Japan’s top business lobby looks beyond borders on climate

TOKYO — The Japan Business Federation will lean on international collaboration as it pursues a carbon-neutral future, the top lobbying group’s chairman told Nikkei in a recent interview, with the campaign targeting players beyond national governments.

Hiroaki Nakanishi, chairman of the group better known as Keidanren, said efforts in the U.S. will emphasize dialogue with individual states, and not just with Washington. One of President Joe Biden’s first acts upon taking office last month was to bring the U.S. back into the Paris Agreement on combating climate change, reversing predecessor Donald Trump’s withdrawal from the accord.

Nakanishi sees opportunities for cooperation with the U.S. and Europe in tackling the issue.

The Keidanren chief warns that as extreme weather becomes more prevalent, the cost of doing nothing will far exceed the expense of developing sustainable business activities. 

Edited excerpts of the interview follow.

Q: With the U.S. returning to the Paris Agreement, will the Japanese and American business sectors work together?

A: We have forums for discussions between the business communities. Climate change is one example, and issues surrounding trade, starting with the U.S.-China conflict, are another. As for Keidanren’s efforts, we think it’s important to talk with not only the federal government, but with state governments as well.

The Trump administration was a special case, but there were differing points of view held by state governments and the business community that stressed the importance of the climate problem. This is especially true for California, where many Japanese corporations have contacts. The state is a Democratic Party stronghold, and it has adopted a tough stance on the issue of climate change.

Keidanren will divide its North American delegates into four regional teams to engage with state governments and leading companies. Considering their strong influence globally, we’re making sure to have extensive coverage. It’s a difficult problem, but there is room for cooperation.

Q: Europe has led the way in crafting environmental standards.

A: Japan is said to be lagging behind, but when speaking to business groups in each country, there aren’t any large gaps in opinions. Europe’s debate on the taxonomy of sustainable activities has numerous issues, with transition technologies being ignored.

The Japanese and European business communities will need to seriously discuss topics such as the treatment of nuclear energy. The taxonomy debate will not move forward even if we speak directly to the EU, so I believe that is the role for [Japan’s] government.

Q: Japan’s business community once was hesitant to support environmental measures in some quarters, but is now more forthcoming.

A: The current course of climate change is destructive and threatens to destroy the economic ecosystem. With sustainable development goals in mind, many have come to deeply understand that economic activity is predicated on the environment. This isn’t a case of taking action in response to foreign pressure.

Costs are the most sensitive problem for the business community. We can’t simply say that higher costs are acceptable, but we’re likely to face much greater expenses if nothing is done. Intensified natural disasters are among the major repercussions of climate change. While always keeping cost in consideration, we have no choice but to move forward with various initiatives and technological development. This is the most important point in my mind.

Keidanren Chairman Hiroaki Nakanishi, seen here in a June 2020 photo, warns of the risk that the cost of doing nothing will far exceed taking steps to ensure sustainable practices.

Q: There have been discussions of adopting carbon pricing, whether in the form of a carbon tax or emissions trading.

A: Before diving into the carbon pricing debate, priorities need to be considered in the principles of energy supply: safety plus economic efficiency, energy security and environmental protection. Within Keidanren, we see carbon neutrality as the highest priority. So among the 3Es, the environment carries the greatest weight. Then it’s a matter of balancing economic viability and energy security.

The pricing mechanism and the way in which the collected money is used in future policy initiatives need to be discussed together.

We are quickly working on the issue with an eye toward making proposals to the Ministry of Economy, Trade and Industry and the Environment Ministry. Matters of the tax code will involve politics. How will this be resolved with Japan’s existing carbon tax as part of global warming countermeasures? Carbon pricing also becomes intertwined with cross-border tariffs. As an organization, we need to first craft our own basic principles.

Q: Prime Minister Yoshihide Suga has committed Japan to attaining net-zero greenhouse gas emissions by 2050, with the goal of raising the ratio of renewable energy to 50%-60%. His government is setting aside 2 trillion yen ($18.9 billion) for R&D on this initiative. Are such measures sufficient?

A: Fully financing with public funds is not possible, and the corporate sector shouldering the burden also has its limits. Having the government seed investments is necessary, with a focus on ESG — environmental, social and governance — investing indispensable in expanding the investor base.

The 2 trillion yen fund can be tapped for 10 years, unlike annual government budget outlays. Technological development and innovation addressing the energy issue take five to 10 years, not one to two years, so the Suga administration has put forward a proper measure. The next pending issue is how the private sector will progress.

Q: What do you see as the role of nuclear power?

A: Not using nuclear power is not an option. The debate has focused solely on restarting reactors or building new ones. The resulting lack of progress has been a negative for Japan. The world has greatly changed in the past decade. Japan, the U.S. and European countries have been slow to take up large reactors of more than 1 gigawatt, leaving China and Russia as the only players.

Numerous startups have emerged for small modular reactors, which limit the damage in cases of accidents. But no Japanese companies are truly involved, and the government is not investing in them.

Electric power companies have spent 5 trillion yen on safety measures alone as they comply with new regulatory standards. They have no cash. The discussion needs to start with who will bring a new vision to nuclear power. Falling behind globally would have implications for national security as well. And with the goal of carbon neutrality, providing a stable supply of electricity without nuclear power would be difficult.

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