July 31st, 2015

Assessment of Japan’s
Energy Mix and INDCs
Systems Analysis Group
Research Institute of Innovative Technology for the Earth (RITE)
Contact：Fuminori Sano, Takashi Homma
Kohko Tokushige, Keigo Akimoto
TEL: +81 774-75-2304, e-mail: sysinfo@rite.or.jp

Introduction
 After the Great East Japan Earthquake and the Fukushima nuclear

power accident, the Strategic Energy Plan was adopted by thegovernment in April 2014. However, it was not defined in concreteterms at the time.
 Moreover, discussions over post-2020 GHG emissions reductions

are still ongoing worldwide, as it is hoped to reach an international
agreement at the COP21 in December 2015. As the COP21 requested
the participating countries to submit their INDCs (Intended Nationally
Determined Contributions), some of them like the US or the EU havealready submitted theirs to the Executive Office of the UNFCCC at
the end of March 2015.
 In this context, the Japanese government decided the drafted energy

mix for 2030 and GHG emissions reduction targets draft (INDCs) at
the beginning of June.
 This presentation offers a quantitative analysis of Japan’s INDCs incomparison with other countries on several points identified as
essential.

2

The energy mix and INDCs
proposed by the Government

The drafted energy mix for 2030
Energy Demand

361 million kL

Economic
growth
1.7%/year

4

Primary Energy Supply

Attempted energy
savings: a huge amount ofappr. 50.3 million kL(-13% compared to the casewithout energy savings)

489 million kL

Renewables:
appr. 13-14%

Nuclear: appr. 10-11%

Selfsufficiency
around 24.3%
improvement

2013: 6%
Electricity
appr. 25%

Final energy
consumption around
326 million kL

Gas: appr. 18%
Electricity
appr. 28%

Coal: appr. 25%
Heat
Gasoline
Town gas
appr. 75%

FY 2013(historical data)

Heat
Gasoline
Town gas
appr. 72%

FY 2030 (after
energy savings)

Oil: appr. 32%

FY 2030

The drafted energy mix in 2030 – the composition of thepower generation mix
Electricity Demand

Breakdown ofelectricity generation

Attempted energy savings: a(Total power generation)huge amount ofappr. 1278 TWhappr. 196.1 TWh(-17% compared to the case(Total power generation)
Economic
without energy savings)
Geothermal
Energy savings
growthappr.
1.0- 1.1%
Transmission and
appr.
1065
TWh
appr. 17%
distribution losses
1.7%/year
Biomass appr.
Energy3.7-4.6%
savings +Wind 1.7%
Renewables:
Renewables:
renewable
Solarappr. 22-24%
appr. 19-20%
energies:appr.
7%
around 40%

Electricity
966.6
TWh

FY 2013(historical data)

Electricity
appr.
980.8
TWh

FY 2030

Nuclear:appr. 17-18%

Nuclear:appr. 20-22%

LNG:
appr. 22%

LNG:
appr. 27%

Coal:
appr. 25%

Coal:
appr. 26%

Oil: appr. 2%

FY 2030

Hydropower
appr. 8.89.2%

Oil: appr. 3%

In the standard case without energy savings, the GDP elasticity of electricity demand is 0.68. This elasticity is
consistent with the one assessed in the RITE analysis, which is around 0.8 for the 2013-2020 period, and 0.6 for 20202030, and also consistent with that of the ‘Current Policies’ scenario in IEA WEO2014. As a result, the estimate by thegovernment seems a reasonable one. However, in the energy savings case, a significant reduction of electricity
demand (17%) is assumed (the elasticity then being 0.05), this point will be further examined in our analysis.

5Japanese government’s proposition for INDCs (2030)
6

Since GHG emissions are strongly dependent on energy mix issues, policy
making and technology development for post-2020 targets need to take carefulconsideration of technical constraints and costs in order to set achievablegoals. Based on this, the Japanese INDCs commit to reduce emission levels in
2030 by 26% compared to 2013 (which corresponds to 25.4% compared to2005), including national emissions reduction and absorption (GHG emissions
in 2030 would be about 1,042 million tCO2 in total).

Compared to 2013 (compared to 2005)
Energy-related CO2-21.9% (-20.9%)

Other GHGs

-1.5% (-1.8%)

Reduction by absorption(LULUCF)-2.6% (-2.6%)

Total GHGs

-26.0% (-25.4%)

Estimation of average
generation cost

Estimation of the evolution of the average
generation cost for the proposed mix
17

generation cost (yen/kWh)Power発電単価（円/kWh）

16
15
14
13
12
11

10
9
2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

[エネルギーミックス案]原発20+再エネ24[Proposed Energy Mix] Nuclear 20%+Renewables 24%[Proposed Energy Mix (Carbon Price included)] Nuclear 20%+Renewables 24%[エネルギーミックス案（炭素価格込）]原発20+再エネ24[Proposed Energy Mix (Carbon Price and Policy Costs included)] Nuclear 20%+Renewables 24%[エネルギーミックス案（炭素価格・政策経費込）]原発20+再エネ24
Estimation of average generation cost for the proposed mix, based on the estimation of generation costs ‘source by source’ madeby the Experts’ Working Group on Power Generation Costs (2015). For these calculations, the evolution of the energy mix
composition until 2030 was determined by one fixed scenario.
Costs in 2030 are anticipated to be 1 or 2 yen/kWh cheaper compared to current levels (2015). However, given that the developmentof renewable energies focuses on solar, costs inevitably increase compared to levels before the Great Earthquake (2010).

