Mid- and Long-Term Roadmap for

Global Warning Measures in Japan

Ryuzo Sugimoto

Deputy Director
Climate Change Policy Division,
Global Environment Bureau Ministry of the Environment,
Government of Japan

Email: Ryuzo_sugimoto@env.go.jp
 Needs of Mid- and Long-Term Roadmap
• Japan’s objective for reducing greenhouse gases:
a 25% reduction by 2020 and an 80% reduction by 2050. From the
level in 1990,
• The Bill for the Basic Act on Global Warming Measures
• In order to develop consensus on this target,,,

Needs a rough draft regarding a path toward realizing a low-

carbon society (what types of measures and policies will be
implemented and when).

Needs the economic impact of GHG reduction by the

economic model
1
Scope, division, and viewpoints of the Mid- and Long-
Term roadmap

Manufacturing Daily life

 Realizing comfortable low-
 Realizing high added value
manufacturing that leads the carbon living, including
world in reducing carbon. changes to lifestyles and work
 Greatly contributing to the styles.
reduction of emissions
worldwide.

 Realizing ideal low-carbon-type cities

where people can live comfortably,
making use of the characteristics of
each region.
 Reducing carbon, including sinks in
rural areas.
Local development
2
 Roadmap toward 2050

Daily Life / Community Development

Energy Conversion ±0%
compared to
Manufacturing Home Industrial Transport Non-energy 1990
1990
482 127 164 217 68 202

2005 456 174 237 257 79 155

2007 468 180 242 246 83 152

2008
(preliminary
estimates) 420 172 232 236 78 148

2020
(variable 374~ 90~ 133~ 153~ 42~ 154~
case*1) (▲11%)*3 (▲48%) (▲43%) (▲35%) (▲46%) (+4%)

-25%
2020
(static case*2) 385~ 81~ 120~ 158~ 41~ 158~
（▲8%）※3 (▲53%) (▲48%) (▲33%) (▲47%) (+7%)

(Possibly includes international contributions and sinks)

2050 252 -80%

*1: An “All-sector Variable Macro-frame Case” premised that a price on carbon has been set .
*2: An “Static Industrial Macro-frame Case” where the operation levels in the industrial sector are static.
*3: Emission reduction levels compared to 2008. 3
 Changes in investment amounts when changing the macro
macro--
frames
• The total investment amount in order to realize a 25% is approximately 60 to 100 trillion yen in the
period from 2011 through 2020.
• By changing the macro-frame, the additional investment amount is lowered by about 10 trillion yen.
Additional investment amount

120
(2011 – 2020, trillion yen)

100
100 92
85
80 74
66
59
60

40

20
0
15% reduction 20% reduction 25% reduction
Case of changing macro- Case of fixed macro-
frames for all sectors frames for industry

Infrastructure development expenses and so forth an not included in this investment.

4
Relationship between low-carbon investment amount and energy
low-carbon
reduction expense
• As for the investment amount for global warming, half of the overall investment amount will be
collected by 2020 and an amount equal to the investment amount will be collected by 2030 based
on energy expenses that can be saved through technologies introduced.

<Low-carbon investment amount and energy reduction expense>

150
Energy saving
investment through
2020
100 Additional
Volume of In the case of device with 10 year lifespan
investment reduction from
50 100 (’11 – ’20 total) energy saving
85
66 technologies
0 Energy reduction

2025

2030
2010

2015

2020
- 41 - 45 - 51 expense
-50 (’11 – ’20 total)
-40 -45 Energy reduction Energy reduction
-53
Energy reduction expense from energy expense from energy
-100
saving investment saving investment
expense
= approx. 51 trillion = approx. 53 trillion
-150 (’21 – ’30 total) yen yen
15% reduction 20% reduction 25% reduction
(25% reduction) (25% reduction)

5
 Suggestion from applied general equilibrium model
““If
If a gear change is done early, the economy will follow along.”
along.”

<Movement of GDP
<Movement of employment
(comparison with course case)>
(comparison with course case)>
25% reduction (innovation acceleration case)
1.00 0.50
15% reduction (innovation acceleration case)
0.80 0.40
）％ 0.30

Decoupling rate (%)

0.60
rate％）
(%)

0.40 （率 0.20
乖離率（

離 0.10
0.20 GDP boost
Decoupling

0.00 乖 0.00 Employment

boost
-0.20 -0.10
-0.40 15% reduction (ordinary case)
-0.20
25% reduction (ordinary case)

2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
-0.60
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

▼ １５％なりゆき ▼ １５％促進
course acceleration

▼ １５％なり ゆき ▼ １５％促進 ▼ ２５％なりゆき ▼ ２５％促進

course acceleration
course acceleration

▼ ２５％なり ゆき
course ▼ ２５％促進
acceleration

Quoted from estimate results by Professor Kanemi Ban of Osaka 6University 6

Suggestion from inter -industry relations table analysis
inter-industry
““The
The industry spillover effect of green investment is more than two-fold,
two-fold, and
the employment spillover effect is significant.
significant.””
The creation of green markets results in the generation of demand of 45 trillion yen and employment
of 1.25 million people as of 2020. Based on an inter-industry relations table analysis, the production
spillover effect on the incremental investment necessary for a 25% reduction is 118 trillion yen and
the employment spillover effect is 3.45 million jobs. The positive effect on the materials, machinery,
commerce, and service industries is significant.

