Priorities for the Japanese Economy in 2018 (January 2018)

Outlook on Negotiations over the Fight against Global Warming and Challenges

Consulting Fellow, RIETI

2018 is a year of decision

2018 is a decisive year in the global climate negotiations. The Paris Agreement was adopted in December 2015 and swiftly put into force in November 2016. However, for the agreement to be enforced in practice, detailed rules must be worked out on such issues as the scope of national targets and the modalities of the "pledge and review" process. Parties are aiming at agreeing on the detailed rules at the 24th Session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP24) in 2018.

At COP23 in November 2017, Parties took note of an "informal note" simply by compiling their own comments. The co-chairs of the Ad-hoc Working Group on the Paris Agreement (APA) in principle are to produce a "reflection note" in April 2018. As the informal note attached to the outcome documents covers all positions of the Parties, they comprise a huge volume exceeding 250 pages, and there is no sign of convergence among the Parties. In addition, it is unclear whether the co-chairs' reflection note will take the form of a negotiation text, and, even if it does, the volume is likely to swell further with various comments from the Parties between April 2018 and COP24.

Therefore, at some point during COP24, the Polish Presidency will need to issue a chair's text aiming at consensus based on careful examination of red lines. It remains to be seen whether Poland will be able to exercise such skillful diplomacy, as France did when the Paris Agreement was adopted. Depending on the progress in this year's negotiations, we cannot rule out the possibility that an agreement will not be reached at COP24. Of course, nobody is mentioning this possibility in public at this point, but it would not be a serious problem if the agreement on rules is delayed until 2019 given that the Paris Agreement was designed as a framework for the period starting from 2020.

In June 2017, the Donald Trump administration's announcement of withdrawal from the Paris Agreement sent shock waves throughout the international community. However, the United States has continued to participate in the negotiations over detailed rules at the COP23 for securing its national interests and actively expressed its views on vital points. Regardless of the Trump administration's position, it is very important to develop a framework which the United States could join.

The current round of negotiations is characterized by a deep rift between developed and developing countries. On one hand, developing countries seek to minimize their mitigation burden by maintaining the dichotomy between developed and developing countries and to obtain as much financial/technical assistance as possible from developed countries. On the other hand, developed countries want to reduce their assistance burden while securing a common mitigation framework for both developed and developing countries. Therefore, the negotiations would not be concluded barring a package deal where developed countries agree to step up assistance, for example, while developing countries accept a review process that minimizes the distinction between developed and developing countries. At COP23, developing countries stressed finance-related issues, such as a review of progress in financial assistance toward 2020 and predictability of public financial assistance. By doing so, they were obviously aiming at a package deal that is as favorable as possible. However, it is not easy to work out a deal by using financial assistance as a bargaining chip since the United States is turning its back.

COP turning into a "beauty contest": Japan at risk of putting itself in a bind

In 2018, a facilitative dialogue (called a "Talanoa dialogue" after the Fijian word that means transparency and harmony) will also be held. Facilitative dialogue is intended to enable Parties to identify the progress toward the goal of the Paris Agreement (stabilizing the global average temperature at between 1.5℃ to 2℃ above the pre-industrial level) and hold discussions on the future course of action. As the Intergovernmental Panel on Climate Change (IPCC)'s special report on 1.5℃ expected this autumn will provide input to the dialogue, the argument would emerge that the current nationally determined contributions (NDCs) are not sufficient and need to be strengthened.

Unlike the Kyoto Protocol, where the Parties' targets were negotiated, the Paris Agreement leaves it to the individual Party although it manages the process. As a result, the COP is increasingly turning into a kind of "beauty contest" where countries compete to make themselves look better in the global mitigation endeavor. The "pledge and review" process is designed so that Parties would feel a shame if they fail to meet the targets set by themselves. At the same time, it also tends to make countries feel compelled to set ambitious targets as window dressing. In the "global stock taking" process and Talanoa dialogue, it will be repeatedly pointed out that the current NDCs are insufficient. The resilience against such external pressure may vary from country to country. However, Japan is exposed to the greatest risk due to its naivety. It could easily stew in its own juices owing to its desire of window dressing. For Japan, the road to restarting nuclear power stations and extending their operational life is not smooth, as indicated by the recent ruling by the Hiroshima High Court that ordered the suspension of a nuclear power station from operation, so further lowering the current target would be unrealistic. Significant reduction would only be a reality not by setting an ambitious target, but by making key technologies more competitive and convenient. Japan should adopt targets for developing key technologies and their cost reduction, rather than setting unrealistic emissions targets, which is an obsession inherited from the Kyoto Protocol era. We should carefully assess the situation and take a realistic approach, and not be swayed by a "mood."

Countering "coal-is-the-villain" view with a pragmatic argument

As highlighted at the launch of the Powering Past Coal Alliance, coal was vilified with a vengeance at the COP23. Japan was also criticized for its export of clean coal technologies to developing countries. However, this is a one-dimensional view that focuses only on "1E" (environment) of the "3E" elements (the other two "Es" are economic efficiency and energy security). It is obvious that Asian countries need clean use of coal for their economic development. While the Powering Past Coal Alliance could expand its number of members, Japan should explore cooperation with countries aiming at a nationally appropriate mix of clean coal and other energy technologies and countries ready to support such endeavor.

Internationally showcasing Japan's unique approach

The Japanese government and industry should internationally advocate the "three arrows" approach, which has been incorporated into the Ministry of Economy, Trade and Industry's Long-term Climate Change Policy Platform. The ongoing debate at the United Nations is preoccupied with reducing domestic emissions on a production basis and within each industry. However, a country's target for domestic emission reduction is not the only yardstick of its "beauty" (its contribution to the fight against global warming). This approach aims at making broader contributions beyond national borders such as transferring clean technology to foreign countries, supplying environment-friendly technologies and intermediate goods to global supply chains, and spurring innovations. The three arrows approach does not necessarily need to be incorporated in the UN rules under negotiation. Japan rather should demonstrate internationally its contributions based on numerical data calculated in a transparent manner.

January 4, 2018

February 21, 2018

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