8

Comparison of RITE’s analysis
results* and government’s
proposition* published on the RITE website on March 31 and April 14, 2014

Power Generation in 2030
(Estimates by using DNE21+ model under the carbon prices of
WEO2014 New Policies Scenario* and the Government’s drafted mix)

10

2030
1400

水素
Hydrogen
太陽光
Solar[TWh/year]
Generation
Power
発電電力量
[TWh/yr]

1200

風力
Wind

1000

バイオマス(CCS有)Biomass (with CCS)
Biomass (without CCS)
バイオマス(CCS無)800

Gas (with CCS)
ガス火力(CCS有)

600

Gas (without CCS)
ガス火力(CCS無)Oil (with CCS)
石油火力(CCS有)

400

Oil (without CCS)
石油火力(CCS無)200

Coal (with CCS)
石炭火力(CCS有)Coal (without CCS)
石炭火力(CCS無)60%

原子力30%+石炭20%
30% + Coal 20%
Nuclear20%+ Renewables+再エネ20%+再エネ20%20% + Coal 30%
Nuclear
原子力20%+石炭30%+ Renewables 20%+再エネ20%50%

25% + Coal 25%
Nuclear
原子力25%+石炭25%+ Renewables 20%

40%

原子力25%+石炭25%
25% + Coal 25%
Nuclear15%+ Renewables+再エネ15%

原子力20%+石炭20%
20% + Coal 20%
Nuclear25%+ Renewables+再エネ25%

Part of baseload (nuclear, coal,Hydro and geoth.) generation
61%
41%
41%

原子力15%+石炭15%15% + Coal 15%
Nuclear30%+ Renewables+再エネ30%2013 electricity
現状放置composition

2013年
2013

2010年
2010

0
Government’s
proposed mix
日本政府案

Nuclear
原子力
Hydropower・
水力・地熱
Geothermal

56%

58%

Under normal conditions(2010), the baseload
represents around 60%
of power generation.

* Carbon price of 37 $/tCO2 (in 2013 price) for the WEO2014 New Policies Scenario (which corresponds to 23$/tCO2 (in 2000 price)) was assumed.

Primary energy supply in 2030
(Estimates by using DNE21+ model under the carbon prices of
WEO2014 New Policies Scenario* and the Government’s drafted mix)
2030年

Imported hydrogen
輸入水素
Imported bioethanol
輸入バイオエタノール

500

Solar
太陽光

400

Wind
風力
Biomass (with CCS)
バイオマス(CCS有)300

Biomass (without CCS)
バイオマス(CCS無)Gas (with CCS)
ガス(CCS有)200

Gas (without CCS)
ガス(CCS無)Oil (with CCS)
石油(CCS有)100

Oil (without CCS)
石油(CCS無)60%

原子力30%+石炭20%
30% + Coal 20%
Nuclear20%+ Renewables+再エネ20%+再エネ20%20% + Coal 30%
Nuclear
原子力20%+石炭30%+ Renewables 20%+再エネ20%50%

25% + Coal 25%
Nuclear
原子力25%+石炭25%+ Renewables 20%

40%

原子力25%+石炭25%
25% + Coal 25%
Nuclear15%+ Renewables+再エネ15%

原子力20%+石炭20%
20% + Coal 20%
Nuclear25%+ Renewables+再エネ25%

Part of baseload (nuclear, coal,Hydro and geoth.) generation
61%
41%
41%

原子力15%+石炭15%15% + Coal 15%
Nuclear30%+ Renewables+再エネ30%2013 electricity
現状放置composition

2013年
2013

0

2010年
2010

一次エネルギー供給[Mtoe/yr][Mtoe/year]
Primary Energy Supply

600

11

Coal (with CCS)
石炭(CCS有)Government’s

proposed mix
日本政府案

Coal (without CCS)
石炭(CCS無)Nuclear
原子力
Hydropower・
水力・地熱
Geothermal

56%

58%

* Carbon price of 37 $/tCO2 (in 2013 price) for the WEO2014 New Policies Scenario (which corresponds to 23$/tCO2 (in 2000 price)) was assumed.
Note) As in IEA statistics, (1) displayed values are in net calories, (2) the energy efficiencies for primary electricity generation are assumed to be 30%
for nuclear, 10% for geothermal, 100% for hydropower & other. (RITE conversion from values published in the government’s proposition)

Economic impact in 2030 Estimated by Using
DEARS Model (GDP and households consumption)+0.6
trillionyen+0.6兆円-0.6兆円-0.6 trillion
yen

+1.8

+0.3

450 Scenario levels of carbon prices
IEA WEO2014 450シナリオレベル

60%

0.9%

0.6%
0.2%

0.0%

0.7%

0.6%
0.3%

0.2%

0.4%

Nuclear 30% +原子力30%
Coal 20% ++石炭20%
Renewables
20%+再エネ20%

原子力20%
Nuclear 20% +Coal 30% ++石炭30%
Renewables
20%+再エネ20%

Nuclear 25% +原子力25%
Coal 25% ++石炭25%
Renewables
20%+再エネ20%

Nuclear 20% +原子力20%
Coal 20% ++石炭20%
Renewables
25%+再エネ25%-0.5%
Nuclear 15% +原子力15％
Coal 15% ++石炭15%
Renewables
30%+再エネ30%

