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16 September 2009

Japanese government-elect announce more ambitious targets

The Democratic Party of Japan (DPJ) won a landslide victory in the lower house elections held at the end of August, giving the party 308 of the 480 seats in the House of Representatives. This number gives the DPJ a majority on all standing committees in the lower house.

The party and its leader have already committed to implementing a number of the policies from their election campaign platform, ahead of the selection of Cabinet members and swearing in of Party President Yukio Hatoyama as Prime Minister on September 16. One such policy is a new target to reduce greenhouse gas emissions by 25% from 1990 levels, by 2020. This target is considerably more ambitious than the one set by Aso Taro in June this year (see Legal Alert of 11 June 2009, www.taalo-bakernet.com/e/newsletters/pdf/2009/B&F/climate0611.pdf ), which amounts to an 8% reduction on 1990 levels.

The announcement was made by Hatoyama three months ahead of the United Nations Climate Change Conference in Copenhagen in December 2009. At this conference the international community must agree on international targets and a framework to combat climate change from 2012-2020, following the end of the first commitment period under the Kyoto Protocol. Hatoyama has confirmed Japan's commitment to a 25% emissions reduction is preconditioned on an agreement on ambitious reduction targets among other developed countries at the Conference. The DPJ's commitment is in line with the "Bali roadmap" for an international agreement on climate change adopted at the Climate Change Conference in 2007, the 2007 Intergovernmental Panel on Climate Change recommendations and the EU goal of a 30% emissions cut among Kyoto Protocol Annexe I (developed) countries. Japan's commitment has been welcomed by Yvo de Boer, the Executive Secretary of the United Nations Framework Convention on Climate Change.

Domestically however, the DPJ target has drawn criticism from a number of Japanese industry groups. The 25% emissions reduction commitment is forecast to negatively impact the earnings of power utilities and thermal power plant builders, oil refiners and steel and chemical manufacturers. The commitment is not all bad news for industry however. Incentives implemented to realize the cut are predicted to boost sales and increase subsidies for Japanese solar cell makers. The likely extension of the Feed-in Tarrif system to cover all forms of renewable energy will benefit wind power developers. Nuclear power business is also likely to benefit. There also will be flow-on business benefits for the electronics sector. Further, while fuel consumption regulations may be burdensome on the car industry, green car development and sales are likely to benefit, particularly as the DPJ simultaneously implements gasoline and automobile tax cuts.

While the methods to be used to reach the 25% reduction target are yet to be finalized, some potential policies, outlined in the DPJ's election platform Manifesto include:

• Introduction of a domestic carbon dioxide emissions cap and trade system.
• Introduction of the long-debated environmental tax or a carbon tax
• Expansion of the newly enacted solar feed-in-tariff system, to include the buyback of all domestic produced solar energy, and to cover the buy-back of all forms of renewable energy by power providers at fixed prices.

The exact timing and extent of these policy changes is yet to be fixed. In addition to winning over a number of skeptical industry groups which have voiced their concern over the economic impact of the ambitious new target, the DPJ's next big challenge will be finding the money amid the numerous priorities in its first budget, to implement its planned incentives and subsidies.

 

Source: Baker & McKenzie

Author: Baker & McKenzie's Global Environmental Markets Team