Alexa
  • Directory of Taiwan

Japan's firms brace for strong impact of Kyoto Protocol

Enterprises fight to balance economy, ecology

Japan's firms brace for strong impact of Kyoto Protocol

The Kyoto Protocol takes effect this week with fanfare but Japan, where the landmark environment treaty was sealed, is not fully prepared itself, with industry scared that a push to cut pollution will set back economic recovery.
Signed in 1997 in Japan's old capital, the ambitious treaty aimed at curbing global warming obliges the world's second-largest economy to cut greenhouse gas emissions six percent by 2008-2012 from the 1990 level.
However, 11 of Japan's 30 industrial sectors including steel and power risk failing to meet their self-imposed targets in cutting carbon dioxide emissions, the Ministry of Economy, Trade and Industry said this month.
The study found that Japan's emissions were going up as the economy expands from a decade-old slump.
The survey has led the powerful trade ministry to reopen talk of imposing government, rather than voluntary, targets on emissions with taxes to coax violators - an idea steadfastly opposed by big business.
Forms of a "carbon tax" have been introduced in parts of the European Union. The United States, the world's biggest CO2 polluter, is boycotting Kyoto, with President George W. Bush saying it would unfairly burden U.S. industry.
A tax on Japanese polluters was originally proposed by the environment ministry and was intensely debated by specialists and politicians last year.
The ruling coalition parties ultimately decided to propose a tax, the size of which has not been set.
Japan's most influential industrial body, the Japan Business Federation, or Keidanren, firmly rejects a pollution tax, saying it is unnecessary and could harm the economy and Japanese companies' competitiveness.
"The environment ministry's CO2-emission tax is a simple tax increase to business, which will in turn result in a hollowing out of plants abroad," said Meguri Aoyama, the chief economist of Keidanren.
"We had set targets ourselves in 1996, before the government decided their policies (for the Kyoto Protocol) in 1998. Although we have a track record on the CO2-emission issue, bureaucrats are looking for another place to squeeze taxes from," Aoyama said.
Indeed, Japanese industries have a greener record than most other countries, according to the Ministry of Economy, Trade and Industry.
Setting fuel efficiency of Japanese steelmakers as a base of 100, with lower figures showing more a eco-friendly policy, the EU average stands at 110, the United States is at 120, Russia is at 125 and China is at 150, according to the ministry.
If Japan fails to achieve its six-percent emission reduction target under Kyoto, it would be forced to cut by another 30 percent as a penalty in addition to the original six percent under the second stage of the treaty from 2013.
A poll of the general public in December by the Asahi newspaper found that 37 percent favored a carbon tax and 50 percent were opposed, although surveys showed a majority of Japanese also felt anxiety about global warming.
One option under Kyoto is a system of credits. A country which cannot meet its own goals can make up for it by buying credits from nations which have exceeded their targets or by setting up clean-energy projects in the developing world, which is largely exempt from Kyoto.
However, "this will be very expensive to Japan," said Takamitsu Sawa, professor at the Institute of Economic Research, Kyoto University.
The swaps are "a system favorable to sellers of credits. Countries such as Russia and Ukraine may set extraordinarily high prices on credits, in which case Japan, which doesn't have a choice but to accept the offered price, will incur financial burdens," Sawa said.
Industry is also skeptical of the credit system, known formally as the Clean Development Mechanism, which will be coordinated through the United Nations.
"It is hard to get permission from a partner country and the United Nations CDM Executive Board, as most of them are on the side of developing countries, which need not cut gas emission" under Kyoto, said Aoyama of the business lobby.
Press reports have said Japan is considering using foreign aid to green projects overseas to claim credits, a plan that could draw international criticism.
Sawa, the professor, believed a carbon tax would be helpful in reducing emissions as it could prompt corporate efforts to create new technologies - both in production and the end product - that eat up less energy.
He cited the example of Japan's largest company, Toyota Motor, which has created the world's first mass-produced hybrid car, the Prius, which emits 50 percent less carbon dioxide than a regular car and has proven a hit with U.S. consumers.
However, Sawa noted that Toyota began work on the hybrid car well before the Kyoto Protocol - and not in response to a tax.