False or True? : The Keidanren Voluntary Action Plan In JapanA Typical Example of “Pledge and Review” System

SummaryThe Keidanren Voluntary Action Plan is an environment action plan devised by the Nippon
Keidanren (Japan Business Federation) that makes no commitment to the Japanese governmentthat targets will be met. The industrial sector and the energy conversion sector account for 64% of
total CO2 emissions and form the core of the Kyoto Protocol Target Achievement Plan of Japan(hereinafter referred to as “Government Plan”).
In the Government Plan, most of the reductions in the industrial sector are reliant on the Keidanren
Voluntary Action Plan and other real policies have not been implemented. However,
The Keidanren Voluntary Action Plan is a plan that uses “easy targets” through “indicatorsconvenient to the industry,” and does not aim to reduce emissions of greenhouse gases. It
cannot become an alternative for emissions trading system.
The Japanese Government Plan mainly focuses on the Keidanren Voluntary Action Plan for
reductions in the industry and power generation sector, and power and steel industries faces
significant shortage to meet their own voluntary targets. That makes achievement of the Kyoto
Protocol targets in danger. Policies such as an emissions trading system must be implemented
quickly.
The Keidanren Voluntary Action Plan is a typical example of “Pledge and Review” System”.
Based on these lessons, a pledge and review system should not be adopted in the negotiation ofpost- 2012 framework.

Dec. 2007, in Bali, COP13/MOP3
Kiko Network
http://www.kikonet.org/

11. Japan’s Government Plan and the Keidanren Voluntary Action Plan
The Japanese government is aiming for the 6%
reduction stated in the Kyoto Protocol.
Of this target, forests sinks accounts for 3.8% andKyoto mechanisms account for 1.6%, with domestic
reductions accounting for a mere 0.6% (Figure 1).
Moreover, gases other than CO2 are also reduced, soenergy related CO2 is aimed to increase by 0.6%.*
However, in 2005, greenhouse gases in Japan had
increased by 7.8% compared to Kyoto base year. In
particular, there has been a significant increase in thenumber and emissions of coal-fired power plants(Figure 2), and emissions have increased substantiallysince the 1990s, equal to the amount of emissions
increase from 1990.
The Japanese energy conversion sector and industrial
sector account for 64% of CO2 emissions, which ishigher than any other developed nation (Figure 3).
Approximately 5000 factories and power plants accountfor 63%, and only 180 power plants and factories
account for 50% of Japan’s total CO2 emissions (directemissions) (Figure 4). Japan’s achievement of Kyoto
Protocol targets seems to depend on the measures
implemented in these major power plants and factories.

Domestic emission reduction▲0.6%
CO2from fossil fuel ＋0.6%
other GHG ▲1.2%(GHG emission in base year =100%)

Forest & Kyoto Mech. ▲5.4%
Forest Management▲3.8%(kyoto protocol article3.4、special bonus to Japan)

Kyoto Mechanism ▲1.6%

Kyoto Protocol
Target ▲6%Base year

Most of reduction:
Forest Management & Kyoto
Mechanism
CO2from fossil fuel :+0.6% from1990 levelFirstcommitment
periodFigure 1: Breakdown of Japanese Reduction
Targets only Partially Comprised ofDomestic Reductions

z*6 gas emissions up 0.6% from base year. As 90% of Japan’s energy iszderived from carbon dioxide, the increase in emission gases is expected
zto be the same.

Figure 2: Rapid Increase in Coal-fired
Power Generation in Japan
Created based on energy balance tables fromthe Agency for Natural Resources and Energy

Figure 3: International Comparison of CO2Emission Structure

Figure 4: Japan’s CO2 Emission Structureby Emission Location

Based on Greenhouse Gas Emission Inventory for Japan,

Based on materials disclosed by Kiko Network in accordancewith the Law Concerning the Rational Use of Energy (FY2003)
and Greenhouse Gas Emission Inventory