-1.0%

0.7%

IEA WEO2014 新政策シナリオレベル
New Policies Scenario levels of carbon prices
450
Scenario levels of carbon prices
IEA WEO2014 450シナリオレベル

-0.2%

現状放置
2013
electricity
ケース
composition

-0.5%

0.5%

Nuclear 25% +原子力25%
Coal 25% ++石炭25%
Renewables
15%+再エネ15%

0.1%

-17.9
trillion yen-17.9兆円-3.0%Part of baseload generation

1.5%

0.5%

-2.5%

appr. 56%

(nuclear, coal, hydro and geothermal)

Households consumption
1.0%

-2.0%

原子力30%
Nuclear 30%+ Coal 20% ++石炭20%
Renewables
20%+再エネ20%

Nuclear 20%
原子力20%+ Coal 30% ++石炭30%
Renewables
20%+再エネ20%

Nuclear 25%
原子力25%+ Coal 25% ++石炭25%
Renewables
20%+再エネ20%

Nuclear 25% +原子力25%
Coal 25% ++石炭25%
Renewables
15%+再エネ15%

Nuclear 20% +原子力20%
Coal 20% ++石炭20%
Renewables
25%+再エネ25%50%*The impact
of carbon
price of
380$/tCO2
which wasestimatedby DNE21+

-0.5%
-1.5%

trillion yen+0.3兆円IEA WEO2014 新政策シナリオレベル
New Policies Scenario levels of carbon prices

40%

0.0%

trillion yen+1.8兆円-1.0%+1.0
trillion yen+1.0兆円-3.6兆円-3.6 trillion yen

Note
The reference case is the2013 composition ofelectricity mix and IEA WEO
New Policies Scenario (forcarbon intensity)

consumption
Households
家計消費の変化variation (in % compared to(%,基準ケース比)
case)
the reference+3.0 trillion
yen+3.0兆円< Government’s
proposition *>原子力20-22%
Nuclear 20-22% +Coal 26% ++石炭26%
Renewables 2224%+再エネ22-24%+0.2
trillionyen+0.2兆円+3.5 trillion
yen+3.5兆円+3.3 trillion
yen+3.3兆円+4.0 trillion
yen+4.0兆円

0.0%
-0.5%
-1.0%
-1.5%
-2.0%
-2.5%
-3.0%
-3.5%

< Government’s
proposition *>-2.8%
原子力20-22%
Nuclear 20-22% +
26% +
Coal
+石炭26%
Renewables 22+再エネ22-24%
24%+1.9 trillion
yen+1.9兆円+2.6 trillion
yen+2.6兆円

原子力15％
Nuclear 15% +Coal 15% ++石炭15%
Renewables
30%+再エネ30%

0.6%
0.4%
0.2%
0.0%
-0.2%
-0.4%
-0.6%

現状放置
Business
2013
Business
electricity
usual
as
usual
asケース
composition

GDPの変化(in % comparedGDP variationreference case)to the (%,基準ケース比)

GDP 0.8%

12

Comparison between RITE model’s results andgovernment propositions
 As shown on P.5, despite a high GDP growth rate (1.7%/year)

projection, the power generation after GHG reduction
measures is anticipated to increase rather modestly.
 Compared with the results of the analysis of several scenarioswith RITE’s economic model, the GDP loss and consumption
loss for the government’s proposition is quite substantial.
 The electricity mix proposed by the government is well-balanced enough not to trigger important economic losses(The GDP under the energy mix is about +0.36 to +0.38%
compared to that in the case assuming the 2013 electricity
composition). However, substantial energy savings are
expected, and therefore a high carbon price (whether explicit
or implicit) is estimated to meet these goals (p.31). According
to the assessment by our economic model, achieving thesetargets will require considerable costs as seen in p.12.

13

Assessment of electricity
demand assumptions

Assessment of electricity demand outlook15

 As we indicated, in the government’s proposition, despite a highGDP growth rate (1.7%/year) projection, the power generation after
GHG reduction measures is anticipated to increase rather modestly.
Here are the results of a more detailed analysis conducted in order toassess the government’s anticipations.
 First, we checked the relationship between GDP change andelectricity demand variation (GDP elasticity of electricity demand) in
the government’s proposition against past values of electricity
elasticity in OECD countries.
 Second, we took a look at past occurrences of high increases ofelectricity costs in major European countries (Germany, Italy, UK)and the cost increase effects on electricity demand.
 Last, we used past research by Prof. Nomura et al. (Keio University)that analyzed how the electricity cost increase in Germany and Italy
affected the industry and related sectors’ growth.

