Industry targets Tokyo’s ambitious new climate goals

Then came the country’s historic August election which ended the business-friendly LDP’s nearly unbroken hold on 50 years of Japanese politics. In power now is the Democratic Party of Japan (DPJ), a coalition of disaffected LDP veterans, independents, and longtime opposition members. The DPJ vowed to wrest control of policymaking from the bureaucracy and interest groups, and set about trying to change the very decision-making process that the business establishment has relied upon to get its views across.

On climate change, the DPJ’s break with the past is striking. The new ruling party has called for an ambitious 25 percent cut of greenhouse gas emissions from 1990 levels by 2020, with a premise that all major economies would join in with similar goals. The target was far more aggressive than the eight percent cut proposed by the previous administration and it quickly upended earlier efforts by Miyamoto’s association to promote its position to the government.

“Our industry is competitive and will stay competitive globally,” says Miyamoto. “But if the government told us to reduce emissions further, that would be suicidal.” Such a move, he warns, would hurt not just the steel industry, “but other high-value-added industries which are linked to one another.”

A Dramatic Change

Miyamoto’s task now is to push his association’s concerns about what he calls a “very severe” new emission reduction target as officials attend the climate talks in Copenhagen. But he faces a major — and unprecedented — problem for Japan’s business lobbyists: “It is hard for us to be heard.”

Miyamoto’s frustration is understandable. For decades, Japan’s powerful business associations enjoyed a close relationship with the LDP-run government; under the LDP, access to the key Ministry of Economy, Trade, and Industry (METI) was a given. Political donations from business associations to the LDP helped ensure easy access. Companies belonging to Nippon Keidanren reportedly donated $30 million to the LDP in 2008, but a mere $1.2 million to the DPJ.

With Japan the world’s sixth largest emitter of greenhouse gases, critics say it is time for a change in Tokyo. Takejiro Sueyoshi, special advisor to the United Nations Environment Program, likens the past to “the tail wagging the dog,” with industry officials talking about their own interests as if they represented all of Japan.” We should not deal with the issue of climate change just from industry’s point of view,” says Sueyoshi, “but from that of Japan’s overall interest.”

The DPJ’s plan of 25 percent emissions cuts by 2020 is indeed ambitious, exceeding those of the European Union (20 percent) and the United States (about four percent, or 17 percent below the 2005 level). Even the DPJ’s cuts of 25 percent are at the low end of what scientists say is needed. The UN-sponsored Intergovernmental Panel on Climate Change has found that wealthy countries like Japan need to cut emissions by 25 to 40 percent by 2020 to achieve stabilization.

Industry Fights Back

Debate over the proposed cuts promises to be intense in Nagatacho, Japan’s Capitol Hill. The DPJ’s plan prompted quick and unusually blunt reactions by leaders of the biggest greenhouse gas emitting industries — from steel makers and electric power generators to the chemical industry. Some warned that if the cuts all relied on measures at home, they would drive energy-intensive industries to developing countries and would ultimately prove impractical.

Moreover, Prime Minister Yukio Hatoyama’s pledge comes on the back of strong discontent shared among the biggest gas emitters over Japan’s current commitment to the 1997 Kyoto Protocol. Meeting its obligations is set to cost Japan’s taxpayers, electric power companies, and steelmakers a total over five years of 500 billion to 1 trillion yen (about US$5.5 billion to US$11 billion) in carbon credit purchases from overseas. “Why would Japan alone go for such a severe commitment?” asks Miyamoto. “We can not make the same mistake.”

At a recent meeting with the new environment minister, Keidanren officials asked the Hatoyama administration to seek what they called a “fair and effective” agreement by major greenhouse gas emitters in the Copenhagen talks. Japan’s major business lobby has also issued a short statement urging the administration to lay out specific steps to meet the new emissions target, including how much it would cost to the public.

For Japan’s broader business community, what “fairness” means and how to attain it is its utmost concern. That’s because it would cost several times more for a country with higher energy-efficiency such as Japan to reduce greenhouse gas emissions per unit than a country such as China, and industry leaders are worried their country’s industrial competitiveness would be hurt. Mitsudo Urano, a trustee of Keizai Doyukai (Japan Association of Corporate Executives), says Japanese businesses are pushing for measures that reflect a country’s previous efforts to improve energy-efficiency, but such concepts will not be popular overseas. What concerns Urano most are the details of the emerging DPJ plan. Says Urano: “I am very concerned.”

Executives of high-emission industries express similar alarm over who will bear the costs of tackling climate change. The administration “should have begun by discussing how much money our country as a whole is willing to spend” before setting a “seemingly unrealistic” target, says Tetsuo Nishide, director general of the Japan Chemical Industry Association.

"The Debate Has Shifted"

Industry, however, is having a hard time making its case to the new government. The Hatoyama administration aims to be a leader in global climate change talks, and so far it has stuck closely to its pledge. An October poll, moreover, found widespread public support, with 72 percent of respondents in support of the policy. “The debate has shifted from what is achievable for Japan [with available technology] to what should be done to reduce greenhouse gas emissions,” observes Yasuko Kameyama, a senior researcher at the National Institute for Environmental Studies. It’s now about what Japan must do to achieve the 25 percent target, she says, and business needs to get on board and work with the new administration.