EU and US2

2. The Actual State of the Keidanren Voluntary Action Plan
The Keidanren Voluntary Action Plan was
8.6%
started in 1997 and is in its 10th year. AtGovernment
reduction for
Industrypresent, it boasts participation from 35
Targetsectorindustries in the energy industry, the mining
industry and the construction industry. Thegovernment plan aims to reduce emissions by KeidanrenTarget0%
reduction
8.6% in the industrial sector, whereas the 2010
target for the Keidanren Voluntary Action Plan
85%
90%95%100%
only sets out to stabilize emissions at the samelevel as 1990.
Figure 5: Differences between the Government Plan
The Keidanren Voluntary Action Plan isand the Keidanren Voluntary Action Plan
positioned as a Kyoto Protocol Target
Achievement Plan in the government plan, but there is no agreement with the government and there
has never been public discussion about the basis or appropriateness of the target levels.
Problems with the Keidanren Voluntary Action Plan are listed below.
- “Target Indices that Suit Industry”
Industries select one or several target indices from CO2 emissions, CO2 per unit, energy consumptions,energy consumptions per unit. And CO2 reductions are not must. Because of this, indices that suitindustry circumstances are selected (Table 1).
Table 1: Examples of Target Indices that Suit Industry
Gross TargetsEfficiency Targets

CO2 Targets

Energy Targets

Industries with declining production
e.g. Automobile manufacturing, etc.

Industries with increasing production
e.g. Power companies,electric/electronic manufacturing, etc.

Industries with declining production
with an increased proportion of carbon
e.g. Steel manufacturing, etc.

Industries with increasing production withan increased proportion of carbon
e.g. Chemical industry, cement*, etc.

* Cement used efficiency targets as production was initially expected to increase when the targets were established.

- Target levels are easy and do not aim to reduce future emissions.
Keidanren Voluntary Action Plan has not been revised in 10 years.
The targets used by the individual industry groups forming the Keidanren Voluntary Action Plan are
also easy targets. There are even some industries that accept deterioration of energy efficiency and CO2
emissions per unit in the period between 1990 and 2010.
- “Production Indices that Suit Industry”
In the Keidanren Voluntary Action Plan, most industry groups have selected indices that have been
increasing since 1990, artificially creating energy-saving records by manipulating the use of target
indices at their own discretion. For example, nominal production is used for automobiles, which have ahigher unit price, while real production is used instead of nominal production for electric/electronics,
which have a lower unit price.
3- “Convoy System”
The plan uses industry organizations and units, and the measures and efforts employed by individual
businesses and locations are hidden within the black box. Because of this, the potential for reductionsin individual businesses and locations remains unknown, with businesses that make efforts being
unrewarded and free-riders reaping the benefits. Because of this, it does not work as an incentive.

3. Detrimental Effects of the Keidanren
Voluntary Action Plan
Enhancement of government policies has been
postponed by industry as target indices andtarget figures are chosen to suit industry incontinual self-evaluations proclaiming targets
have been reached. Coal consumption has
increased as a result of measures not being
implemented, and coal consumption has
particularly increased in electric powercompany plants and self-generation facilities in
the manufacturing industry.
The energy efficiency of industry has been
deteriorating since 1990 (Figure 6).

Figure 6: Energy Efficiency of Japanese Industry in
Decline during the 1990s
Created based on the “Handbook of Energy & Economic Statistics inJapan” from the The Institute of Energy Economics

4. The Government Plan Risks Failing to Achieve Targets by Continually Relying on theKeidanren Voluntary Action Plan
Even the easy targets set in the Keidanren Voluntary Action Plan do not seem likely to be achieved.
The government has stated that excess CO2 emissions amount to 34 million tons (2.7% of the Kyotobase year emissions), but Kiko Network believes these are optimistic forecasts, and that excessemissions are forecast to reach 150 million tons of CO2 (12% of the Kyoto base year emissions) under
the current policies lacking in emissions trading and carbon tax. More than half of this is in power andsteel manufacturing that are unlikely to reach their targets in the Keidanren Voluntary Action Plan
(Figure 7).
In Autumn of 2007, industry groups “voluntarily” raised targets, creating a stir. However, 11 of the 18
industries that raised targets have achieved their “targets” for many years and the new targets are
below the levels already being achieved. The raising targets in these industries are in name only andcannot be called additional reductions.

<By Sectors><By Measures>
Figure 7: Japan’s Government Plan
Lacks Reduction Measures(Overestimation of Targets)
Kiko Network “List of Evaluations of Measures inthe Kyoto Protocol Target Achievement Plan”

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5. Japanese Industry has not Dried Up (Great Reduction Potential)
Keidanren claims that the Japanese industrial sector has
dried up and has no room for reductions, but these claims
are baseless as shown by the facts below.
(1) Room for energy efficiency improvementsThe energy efficiency distribution in power plants andparts of the manufacturing industry shows that theefficiency of the best power plants is almost double that of
the worst (Figure 8), and significant reductions can beachieved by aiming to become a “top runner plant” byemploying the best technologies available in all plants.