GDP elasticity of electricity demand forOECD countries (5-year average)
Electricity elasticity
GDP弾性:
1.0 > 1.0

6Electricity (%)
電力年成長率consumption annual
growth rate (%)

GDP elasticity of electricity demand > 1.0

Variation rate on a 5year span for 4 periods :Japan

GDP弾性: >1.0

Germany

5FranceItaly
GDP弾性: <1.0
GDP elasticity of electricity demand < 1.0

4

United Kingdom
Netherlands
Denmark

3

SwedenSpain
United States

2

CanadaAustralia
Korea

1(1990-92)～(1995-97)(1995-97)～(2000-02)(2000-02)～(2005-07)(2005-07)～(2010-12)(We take 3-year
averages in order toavoid singularities that
may be caused byparticular circumstancesat one time point, suchas natural catastrophy or
financial crisis)

Hungary
PolandTurkey

0
-2

-1

0

1

2

3

4

5

6

GDP年成長率(%)
GDP annual
growth rate (%)-1-2
Effect of the Great
Earthquake onelectricity supply

Government’s energy mix
GDP’s
assumed level(1.7%)
Cases of negative
elasticity are very
rare

16

GDP elasticity of electricity
demand is a little less than 1.0
in most OECD countries

GDP elasticity of electricity demand forOECD countries (10-year average)
Electricity elasticity > 1.0

GDP弾性: 1.0

7
電力年成長率(%)
Electricity
consumption
annual growth rate (%)

GDP elasticity of electricityGDP弾性:
demand > 1.0>1.0

France
GDP弾性:GDP elasticity of electricity
demand<1.0
< 1.0

5

Netherlands
Denmark
SwedenSpain
3
United States
CanadaAustralia

2

Korea
Hungary
1
PolandTurkey
0
-1

0

1

2

3

4

-1

Government’s energy mix
Effect of the Great GDP’s assumed level(1.7%)
Cases of negative
Earthquake onelasticity
are very rareelectricity supply

5

6
7
GDP年成長率(%)
GDP annual growth rate (%)(1990-92)～(2000-02)(1995-97)～(2005-07)(2000-02)～(2010-12)

Italy
United Kingdom

4

Variation rate on a 10year span for 3 periods

Japan
Germany

6

17(We take 3-year
averages in order toavoid data distortion
that may be caused bysingularity at one time
point, such as natural
disaster or financial
crisis)GDP elasticity and price elasticity of electricity demand
Germany18

240

Index (100 base = year 2000)
指標（2000年=100）

220
200

180

電力消費量
Electricity consumption

160
140

GDP

120

100
80
60

Electricity price for the industry sector
電気料金：産業（家庭の(base 100 = residential price in 1990)
1990年=100）
Electricity price for the residential sector
電気料金：家庭

40
20【Multiple regression analysis】
1990-：GDP elasticity 0.76, Price elasticity -0.03
0（Constant coefficient：0.89）
1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2000-：GDP elasticity 0.49, Price elasticity -0.03（ Constant coefficient ：0.41）

The GDP elasticity of electricity demand in Germany varies between 0.5 and 0.8. The lowest levels ofelectricity elasticity were observed twice : at the time of the reunification of Germany and recently,
as the effects from the rapid increase in electricity costs are starting to appear on prices for
consumers. However, the multiple regression analysis shows that the price elasticity remains small.

GDP elasticity and price elasticity of electricity demandItaly19

180

Index (100 base = year 2000)
指標（2000年=100）

160
140
120

Electricity consumption
電力消費量

GDP

100
80

Electricity price for the industry sector
電気料金：産業（家庭の(base 100 = residential price in 1990)
1990年=100）

60

Electricity price for the residential sector
電気料金：家庭

40
20【Multiple regression analysis】
1990-：GDP elasticity 1.27, Price elasticity -0.06
0（Constant coefficient：0.99）
1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2000-：GDP elasticity 1.07, Price elasticity 0.06
（ Constant coefficient ：0.85）

The GDP elasticity of electricity demand in Italy varies in a range of 1.0. Although the electricity
consumption seemed to go down from 2006, the correlation with GDP is strong. As for Germany, theprice elasticity remains small (against intuition, from 2000, it remains positive).

GDP elasticity and price elasticity of electricity demandUnited Kingdom

20

220

指標（2000年=100）
Index (100 base = year 2000)

200
180

電力消費量
Electricity consumption

160
140

GDP

120
100
80
60

Electricity price for the industry sector
電気料金：産業（家庭の(base 100 = residential price in 1990)
1990年=100）
Electricity price for the residential sector
電気料金：家庭

40
20【Multiple regression analysis】
1990-：GDP elasticity 0.45, Price elasticity -0.10
0（Constant coefficient：0.94）
1978 1982 1986 1990 1994 1998 2002 2006 2010 2014 2000-：GDP elasticity 0.61, Price elasticity -0.11（ Constant coefficient ：0.60）

Compared to Germany and Italy, the GDP elasticity of electricity demand of United Kingdom is rather
low (which can be partly explained by the high share of financial services in the UK economy), but still
varies within a 0.5 range. The price elasticity is significantly more important then in Germany and Italy
with a value of -0.1 (which means that if the price increases by 100%, the demand decreases by 10%).

