Audit on implementation of environmental policy

1. Audit on implementation of environmental policy The 6th Seminar on Environmental Auditing （October 2016） Board of Audit of Japan

2. Contents １．Environmental policies in Japan ２．Overview of environmental audits conducted by the Board ３．Audit case: The implementation status of the projects related to renewable energy ４．Experience and Challenges

3. 1. Environmental Policies in Japan • Basic Environment Act • Aims to comprehensively and systematically promote measures for environmental conservation • Basic environment plan • Stipulates the outline of integrated and long-term measures for environmental conservation • Sets down 9 priority areas

4. 1. Environmental Policies in Japan Breakdown of Environmental Conservation Expenditure (Initial Budget for FY 2016)

5. 1. Environmental Policies in Japan • Japan’s policies for renewable energy →　Government of Japan accelerates the introduction of renewable energy as far as possible for three years since 2013 followed by continuous active promotion. • Annual electricity generated in Japan (FY2015)

6. 2. Overview of environmental audits conducted by the Board • Audit divisions in charge of environmental audits • Environment and Regional Development Audit Division • Each audit division in charge of the projects implemented by the ministries except for the Ministry of Environment (MOE) • Divisions which conduct flexible and cross-cutting audits • Results of environmental audit (FY2012-2014)

7. 3. Audit case: Objectives, focuses, subjects, and method for audit The implementation status of the projects related to renewable energy (Special Report to the Diet and the Cabinet FY2014) • Audit objectives and focuses The Board conducted audits on the progress status of the renewable energy projects by the seven governmental organizations (Cabinet Office, MEXT, MAFF, METI, MLIT, MOE (6 ministries) and NEDO) The Board focused on the following points • whether renewable energy facilities installed by 7 governmental organizations and local governments were used in conformity with the purpose of such installation • whether national subsidies under the feed-in tariff system based on the Renewable Energy Act were properly handled by the 6 ministries • Whether local governments formulated appropriate plans for the introduction etc. of renewable energy

8. 3. Audit case: Objectives, focuses, subjects, and method for audit The subjects: Renewable energy power-generating facilities and renewable energy utilization facilities where 7 governmental organizations / local governments installed by using national subsidies during the period from FY2009 to 2013 Audit Methods: Field audit and review of documents submitted by the 7 governmental organizations and prefectures etc.

9. 3. Audit case: Audit results • Progress status of projects on renewable energy (FY2009 – FY2013) • Status of abolition and discontinuance of renewable energy facilities 41 facilities were discontinued as of the end of March 2014. mainly because; - investigations into the cause of breakdown were being carried out (16) - repairing or the procurement of parts was taking time (5)

10. 3. Audit case: Audit results c. Overlapping of renewable energy projects There are many similar nationally subsidized projects pertaining to renewable energy. 　≪Installation of photovoltaic facilities in school with subsidies≫ Local governments used national subsidies welcome the various projects by several ministries to widen their choice while some local governments point out the problem of difficulties in collecting information.

11. 3. Audit case: Audit results d. Handling of national subsidies for renewable energy power-generating facilities by 7 governmental organization following enforcement of the feed-in tariff system Feed-in tariff system (see next slide for detail) was introduced in July 2012, under which electric power suppliers are obliged to procure renewable energy electricity at purchase price during purchase period prescribed by the State (METI). In relation to 639 facilities installed in the subsidized projects, electricity was sold without any amount equivalent to the national subsidy deducted from the purchase price, or national subsidy was not returned. ⇒Need to check if the purpose for which the subsidy was provided is not deviated when the electricity generated in the subsidized renewable energy facilities is sold under feed-in tariff system

12. 3. Audit case: Audit results • This is a scheme to foster renewable energy in Japan with the help of all electricity customers. • Electric utilities will be obliged to purchase electricity generated from renewable energy sources such as solar PV and wind power at a fixed price (purchase price) for a fixed period (purchase period). This will promote the introduction of renewable energy. • Costs of purchased electricity generated from renewable energy shall be transferred to electricity customers all over Japan in the form of a nationwide equal surcharge. They shall pay the surcharge for renewable energy proportional to electricity usage Summary of the Feed-in Tariff system for Renewable Energy (Source: METI)

13. 3. Audit case: Audit results e. Local governments’ formulation of plans for the introduction of renewable energy Of 1659 organizations, 966 organizations (58.2% of total 1659) had formulated plans for promoting renewable energy introduction. - 500 organizations of 966 had only a qualitative target and no specific quantitative target. 693 organizations (41.7% of total 1659) had no specific plans. f. Problem with expansion of renewable energy introduction in regions Opinions related to subsidies and financial assistance raised such as; “Is it possible to integrate various state aid lists concerning renewable energy, or make block grants available for them?”

14. 3. Audit case: Observation The Board presented following opinions to the State and NEDO. • The ministries and agencies taking control of national subsidies for renewable energy should arbitrarily require a report from local governments on their renewable energy power-generating facilities and renewable energy utilization facilities whose use is suspended for long. • The State should consider integrating information on various national subsidies for renewable energy. • Where a renewable energy business enterprise is, on the basis of the feed-in tariff system, to sell electricity generated through the subsidized facilities, the ministries in charge of the subsidy should arbitrarily check that the purpose for which the subsidy was provided is not deviated. • The State should consider whether to advise local governments that have not formulated a plan for promoting renewable energy introduction to formulate one. • When a project relating to renewable energy is to be implemented, the State and NEDO should strive to collect information on problems with the expansion of renewable energy arising in the relevant area, and take measures against such problems if necessary.

15. 4. Experience and Challenges • Importance on inter-ministerial approaches for auditing to grasp and assess the full picture of specific area of an environmental policy. • Necessary to determine the most effective timing, subjects, perspectives etc. for the audits since environmental audits require a long-term perspective.

16. Question?

17. Thank you!