# Japan's Policy Beyond 2013 Under Scrutiny as the World Moves Toward a New Global Warming Regime

HATA Shigenori
Faculty Fellow, RIETI

## COP17 agreement on process for new framework

The 17th Conference of the Parties (COP17) to the United Nations Framework Convention on Climate Change (UNFCCC), held in Durban, South Africa, at the end of last year, came to an end having set a second commitment period for the Kyoto Protocol and reached agreement on a process for formulating a future framework in which all countries—including the United States, China, and India—would participate, and also established a Green Climate Fund.

Earlier predictions had it unlikely that major countries would overcome their conflicting interests and agree on a mandate for a future framework, so the outcome can be seen as better than expected.

Let us look at each of these achievements. First, the European Union (EU) led the way in bringing about a consensus on setting a second commitment period for the Kyoto Protocol. This second commitment period is due to start in 2013, and the final decision as to whether it will end in 2017 or 2020 is to be made before the start of COP18 at the end of this year. At COP16, held in Cancun, Mexico, in 2010, Japan announced that it would not be participating in this second commitment period, declaring that the lack of participation from major emitters such as the United States and China precludes a global reduction in emissions, and it made official its stance on non-participation at the recent COP17.

With regard to a future framework, it was agreed upon to organize an Ad Hoc Working Group on the Durban Platform for Enhanced Action that would conclude as soon as possible, by the end of 2015 at the latest, so that the new framework could be instituted in 2020 and steps taken toward implementation.

A variety of other decisions were also made to put the Cancun Accord into effect, including the establishment of a Green Climate Fund and the basic operational guidelines for the Climate Technology Centre and Network (CTCN). It is important that steady efforts be made to implement these decisions.

With COP17, Japan finalized its non-participation in the second commitment period, leaving it free between 2013 and 2020, when the new framework is likely to begin, of any legally-binding reduction obligations similar to those of the Kyoto Protocol's first commitment period.

Nevertheless, just because Japan is not obligated to make reductions does not mean that it should sit by idly during this period; instead, it must work toward genuine global emissions reductions and contribute to this cause in tangible ways.

Japan must do so because its contributions during this period will help it secure an advantageous position in UN negotiations on the new framework. These UN talks will fundamentally manifest the clash between developing and developed countries, but at COP17, the Maldives and other developing countries called upon large-emitter developing countries such as China and India to assume their fair share of responsibility. Opinion has begun to split among the developing countries, a group that heretofore has appeared monolithic, and it seems possible that support targeted at particular developing countries could broaden support for Japan's stance in the UN negotiations.

## Global emission reductions through Japan's low-carbon technology

What kinds of contributions should Japan make? Developing countries require technology, capital, and know-how, and given the expectations of many countries toward Japan's low-carbon technology in particular, consideration should be given to utilizing this superb technology to help reduce emissions.

The International Energy Agency (IEA) forecasts that world energy demand will reach about 1.4 times its 2007 level by 2030. 93% of that increase will come from developing countries, with China accounting for 39% and India for 15%. Developing countries' share of energy demand is consequently expected to climb from 47% in 2007 to 56% in 2020 and then to 59% in 2030. It is no exaggeration to say that the key to realizing global emissions reductions lies in reducing emissions in developing countries.

Emissions reduction costs in developing countries are considerably lower than in Japan, and major reductions in emissions are therefore possible through funding and technology transfer. An estimate by the Research Institute of Innovative Technology for the Earth (RITE) puts Japan's marginal abatement cost at $476 per ton of CO2 (in reducing CO2 emissions by 25% from 1990 levels) and China's at$0; in other words, China's level is such that it can be offset by energy-saving effects. The United States ($60) and the EU ($48) also have considerably lower costs than Japan. Japan has successfully made it through two oil crises by undertaking energy conservation efforts, but conversely this has left it with extremely little leeway for further reductions.

## Clean Development Mechanism (CDM) issues

Clean Development Mechanism (CDM), a technology transfer scheme, is being employed for the sake of emissions reductions. The UNFCCC Secretariat reports that 3,802 CDM projects have been registered and about 846.75 million tons of Certified Emission Reductions (CER) issued as of January 20, 2012, making this an important scheme for transferring technology to developing countries.

As the regime has taken root, however, certain issues pertaining to the CDM have surfaced, with three being particularly notable: (1) the CDM Executive Board exercises centralized management of project approval, reduction credit issue, etc., under the Kyoto Protocol to the UNFCCC, creating procedural inefficiencies that drag out project screening to an average of two years, (2) the CDM Executive Board strictly adheres to the criterion of additionality in screening projects, with the outcome being that the low-carbon technologies that are Japan's particular forte are not often adopted (simply put, additionality requires that a project only be implemented if revenues are produced from the sale of reduction credits; energy conservation efforts that simply pay off economically are thus not deemed to have additionality), and (3) the bias toward China and India as project host countries does not contribute much to technology transfer to other developing countries.

CDM remains an important framework under the Kyoto Protocol, but on its own is not adequate to promote further emissions reductions on a global scale; a new and flexible framework is needed to complement it.

## Japan's new approach: Proposal for a bilateral offset credit mechanism

Against this backdrop, Japan has been engaged in discussions with concerned countries on the creation of a bilateral offset credit mechanism (BOCM) to serve as an approach to complementing the CDM. Official discussions have already begun with India, Indonesia, Vietnam, Cambodia, Thailand, and Laos.

The basic idea underlying this mechanism is for Japan and the host country to carry out joint emissions reduction projects, with the ensuing reductions to be divided up between the two countries. By giving the scheme flexibility based on bilateral agreements, the hope is to make it a more user-friendly mechanism than the centralized CDM. This approach can also provide leverage in disseminating Japan's low-carbon technology to developing countries.

Considerable attention will be focused on future developments in the discussions on a new framework by the Ad Hoc Working Group on the Durban Platform, and the international community will undoubtedly be keeping a close eye on the efforts of Japan, which will not be participating in the Kyoto Protocol's second commitment period, in and after 2013. Japan should demonstrate the level of its commitment by resolutely helping to reduce global emissions through the BOCM.

January 31, 2012

January 31, 2012

## Article(s) by this author

• ### The Significance of the Revision of the National Guidelines for Evaluating Government Funded R&D

January 31, 2013［Issues Facing the Japanese Economy in 2013 (January 2013)］

• ### Japan's Policy Beyond 2013 Under Scrutiny as the World Moves Toward a New Global Warming Regime

January 31, 2012［Column］