Electricity cost and growth rate for industry sectors
Germany (before electricity price hike)
Cost share of electricity in industry sectors (vertical axis) and annual growth rate of Industry-GDP (horizontal axis)
in Germany(1995-2000)
Source: Keio University, Prof. Nomura, WIOD Data（http://www.wiod.org/）. Calculation base on German National Use Tables（ Feb. 2015）

Cost Share of Electricity, Gas and Hot Water in Industy Output in 2000

3.0%

Other Non-Metallic Mineral

2.5%
MetalsInland Transport
Textiles

2.0%

Chemicals

Rubber and Plastics

Wood
Pulp, Paper, Paper Printing

1.5%

Hotels and Restaurants
Food
Agriculture
Retail Trade

Leather
Education
Manufacturing, Nec; Recycling

1.0%

Health and Social Work
Motor Vehicles and Motorcycles

Post and Telecommunications

MachineryTransport Equipment
Electrical and Optical Equipment

Public Admin and Defence
Other Community

0.5%

Other Supporting

Wholesale Trade
Financial Intermediation

FISIM

Renting of M&Eq
Real Estate
Private Households with Employed
Air Transport
Persons-2%0%Construction

Water Transport

0.0%

-8%

-6%

-4%

2%

4%

6%

8%

10%

Annual Growth rate of Industry-GDP at Current Basic Prices during 1995-2000(difference from the GDP growth of total economy)

12%

21

Electricity cost and growth rate for industry sectors
Germany (after electricity price hike)
Cost share of electricity in industry sectors (vertical axis) and annual growth rate of Industry-GDP (horizontal axis)
in Germany(2000-2011)
Source: Keio University, Prof. Nomura, WIOD Data（http://www.wiod.org/）. Calculation base on German National Use Tables（ Feb. 2015）
Cost Share of Electricity, Gas and Hot Water in Industy Output in 2011

3.5%
Other Non-Metallic Mineral

3.0%
Textiles2.5%
Pulp, Paper, Paper Printing
Wood

MetalsRubber and Plastics

2.0%
Chemicals
Inland Transport
Food

1.5%
Coke

Leather

Agriculture
Hotels and Restaurants
Education
Retail Trade
Manufacturing, Nec; Recycling
Motor Vehicles and Motorcycles
Health and Social Work

1.0%

Public Admin and DefenceElectrical and Optical Equipment
Post and Telecommunications
MachineryTransport Equipment
Other Supporting

0.5%

Other Community

Air Transport

Wholesale Trade

Financial Intermediation
Construction Private Households withReal
EstateEmployed
Renting of M&Eq
Persons
FISIM

Water Transport

0.0%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

Annual Growth rate of Industry-GDP at Current Basic Prices during 2000-2011(difference from the GDP growth of total economy)

Although moderate, the correlation between electricity costs and economic growth in
the industry sector can be seen on this graph.

22

Electricity cost and growth rate for industry sectors
Italy (before electricity price hike)
Cost share of electricity in industry sectors (vertical axis) and annual growth rate of Industry-GDP (horizontal axis)
in Italy (1995-1999)
Source: Keio University, Prof. Nomura, WIOD Data（http://www.wiod.org/）. Calculation base on Italian National Use Tables（ Feb. 2015）
Cost Share of Electricity, Gas and Hot Water in Industy Output in 1999

6%
Other Non-Metallic Mineral

5%

4%

Rubber and Plastics
Pulp, Paper, Paper Printing

3%

TextilesChemicals

Mining

Metals Public Admin and Defence

Food
Wood

2%
Retail Trade

Coke

Hotels and Restaurants

Agriculture
Machinery

Post and Telecommunications
Electrical and Optical Equipment
Inland Transport
Motor Vehicles and Motorcycles
Other Community
Education Health and Social Work

1%

Leather

Other Supporting
Manufacturing, Nec; Recycling

Water Transport

Financial Intermediation

Air Transport

0%
-13%

Transport Equipment

-12%

-11%

-10%

-9%

FISIM

-8%

-7%

-6%

-5%

-4%

Wholesale Trade
Private Households with Employed
Persons

Construction

-3%

-2%

-1%

Renting of M&Eq
Real Estate

0%

1%

2%

3%

4%

5%

Annual Growth rate of Industry-GDP at Current Basic Prices during 1995–1999(difference from the GDP growth of the whole economy)

6%23

Electricity cost and growth rate for industry sectors
Italy (after electricity price hike)
Cost share of electricity in industry sectors (vertical axis) and annual growth rate of Industry-GDP (horizontal axis)
in Italy (1999-2011)
Source: Keio University, Prof. Nomura, WIOD Data（http://www.wiod.org/）. Calculation base on Italian National Use Tables（ Feb. 2015）
Cost Share of Electricity, Gas and Hot Water in Industy Output in 201110%
Other Non-Metallic Mineral

9%

8%

7%

6%

Rubber and Plastics

5%

Pulp, Paper, Paper Printing

Chemicals

4%

TextilesMiningRetail Trade

Food

Wood
Agriculture3%

Post and Telecommunications

Machinery

Hotels and Restaurants

MetalsElectrical and Optical Equipment

Public Admin and Defence

Transport Equipment

Other Community
Manufacturing, Nec; Recycling
Health and Social Work
Motor Vehicles and Motorcycles
Leather
Renting of M&Eq
Education
Inland Transport
Real Estate
Construction
Coke
Other Supporting
Water Transport
Financial Intermediation
Private Households with Employed
FISIM
Wholesale Trade
Persons

2%

1%
Air Transport

0%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

Annual Growth rate of Industry-GDP at Current Basic Prices during 1999–2011(difference from the GDP growth of the whole economy)

Although moderate, the correlation between electricity costs and economic growth in
the industry sector can be seen on this graph.

24

Assessment of INDCs (emissions
reduction targets for 2030)
Focus on international fairness
and ambition levelEquity assessment of the emission reduction efforts
across countries

26



Obviously there are disparities between countries: it is essential that emission
reduction efforts should be as equitable as possible, taking into account the specificcontexts of all countries.