But the DPJ is no LDP. Under the LDP, the business community, especially Nippon Keidanren, had broad access to the ruling party and the Ministry of Economy, Trade, and Industry. Such close relationships worked well for business in setting a modest greenhouse gas emission reduction target of eight percent, announced in June by the previous administration of Prime Minister Taro Aso. Under Aso, a six-month special committee on climate change looked at options for Japan, inviting views from the business leaders, environmental NGOs, and experts from leading research institutes. Environmentalists complain that their views were not as well reflected as those of the business community. They stress that the months-long discussion failed to consider the cost of inaction on climate change, and overly emphasized the negative impact on the economy. While the committee was meeting, major business groups under Nippon Keidanren also tried to apply pressure by taking out what were, for Japan, unusually provocative (and expensive) newspaper ads in March and May. One ad asked readers the best option for Japan — while stressing the cost in jobs, decline in income, and higher energy bills.

It was against this background that Hatoyama’s bold plan was announced, much to the delight of Japanese environmentalists. To see how things have changed in just a few weeks, the climate task force established by the new government in late October is a good place to start. The team was set up to review earlier analyses by the Aso administration’s climate committee, which was seen as too negative, with little mention of potential economic benefits in tackling climate change such as creating new businesses and stimulating technological innovation. And unlike the previous study group, business leaders are not invited to sit on the panel, a striking break with the past.

Lobbying, Japanese Style

The same constraint now goes for lobbyists targeting members of the Diet, Japan’s parliament. “The DPJ is trying to undo how business was done under the LDP,” says Kiyoyuki Tomita, a research fellow at the Tokyo Foundation and former METI official. “So how to lobby and how to petition will have to change.” Previously, the business community enjoyed regular access to LDP politicians, so it could regularly lobby on issues that mattered to them. Of special interest were the LDP’s policy sections, which gave lobbyists easy and informal access to lawmakers. Representatives of business and industry were invited to give their views as “interested parties,” and they played a key role in the legislative process under the LDP. Groups like the Steel and Iron Federation, for example, were welcome at meetings on climate change or the economy.

Lacking the leverage of the past, the business community will have to build new relationships with the DPJ as it begins to implement its agenda on climate change. Complicating matters, say insiders, is that it is not even clear who in the new administration are the key players on climate change policy. And without the informal access provided by the LDP and METI, major industries will, at least for now, have to reach DPJ ministers and party leaders through formal, official meetings. But industry is also starting to speak up. Miyamoto’s federation has joined with eight other leading industry associations in circulating a petition calling for cautious steps on climate. Administration critics, meanwhile, are writing articles with titles like “The High Price Paid for Hatoyama Speech” (from a Keidanren-backed think tank) and “Hatoyama Climate Pledge Flawed” (from The Yomiuri Shimbun, Japan’s largest daily).

At the same time, the unusual circumstances for Japan’s heavy industries have brought them some unlikely allies: labor unions, the core backers of the DPJ. “As far as the issue of environment is concerned, we are in a complete agreement, though we would not act physically together,” says Miyamoto. Rikio Kozu, general secretary of the 250,000-member Japan Federation of Basic Industry Workers’ Unions, seems as frustrated as anyone in Keidanren over Japan’s obligations under the Kyoto Treaty. “We have the world’s top-level energy-efficiency, but even so, we will have to bear the burden of buying credits,” says Kozu of the massive purchases in carbon offsets Japan may have to shoulder. “That money could have been spent on our plants and wages.” Atsushi Uchida, general secretary of the Federation of Electric Power Related Industry Worker’s Unions, is similarly concerned. Uchida says his 210,000 members will consider staging an action if the details on greenhouse gas targets are not agreeable.

Growing Momentum, Growing Debate

Meanwhile, momentum is building on the policy front. The administration has set up project teams to discuss measures it hopes will help reduce the country’s greenhouse gas emissions, such as an emissions trading scheme and a comprehensive incentive program for renewable energy. And the Environment Ministry has recently proposed introduction of an environmental tax worth nearly 2 trillion yen a year that would help pay for the costs of meeting new targets resulting from Copenhagen and later talks. In the past, Keidanren and other business interests have successfully resisted these measures, and opposition remains strong. On December 7, nine major industry groups – including steel, cement, oil, chemical, and electronics –joined together to oppose any new carbon tax, arguing that it would damage what is already the world’s most energy-efficient economy. The young DPJ government will face major challenges trying to enact such ambitious reforms. Tetsunari Iida, executive director of the Institute for Sustainable Energy Policies and a member of the government’s climate task force, is hopeful but not without a caveat. “Implementing these far-reaching schemes will require an enormous commitment by a professional team,” he says. These projects, he points out, fall under the jurisdiction of the METI, which remains an unwilling party on climate change. And the Environment Ministry is not influential enough to lead. “The crucial question,” he adds, “is whether the Prime Minister’s office can become the commander’s office.”

This much seems certain: the shifting political currents in Japan have lessened the once formidable impact of Keidanren, and raised troubling questions about who exactly it represents. Among its members are not only major greenhouse gas emitters but also numerous companies that deal directly with consumers — and some of these firms are keen to take advantage of new opportunities in green businesses and to promote their green image. Such breaks within the business community may help explain why Keizai Doyukai, a group of top executives from about 900 large corporations, many of them also Keidanren members, proposed in May emissions cuts much more ambitious than those backed by Keidanren.

The debate is still heating up in Japan, and the public will soon hear more from the Hatoyama administration, as well as from the business community. Ultimately, the fate of Japan’s new climate change policy rests with how effectively the DPJ can win public backing. With critics becoming more vocal, they will have plenty of work to do: Hatoyama and his allies must convince fellow Japanese that their ambitious plan can help save the planet while not wrecking their economy.

Akiko Kashiwagi is a Tokyo-based freelance journalist and an associate of the International Consortium of Investigative Journalists. ICIJ member Mitsuhiro Yoshida contributed to this report.