Building of low-carbon society

As of 2020,
Benefits

Vitalization of Abundant living

Strengthening of 45 trillion yen in demand
regions spaces
Energy security international
competitiveness •• and employment for 1.25
million people are created
Creation of various benefits
•
Technology

Super- Next- High- Photovoltaic Wind-power

insulated
houses
generation
automobiles
efficiency
water heaters
generation generation ••• Demand for global warming
measures will have various
Spillover effect on various industries spillover effects on industry,
Materials industry Machine industry Services and as of 2020 there will be:
(steel chemicals, Commerce ••• (Total)
Individual industries

(electrical machines, (education, research,

glass, etc.) transport machinery, etc.)
etc.)
•a market scale of 118
72 trillion yen 186 trillion yen 107 trillion yen 110 trillion yen • • • 592 trillion yen
trillion yen
•an employment scale of
200,000 people 400,000 people 1.38 million people740,000 people • • • 3.45 million people
3.45 million jobs
* The monetary amounts are totals for 2011 through 2020 and the numbers of employees are the annual averages.

Quoted from estimated results by Professor Kiyoshi Fujikawa of Nagoya University and Mitsuru Shimoda of the Applied Research Institute
7 7
 MAIN ISSUE ON ECONOMIC ANALYSIS FOR
CLIMATE POLICY IN JAPAN

 Total Cost of 25% reduction

 The effect on GDP

 The effect on Job

 The effect on family income

Development of the possibility of the new industries

8 8
REFERENCE
the forward looking type model by Professor Ban of
Osaka University

9
BASIC PROPERTIES OF FORWARD LOOKING
TYPE MODEL
1. Forward Looking(Intertemporal Optimization )
 Households are supported to determine their saving
and investment in order to maximize their discounted
present value of utility over 2005 to 2020 with CO2
emission constraints.
 Investment would be expended only if investment cost
is less than its return.

2. Technology of production and preference of consumption

are explicitly involved in the model
 Changes in technology and preference take an
important role in the model.
 Adaptation of new technology such as renewable
energy are explicitly evaluated.
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BASELINE SCENARIO

items assumption
CO2 emissions, fuel combustion, industrial process and waste included
Long term perspective for CO2 emissions in 2020 +4% increase from 1990

Frame of macro economy and energy

Increase in labor force Δ0.3% per annual
Labor argument technological progress 1.5% per annual
Equilibrium growth rate 1.2% per annual
Improvement of total primary energy per GDP 1.1% per annual
Decarbonization per total primary energy 0.5% per annual
Real interest rate (＝discount rate) 5% per annual
Capital depreciation rate 8% per annual

Renewable energy in 2020

Renewable energy 336 billion kWh
Recline in cost of equipments and installation 4% per annual
Increase in spaces for renewable energy 15% per annual
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ALTERATIVE SCENARIO

25% reduction from

items
1990
No innovation scenario after 2011

Renewable energy 55.7 billion kWh

Innovation scenario after 2011

Renewable energy 134.7 billion kWh

Feed in tariff for renewable energy 50％ of cost

Decline in cost of equipments and installation cost 8% per annual

Increase in spaces for renewable energy 32.5% per annual

Increase in preference to low carbon goods and services

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WHY DOSE GDP INCREASE?

 Households reduce consumption expenditures in order to increase

investment expenditures, because they think that investment for
low carbon society is profitable for them.

Consumption demand is just replaced by investment demand.
As a result, decline in consumption dose not mean reduction
in aggregate demand in total.

Increase investment results in accumulation of capital stock,
which expands the economy.
Capital stock increases by 31 trillion yen by 2020.

Relatively higher target is appropriate for encouraging R&D
development and technological innovation.

As a result, GDP may increases even though the target of
CO2 reduction is high.

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REFERENCE II
Roadmap

14
Targets for Mid- and Long-Term measures and policies

Display of roadmap

1990 2010 2020 2050

▲25% ▲80%

★ Toward mid-term objective (2020)

Maximum utilization of current technologies for measures

 Mass spreading of existing technologies

 Thoroughly making emissions volumes known
 Building a mechanism in which people and companies cooperating with reducing
emissions are rewarded

★ Toward long-term objective (2050)

Changing mechanisms and infrastructure of society starting from now

 Building a mechanism to promote continuous research and development and commercialization of

revolutionary technologies
 Promoting hardware and infrastructure development to realize a low-carbon society
 Vitalization of human resource development, environmental education, and environmental finance
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Case setting related to macro-frames

The macro-frames (indicators showing the condition of society and the economy) will be changed
according to measures. In addition to the preliminary calculation of macro-frames given initially,
analysis and evaluation regarding emissions volumes and reduction volumes will be carried out
based on the macro-frames, which have been changed according to carbon prices.

Macro-frames are
expected to change
according to carbon
prices.
Macro-frame
Case of changing macro-
Japan economy model Japan technology model frames for all sectors
Consistent activities and prices are calculated in Technologies are chosen according to the
terms of the macro economy according to the reduction targets.
reduction targets. Case of fixed macro-
frames for industry
Energy efficiency Common fixed macro-
additional investment amount frames are expected
regarding all reduction
targets.

Macro-frame
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