However, in a context of international competition, if there are major disparities inmarginal abatement costs from one country to another, production is likely to shift fromcountries with high marginal abatement costs to countries with low abatement costs even if the energy efficiency of their production processes is higher in the former
countries - which would make difficult to continue sustained effort. Moreover, if thecountries with low marginal abatement costs have low energy efficiency as well, they
may increase world total emissions. As a result, emissions targets have an urgent needfor international balance especially regarding marginal abatement costs.

In order to make a proper assessment of emissions reductions efforts and their
reduction implementation, it is important to look at them in the light of appropriate
indicators.



Since every indicator has strong and weak points, it is difficult to evaluate emissions
reductions efforts with one single indicator. It is thus important to choose anappropriate set of several indicators, to show emission reduction efforts, identify thepotential weaknesses leading to further emission cuts.
For instance, the emission reduction rate estimated from one particular reference year
is not representative. In particular, choosing a year from the distant past such as 1990
does not allow taking into account the major changes that later occurred in society, andis all the more unlikely to be representative of emission reduction efforts.

Emissions reduction rate from base year of INDCs
for Japan and other major countries
Emissions reduction rate from base year
From 1990

From 2005

From 2013

Japan：in 2030, -26% from2013 levels-18.0%-25.4%-26.0%

US： in 2025, about -26 to-28% from 2005 levels-14 to -16%

-26 to -28%

-18 to -21%

EU28： in 2030, -40% from1990 levels

-40%

-35%

-24%

Russia： in 2030, -25% to 30% from 1990 levels-25 to -30%

+10 to +18%

ー

China： in 2030, -60% to-65% of CO2 intensity from2005 levels+329 to +379%+105 to +129%

ーIf we take 2013 as the base year, the Japanese targets are more ambitious in the emissions
reduction rate than the US or European ones.

27

GHG intensity of GDP (MER)28

GHG intensity of GDPMER (kgCO 2eq/US2005 $)

1.4

China
1.2

Russia

1

1.07
0.91

0.8

South Korea

0.6

EU-28
0.4

United States
0.27

Japan

0.18
0.16

0.2
0
1990

0.32

2000

2010

2020

2030

Note) The lower range of emission targets are shown for the countries submitting their INDCs with ranges.

Even from the GHG intensity, the Japan’s INDC sets a more demanding target than the
US or the EU.

Changes in GDP and CO2 intensity
Records for the 10-year period from 2002 to 2012 and INDCs
World

0

Japan
Mexico-1

Change in CO2 per GDP (%/yr)

Saudi Arabia

Korea

India
South Africa

Italy

Germany
-2
EU28

China

CanadaAustralia

FranceSpain

Indonesia

Increase of amounts of CO2 emissions in 2012 compared to 2002

UK
US
EU28(2010-30)-3

RussiaJapan(2013-30)-4Larger efforts of
CO2 reduction in US(2010-25)
this direction canbe recognized!?

-5
Decrease of
CO2 intensity in2012 compared
to 2002-6

China(2010-30)

Russia(2010-30)

Decrease of amounts of CO2 emissions in 2012 compared to 2002

-2

0

2

4

6

8

10

12

Change in GDP (%/yr)
Note : The CO2 intensity in 2012 for Japan was strongly impacted by the shut down of all nuclear reactors.

Even based on the relationship between GDP growth rate and emissions intensitychanges, the Japanese INDCs appear as ambitious emissions reduction targets.

29

GHG emissions per capita
30

25

Emissions per capita (tCO2eq/capita)

United States
20

15

17.9
Russia14.8
South Korea
11.1
10.9
8.9

Japan

10

EU-28

China
5

0
1990

2000

2010

2020

6.6

2030

Note) The lower range of emission targets are shown for the countries submitting their INDCs with ranges.

CO2 marginal abatement costs for the INDCs of Japanand other major countries (RITE DNE21+ estimate)
Marginal abatement cost ($/tCO2eq)
Low case
Japan：in 2030, -26% from2013 levels

High case

About 380
(for the target of energy-related CO2 only, the estimate is about 260)

US： in 2025, about -26 to-28% from 2005 levels

60

EU28： in 2030, -40% from1990 levels

69

166

Russia： in 2030, -25% to 30%
from 1990 levels

06China： in 2030, -60% to-65% of CO2 intensity from 2005
levels～0～0Note : All the costs do not consider LULUCF measures.

The marginal abatement cost for the Japan’s INDCs is estimated to be substantially higher
than in other countries, because high energy savings are expected in the INDCs despite ofgood performances in energy efficiency in Japan (see References).

31

Emissions reduction costs relation to GDP for the INDCs ofJapan and other major countries (RITE DNE21+ estimate)
Emissions reduction costs per GDP (%)
Low case
Japan：in 2030, -26% from2013 levels
US： in 2025, about -26 to-28% from 2005 levels

High case

About 0.7
0.36

EU28： in 2030, -40% from1990 levels

0.42

0.82

Russia： in 2030, -25% to
30% from 1990 levels～0～0China： in 2030, -60% to-65% of CO2 intensity from2005 levels～0～0

The Japanese target appears as stringent as the European ones in the light of the indicator ofemission reduction costs per GDP.