Energy consumption per product unit [GJ/t](2) Room for fuel conversion
Emissions can be reduced by 12% by converting coal(excluding coal and cokes used in steelproduction) used in power generation andindustry to natural gas. Emissions can also be
reduced by 5% simply by fully utilizing
underused natural gas fired power generationand lowering the equivalent amount of coal firedpower generation.
(3) International comparison of energy
efficiency
According to estimates made by the Ministry of
the Environment, Japan is being overtaken by
Europe in energy consumption per unit ofproduction in the steel and paper manufacturingindustries (Figure 9).

Figure 8: Distribution of Energy Efficiency of EachPower Plant
Based on Agency for Natural Resources and Energy’s“Overview of Electric Power Supply and Demand”

UKUSAGermanyJapan

Figure 9: International Comparison of Production to Energy
Consumption in the Steel Industry
Ministry of the Environment “Trends and Background ofGreenhouse Gas Emissions in Japan”(4) International comparison of fuel composition
A comparison of energy consumption composition
in industry shows that half of Japan’s fossil fuelusage is account for by coal, which has high CO2emissions and natural gas is only around 10percent. In contrast, coal usage is 10-20 percent
and gas usage is 50-70 percent in Europe. Even inelectric power generation, the portion of fuelcomposition of Japanese power plants accounted
for by coal is higher than in EU power plants.
In addition, cogeneration is rarely used forbusiness power generation in Japan and there isroom for more reductions considering that Japan
5Figure 10 International Comparison of CO2Emissions in Relation to GDP
Source: Based on the Greenhouse Gas Emission Records
Submitted by Japan, EU and US for the UNFCCC
and IEA Energy balances of OECD countries
2003-2004 (GDP)has been reluctant to expand renewable energy.

6. International comparison by country
When comparing CO2 emissions and energy consumption in relation to the GDP of each country, thehigh GDP of Japan is overestimated in currency conversions because of the high cost of living, andJapan’s efficiency seems higher than it actually is. When comparing purchasing power parity, Japan isslightly below Europe, with the ratio of Japanese industry being far higher than Europe, while theproportion of households and transportation is lower (Figure 10). If Japan’s efficiency is high, it isbecause the waste in industry is made up in households and transportation.

7. Preparations for fair allocation of emissions are ready!
Power plants and factories account for approximately 60 percent of direct emissions in Japan, and theintroduction of Cap & Trade emissions trading is essential.
It has been indicated that the initial introduction of emissions trading is difficult. However, Keidanren
makes no mention of fair distribution of responsibility within industries in the Keidanren Voluntary
Action Plan.
Fortunately, Japan has had a system for periodic reporting each year for the past 14 years thanks to
the Law Concerning the Rational Use of Energy, and 5,000 large business locations nationwide reporttheir fuel consumption by type, production volume, energy capital expenditure and energy efficiency to
the Ministry of Economy, Trade and Industry. If this data is made public and utilized, “fair initial
allocation will be easy” in Japan. The use of this data will also make it possible to use a sectoral
benchmark in Japan.

8. Suggestions for International Systems
The Keidanren Voluntary Action Plan can be viewed as a typical pledge and review system. It cannot
be alternative to emissions trading scheme. Keidanren has no qualms about the selection of indices tosuit industries or the easiness of the target levels, and it should be noted that Keidanren is pushing thesectoral approach for post 2012 framework of the Kyoto Protocol.
Inevitably, developed countries like Japan need to accept deeper reduction targets for post 2012
framework, and the Keidanren plan cannot be a measure to secure the implementation. Japan should
decide to introduce C & T emissions trading system immediately.
References
Kiko Network “List of Evaluations of Measures in the Kyoto Protocol Target Achievement Plan” (2007)
Ministry of the Environment “Trends and Background of Greenhouse Gas Emissions in Japan” (Materials submitted to theGlobal Environment Subcommittee in the Central Environment Council, January 2004)
Agency for Natural Resources and Energy “Overview of Electric Power Supply and Demand”

Contact : Kiko Network

URL : http://www.kikonet.org/ E-mail : tokyo@kikonet.org

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