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September 12, 2005

Japan's Green Economic Edge

Takamitsu SAWA (Professor, Kyoto University)

There are two meanings to the axiom that the 21st century is the century of the environment: (1) Global environmental problems will become more serious, and (2) environmental problems will be the driving force of economic development.

Already, since the beginning of this century, significant climatic changes have been noted in the world, although there is no clear scientific evidence linking the recent changes to a rise in the atmospheric concentration of carbon dioxide.

For example, an abnormally large number of typhoons have hit Japan, while hurricanes with winds gusting up to 80 meters per second have slammed into Florida. Killer heat waves and cycles of droughts and floods have wrought havoc in wide regions of the world.

In the 20th century, technical revolutions were driven by shortages or limitations. Economic expansion was triggered by the development of equipment powered by electricity and oil products. In the last 20 years of the century, research and development of information technology was the driving force for economic development.

As we stand at the beginning of the 21st century, a wide array of IT equipment has been commercialized. In industrial countries, the market for such equipment is practically saturated. With people's material needs in developed world having been nearly satisfied, economic growth in coming years is likely to be driven by the insatiable human desire for longevity and the need for global environmental protection.

The desire for longevity has led to the promotion of life science, but Japan lacks a competitive edge in this field. There is little chance that medicines and medical equipment will be the driving force of Japan's economic growth.

In the field of environmental protection technologies, though, automakers in resources-poor Japan are ahead of their foreign rivals in developing fuel-efficient vehicles. For example, the Prius hybrid car, introduced by Toyota Motor immediately after the Kyoto Conference on Climate Change, outclasses similar vehicles developed by foreign automakers.

Japanese electronics manufacturers are unrivaled in the development of power-efficient equipment, and Japanese-made desulfurization and denitration equipment is highly efficient.

It is no exaggeration to say that Japanese environmental protection technologies is the best in the world. No doubt Japan's economic growth in "the century of the environment" will result from research and development of environmental protection technologies and the commercialization of them.

The Japanese business community has raised strong objections to a proposal to impose a special tax on fossil fuels to deal with global warming. It should be pointed out, however, that the proposed tax would prompt consumers to switch to power-efficient equipment and, as a result, would promote the development of such equipment.

Industrial countries, except the United States, have common but differing obligations to reduce their carbon-dioxide emissions. Therefore, Japan's development of fuel-efficient cars and fixed fuel cells ahead of other countries will not only contribute to its economic growth but also help in its transformation from an economic powerhouse to a major environmental technology power.

The Kyoto Conference on Climate Change introduced the clean development mechanism (CMD). Under this system, if governments or companies in developed countries help cut greenhouse-gas emissions by investing in developing country projects, they can receive carbon credits equivalent to the reductions brought about by their overseas investments. This system gives Japan's government and companies incentives to use their environmental-protection technologies to contribute toward cutting greenhouse-gas emissions in developing countries.

A government plan for achieving targets under the Kyoto Protocol, adopted by the Cabinet on April 28, calls for using the Kyoto mechanism (trading of emission rights, joint implementation, and CDM) to make emission cuts equivalent to 1.6 percent of 1990 carbon-dioxide emissions.

Among the three factors mentioned, CMD is likely to play the most important role. Furthermore, technology transfers to developing countries will be crucial in solving global environmental problems.

(This article appeared in the August 29, 2005 issue of The Japan Times)

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