32

Linkage with long-term targets

Linkage with the Article 2 of the United Nations
Framework Convention on Climate (long-term goals)

34[Article 2 of the United Nations Framework Convention on Climate]
The ultimate objective of this Convention and any related legal instruments that theConference of the Parties may adopt is to achieve, in accordance with the relevant
provisions of the Convention, stabilization of greenhouse gas concentrations in theatmosphere at a level that would prevent dangerous anthropogenic interference with theclimate system. Such a level should be achieved within a time-frame sufficient to allow
ecosystems to adapt naturally to climate change, to ensure that food production is notthreatened and to enable economic development to proceed in a sustainable manner.


Since the objectives of the Article 2 of the Convention are not described in concreteterms, international targets are widely subject to debate: it is much discussed whether
the INDCs are consistent with the “2C target” (the target that limits temperature rise
below 2C compared to preindustrial levels).



At first, the consistency between the required emissions pathways for the 2C target
and the submitted or announced INDCs of major countries (Japan also included) was
analyzed. (RITE published its understanding of the last IPCC report about what path to choose
for the 2C target, on its website on April 22, 2015: “Interpretation of IPCC AR5 Scenarios
under better understanding of climate sensitivity assessments, and the implications of INDCs
in terms of 2C target”. Please also see.)At second, we made an analysis regarding the balance of the burden sharing in Japan interms of emission reduction costs in 2030 and 2050.

Relationship between climate sensitivity and global
emission pathways for 2C target, and outlook on INDCs

Deeper emission
reductions should be
realized throughtechnology
innovations although
they are uncertain.

Larger emission reductions
should be realized throughpeer-reviews in the PDCA cycle.

80

70

GHG emissions (GtCO2-eq./yr)

35

60+2 C with around
50% probability

50AR5
530-580 ppm(+7 -47%)

40

30
Actual emissions20

AR5
480-530 ppm(-25 -57%)

Emissions under current policies and measures
INDCs submitted by March 31 assumed to be implemented + China's pledge

AR5 430-480 ppm(-41 -72%)

Below +2.0 ºC through 2100 under climate sensitivity of 2.5 ºC; temporary overshoot of 580 ppm

10

The probability
achieving below+2C increases.
On the other hand,measures withunrealisticallyhigh costs have tobe adopted.

Below +2.0 ºC in 2100 under climate sensitivity of 3.0 ºC; temporary overshoot of 530 ppm
Below +2.0 ºC through 2100 under climate sensitivity of 3.0 ºC; below 500 ppm through 2100

0
1990

2000

2010

2020

2030

2040

2050

Estimated by RITE

There are large gaps between the expected global emission under current INDCs
and the emission pathway to 2C target under climate sensitivity of 3.0C.
However, the INDCs are consistent with 2C target if climate sensitivity is 2.5C.

The framework of theprocesses to induce future
emission reductions are
more important than thelevels of INDCs decided in
COP21.

Assessment of equity across generations in terms ofemissions reduction costs for future time points

36

Emission reduction costs in 2030 and 2050 were compared, applying INDCs emissions
reduction for 2030 and assuming a cut by half of world total energy-related CO2
emissions in 2050 compared to 2005 levels as a long-term goal (Marginal abatement
costs are assumed to be equal across countries in 2050.).

The expected marginal abatement cost is 431$/tCO2 in 2050 for the long-term goal. At
that time, the Japanese emissions are assessed to be about half of 2005 emissions
levels under the equal marginal abatement costs, and the ratio of emissions reductions
costs compared to GDP to be 0.74%. In other words, the economic burden of Japanese
INDCs for 2030 is about the same level as the cut by half of emissions worldwide in 2050.

GHG emission, marginal abatement costs, ratio of emissions reduction costs compared to GDP for Japan

2030
GHG emissions (compared to2005 levels)

2050(Reduction by half of world total energy-related CO2
emissions after equalization of marginal abatement costs)-25.4%-50%

Marginal abatement cost ($/tCO2)

381

431

Ratio of emissions reduction costs
compared to GDP (%)

0.72

0.74

[Reference]In the case of below +2C through 2010 under climate sensitivity of 2.5C, the required GHG emission for Japan in 2050 is -32% compared to2005, and the marginal abatement cost is 40$/tCO2; the emissions reduction costs per GDP is 0.22%.
In the case of below +2C in 2010 (overshoot of temperature) under climate sensitivity of 3.0C, the required GHG emission for Japan in 2050 is-48% compared to 2005, and the marginal abatement cost is 360$/tCO2; the emissions reduction costs per GDP is 0.65%.

Main points on long-term targets
37

 Even if we assume to stay within a 2℃ warming compared topreindustrial levels, there is great uncertainty regarding the actual
outcome due to climate sensitivity; based on the latest expertise of the
IPCC Fifth Assessment Report, the emissions pathways for the “+2℃”
target present a high flexibility. The INDCs published so far, including theJapanese ones, are within the pathway range to meet the 2℃ target as
long as the expected value is used (under a climate sensitivity of 2.5℃).
 In a long-term perspective, we should keep enhancing the INDCs thorughthe enforcement of PCDA cycles and development of innovativetechnologies.
 The maximum allowable global emissions are comprised within a wide

range, which makes it difficult to assess the right amount; and for now,
we might assume the long-term target consists of cutting emissions byhalf compared to 2005, which is pretty stringent. Still, if we measure theJapanese intergenerational emissions reduction efforts for 2030 and 2050
in terms of the ratio of emission reduction costs to GDP, they are
estimated to be roughly the same: 0.72% in 2030 and 0.74% in 2050. In
regard with the long-term targets, the Japanese INDCs for 2030 can thus
be assessed as sufficiently large.

