Japan: Is a Net Zero Society Reachable Without CO2 Pricing?

From 1992 Japan was at the frontline of the global fight against climate change with the symbolic Kyoto Protocol. Then the earthquake, the tsunami and Nuclear Plant accident in Fukushima in 2011 drastically changed Japan's energy situation. With all 48 of its nuclear reactors shut down, the impact on Japan's energy mix and climate strategy was huge.

To maintain the equilibrium of the system, Japan had to rewire it, starting with the entire electricity demand side to decrease peaks and overall consumption; making enormous effort and accepting an important drop in quality of life. Old and inefficient thermal plants were restarted with the known consequences on CO2 emissions and trade balance. Not many countries would have had the collective strength and discipline to overcome a sudden cut of electricity supply of this magnitude.

In advance of COP21 in Paris at the end of last year, Japan pledged to cut emissions from 2013 levels by 26% by 2030, 'ensuring consistency with its energy mix' in it's Intended Nationally Determined Contribution (INDC). Noting the Fukushima accident in this text, Japan highlighted the review and rebuild of its energy plan from scratch in the form of the Strategic Energy Plan.

I was in Japan a couple of weeks ago, and met business leaders, business associations and friends, to exchange on the Japanese energy approach to a post COP21 world. The keyword that sums up this approach for me is one used in Japan's INDC itself - consistency. In all my conversations from the most conservative corner to the most advanced, the positions on the INDC shared a common ground. That we have listened to our stakeholders and established a bottom up approach to the problem, decided on an INDC that we will achieve with a lot of effort, but we are confident to reach this goal.

To reach this INDC, Japan will build on its strengths by using cutting edge technology and efficient processes to combat emissions. In Paris during COP21, Prime Minister Shinzo Abe said: "We'll achieve (the goal) without sacrificing economic growth." Japan's strength in technologies such as battery and electricity storage, hydrogen economy, efficiency in electricity systems, IT incorporation into objects and solid and efficient industrial processes, will not just work towards the goals internally, but also externally by trading with countries that need equipment and know-how. This then will contribute to the overall reduction in GHG.

The confrontation of this position to a zero net world however opens some area of discussion.

Firstly we cannot see the entire picture of emission reduction without looking at nuclear. More than four years after the accident in Fukushima, only two nuclear reactors have been operating commercially since the end of 2015, with two more scheduled for a restart in late February 2016. There has been understandable mixed public opinion about this from citizens and campaigners, but it is clear that without nuclear power, Japan will struggle to reach its INDC target and the net zero goal in time. The INDC relies on an energy mix with more than 20% of nuclear power.

Finally and certainly the area where the discussion with my counterparts was heated, was the price of CO2. We see it as a fundamental element to lead to behavioural change, because it will change the business measurement of performance and become a strong inducer of a new economy. However it is seen sometimes in Japan as an unnecessary burden on business, diverting resources from their R&D effort towards new technology; particularly if the system of trading quotas is retained.

As a former CEO of a global technology company, I know and believe that R&D is not primarily a matter of availability of funds, neither is an act of god nor can be left to chance or political impulse. It is a careful decision of people knowing deeply their business and aiming to answer future needs; identified, anticipated or even dreamed sometimes.

I believe that to trigger this huge change in model necessary to reach zero net emissions, we need to make business understand that this is the only way, that society is seriously calling for this and that the right price signals are being established. We need to establish with serenity the final picture of what we want to achieve. Then CO2 price is a must to mobilize the fantastic energy and creativity of the business world, which will trigger the emergence of new technologies the magnitude of which we may not even imagine today, and Japan will definitely be one of the major players in the game.