov’t-sponsored energy project in Kazakhstan, private sector biofuel in Brazil) Mitsubishi Research Institute Inc. Sustainable Development Research Dept.

  6. KP and Japan • Japan’s emission profile • Has to decrease emissions by 6% • So far it has increased by about 8% • Without measures, may increase by another 10% • Decrease in 1997-98 mainly due to recession Data: Japanese government Mitsubishi Research Institute Inc. Sustainable Development Research Dept.

  7. Why Japan faces the toughest challenge(Even though every country says so…) GHG Emissions 2000 • Japan • Already energy-efficient • Already afforested (>60%) • Few non-CO2 measures (waste, pasture, aluminum) • Close links with CO2, energy trends Data from the governments Mitsubishi Research Institute Inc. Sustainable Development Research Dept.

  8. KP and Japan-domestic compliance • No additional measures until 2005 • If likely to miss target, then additional measures from 2005 • Carbon / energy tax? Emissions trading? • Scenario of compliance • Bring back to 1990 level through energy-related measures • 0.5% reduction through methane / N2O • 2.0% increase through use of HFC, PFC, SF6 • 3.9% reduction through sinks • 2.0% reduction through “revolutionary tech. / further efforts” • Remaining 1.6%…??? Mitsubishi Research Institute Inc. Sustainable Development Research Dept.

  9. Domestic emissions trading • Industry views • Against caps, but against tax • Why should industry bear the burden? • Industry the only sector where emissions are kept constant • Gaps in the expectation • Industry: stabilization • Government: 7% reduction • Recent change in organization may be important Data: Japanese government Other: Energy transformation, process, waste Mitsubishi Research Institute Inc. Sustainable Development Research Dept.

  10. Kyoto Mechanisms - status of discussion • “To be pursued due to its cost-effectiveness” • METI&MoE... co-leaders in climate policy • Creation of domestic registry to be operational by 2005 • http://www.registry.go.jp • Keep abreast of the work in progress in EU, a market four times as large Mitsubishi Research Institute Inc. Sustainable Development Research Dept.

  11. Kyoto Mechanisms - status of discussion • METI • “KM helpdesk” to facilitate private sector involvement: Received inquiries for 50CDM projects / 20 JI projects • Emphasis on JI / CDM... industry influence • Investigation of risk insurance scheme (via NEXI, etc.) • Affiliate organizations’ intentions to become the project implementation entity, a la Senter?... Plans to allocate 1.9bn JPY (c.16million USD) to fund a quarter of CDM/JI finance • Condition: no oversea transfers Mitsubishi Research Institute Inc. Sustainable Development Research Dept.

  12. Kyoto Mechanisms - status of discussion • MOFA • JBIC announces its intention to be a fund for KM • Potential conflict with its ODA activities • Potential conflict with METI • Much know-how in disbursing funds (e.g. hydropower) • MoE • Step 1 (2002-2004): Voluntary ET for experience-gaining • Step 2 (2005-2007): Build up on the experience • One-year commitment periods, bankable unlimited OTC trading of 6gases • Interest towards the UK ETS... due to its tax implications? Mitsubishi Research Institute Inc. Sustainable Development Research Dept.

  13. Possible ET schemes • Government does everything • If industry is deemed as meeting its target (not very likely after the nuclear problems) • 100Mt-CO2 X 10USD/t-CO2 = 0.1% of government budget, 10% of FY2003 climate policy budget • Government bids against credits gained by the industry • Industry bears targets Mitsubishi Research Institute Inc. Sustainable Development Research Dept.

  14. A Government perspective • Public-private funding • Pending issues • Turf issues • ODA concerns • Budget • Which organization shall be the Fund? Projects finance credits KM Fund Company A Company B Gov’t assistance risk insurance financial assistance Sectoral compliance (industry scheme) National Compliance Mitsubishi Research Institute Inc. Sustainable Development Research Dept.

  15. Outlook for CP1 • Japan stands to be the largest buyer of emissions reduction credits (perhaps on the order of 100Mt-CO2/yr). • Electricity industry has the largest carbon exposure (and interest in projects), but some other sectors are also candidates. • Role of government is probably significant • Active role in project development • Passive role as a purchaser, possibly with a bidding process • A possibility: Emissions trading for the industry / carbon-energy taxation for other sectors (after 2005) Mitsubishi Research Institute Inc. Sustainable Development Research Dept.

  16. Post-2012: ready to fight? • No official position yet • METI-affiliate committee’s report (2003/5) • Kyoto Protocol is unfair • Need to incorporate US and key developing countries • Emphasis on policies and measures • New framework should be bottom-up, should not be preoccupied with enforcement Mitsubishi Research Institute Inc. Sustainable Development Research Dept.

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