Conclusions

Conclusions (1/2)
39Considering the need to answer in a balanced way to the national preoccupations
known as the 3E+S, namely: controlling electricity costs, reducing CO2 emissions,ensuring energy security and stability of supply, the government’s proposition for
the energy mix is generally assessed as appropriate.

However, the government’s energy outlook anticipates a GDP growth of 1.7% per
year, and simulteanously, a growth of electricity demand of 0.1% only (the GDP
elasticity: 0.05). The electricity in Japan is estimated close to 1.0 if we set aside
the time right after the Great Earthquake when electricity savings wereendeavored at all costs; since many OECD countries have an elasticity between
0.5 and 1.0, the government projection is small compared to historical records.

Even among countries where the GDP elasticity seems low, in many of themelectricity demand is constrained through the effects of rising electricity costs on
prices. On the other hand, in many countries where we observe a low priceelasticity, keeping the demand in control requires considerably high electricity
prices.



In the government’s outlook for long-term energy demand, the basic policy
intends to “decrease prices under current levels”. According to the abovementioned facts, given the strong correlation between GDP and potential
electricity demand, decreasing electricity demand substantially thourgh electricity
savings while “decreasing prices under current levels” – even a little – is achallenge which has not yet been addressed anywhere in the world.

Conclusions (2/2)
40 As for GHG emissions targets, the comparison of the INDCs of majorcountries through several indicators leads to high evaluation of Japan’s
INDCs. However, since these ambitious targets are based on highexpectations from the energy savings policy (corresponding marginal
abatement costs in Japan are exceedingly high compared to other countries),
it will not be easy to achieve such ambitious target. The international
competition in the industry is also a concern.
 Regarding long-term targets (the “2C” target), the range for emission

pathways to achieve the 2C target is very wide; the INDCs are likely to be on
the track of the pathways of 2C target if more than 50% achievability for thetarget is adopted and the median value of equilibrium climate sensitivity is 2.5
C. (The climate sensitivity was changed from 2.0-4.5C in the IPCC AR4 to
1.5-4.5C in the IPCC WG1 AR5.)
 Moreover, we evaluated the burden sharing of emissions reduction costs

between 2030 and 2050 in Japanese target: for now, the long-term target
consists in cutting emissions by half compared to 2005. The Japaneseintergenerational emissions reduction efforts for 2030 and 2050 in terms of
the ratio of emission reduction costs to GDP are estimated to be roughly thesame and rather than passing the costs to future generations, they offer areally good intergenerational balance of burden sharing.

References

Comparison of energy efficiencies
in major energy sectors (1/2)
43

Japan

41

Germany

39

Coal power generation

US37

Source: RITE, 2014 (estimation based IEA
data, 2013)

China

35

Korea

33

Russia

31

India

29
EU (27)
27
World
25
1990

1995

2000

2005

2010
60
Spain

Gas power generation

55

Source: RITE, 2014 (estimation based IEA data, 2013)

The value of the ratio of energy outputs to GDP
level (the ratio of primary energy consumption
to GDP) varies according to the structure of theindustry. Moreover, in order to evaluate theemission reduction efforts, it is necessary tomeasure separately the energy intensities(energy efficiency) of the main sectors and the
production processes.

UK
Mexico50

Efficiency (%)

Efficiency(%)

42

Italy
45

US
Japan

40

Iran
35

RussiaEU (27)

30

World
25
1990

1995

2000

2005

2010

Comparison of energy efficiencies
in major energy sectors (2/2)
Primary energy consumption of BOF steel(GJ/ton of crude steel)

35

2010

30

28.3
25.9 25.7

25

34.5

33.1

2005

23.1

22.9

26.8

27.7 27.7

28.1 28.2

28.9

28.3

29.1

43

33.2
31.1

30.0 30.3

Iron andsteel(BOF
steel)

28.3

23.5 23.8

20

15
Source: Oda et al. 2012;
RITE, 2012

10
Japan

Korea

Germany

China

FranceUK

India

BrazilUS

RussiaUkraineCement(Clinker)

Source: RITE estimatebased on WBCSD/CSI
data

Heat consumption of clinker production(GJ/t-clinker)

6

2005

5.4

2010

5.2

5
3.7 3.84
3.1 3.3

3.3 3.3

Japan

India

4.0

4.2

3.9

3.8

4.0

4.2

4.0

3.5

3
2

1
0
Germany

UK

FranceUS

China

RussiaComparison of marginal abatement cost curves
in major countries (2030)

44

400
米国
US

abatement costs [$/tCO2eq]
GHG marginal
GHG限界削減費用

350

EU28
日本
Japan

300
250
200
150
100
50
0

-20

-10

0

10
20
30
40
50
60
GHG reduction2005年比GHG削減率
rate compared to 2005 [%]For the same GHG emissions reduction ratio compared to 2005, the marginal abatement
cost is higher in Japan than in the US or Europe.
*For this marginal cost abatement curve, we made the assumption of an equalization of world abatement costs for each price range.