Development Bank of Japan
Research Report
No. 6

Current Status and Future Perspective of
the Japanese Remediation Industry:
Technology and Market for Underground
Remediation

April 2000

Economic and Industrial Research Department
Development Bank of Japan

Contents
Summary ............................................................................................................................. iii
Introduction .......................................................................................................................... 1
I.

Concept of the Remediation Industry ...........................................................................3
1. What is the Remediation Industry?............................................................................................3
1.1 Pollution of the Underground Environment ................................................................ 3
1.2 Meaning of the Underground Environment and Its Pollution................................... 3
1.3 Characteristics of Underground Environmental Pollution ......................................... 4
1.4 Definition of Remediation ............................................................................................... 5
2. Developments Concerning Remediation.................................................................................. 5

II. Progress of Reforms of the U.S. Superfund Scheme......................................................7
1. Changes in the Superfund Act ................................................................................................... 7
2. Outline of the Superfund Act..................................................................................................... 9
2.1 Brief History....................................................................................................................... 9
2.2 Outline of the Scheme ...................................................................................................... 9
2.3 Characteristics ..................................................................................................................10
2.4 Problems ...........................................................................................................................12
3. Reforms of the Superfund Scheme .........................................................................................12
3.1 Three Rounds of Reforms .............................................................................................12
3.2 Brownfield Redevelopment ...........................................................................................15
III. Progress of Soil Protection Policy in Germany ............................................................ 17
1. Outline of Soil Protection Policy .............................................................................................17
1.1 Current Condition of Soil Pollution .............................................................................17
1.2 Policy Response ...............................................................................................................17
2. German Federal Soil Protection Law......................................................................................18
2.1 Outline ..............................................................................................................................18
2.2 Characteristics ..................................................................................................................20
3. Response to Soil Pollution in Former East German Territory ...........................................23
3.1 Soil Pollution in Former East German Territory .......................................................23
3.2 Brief History of Soil Pollution in Former East German Territory ..........................24
3.3 Huge Remediation Costs and Role of Government ..................................................27
3.4 Implications of Measures Taken for Former East German Territory.....................30
4. Future Perspective of Underground Environmental Protection Policy in Germany ......30

Development Bank of Japan Research Report/ No. 6i

IV. Current Status and Future Perspective of the Japanese Remediation Industry.......... 32
1. Remediation Market in Japan ...................................................................................................32
1.1 Past Developments..........................................................................................................32
1.2 Characteristics of Remediation Market So Far ...........................................................33
1.3 Discussions on Scale of Remediation Market .............................................................34
2. Progress of the Japanese Remediation Industry ....................................................................36
2.1 Technologies and Expertise Accumulated by Entrepreneurs...................................36
2.2 Development of Various Technologies .......................................................................37
2.3 Emergence of Technological Innovation and Integration ........................................41
3. Development of the Japanese Remediation Industry ...........................................................42
3.1 Pending Issues..................................................................................................................42
3.2 Direction of Practical Response....................................................................................42
3.3 Japanese Brownfield Redevelopment Projects............................................................44
References ........................................................................................................................... 47ii

Development Bank of Japan Research Report/ No. 6

Current Status and Future Perspective of the Japanese Remediation Industry:
Technology and Market for Underground Remediation

Summary
1. Pollution of the underground environment including soil and groundwater has attracted
much attention recently. The underground environment is as much a part of the naturalenvironment as air and water, and plays a vital role in the survival of creatures and the kinetics ofchemical substances. Unlike air and water pollution, however, pollution of the undergroundenvironment has specific characteristics.
(i) Pollutants have long retention periods and so accumulation is a problem; measuresother than those against emission sources are thus required.
(ii) The polluter-pays principle is not always applicable.
(iii) It is difficult to develop countermeasures as the pollution concerns privately-owned
goods.
2. Thus, measures against underground environmental pollution include aspects that do not
apply to other types of environmental pollution. Since hazardous substances do not easily
disperse underground, the remediation process is important for the cleanup and isolation ofexisting pollution, as well as end-of-pipe measures to prevent the accumulation of hazardous
materials. This process is undertaken by the remediation industry. It has become a promisingbusiness in Europe and the United States, and is now recognized as an industry in its own right.
This development has been helped by the creation of a remediation market under policies
designed to address underground pollution issues.
3. The United States was the first country to address these issues, based on the so-called
Superfund Act, which was passed in 1980. Although remediation was one of its original
objectives, the rigid institutional design prevented coordination among the parties involved andso remediation was delayed. Following operational reform in 1993, however, the pace ofremediation activities has risen significantly in recent years. This reform provides a model for
creating a remediation market, particularly the mechanism of brownfield redevelopment projects
to promote the utilization of decommissioned plant sites that have been abandoned due tobusiness risks related to underground environmental pollution.
4. In 1999, Germany enacted the Federal Soil Protection Law, the most recent legislation forprotecting the underground environment. In addition to addressing environmental issues, theGerman model is characterized by its industrial location policy considerations that promote there-use of plant sites through rational remediation. It adopts several innovative mechanisms
including trigger levels defined by land use and certain flexibility in remediation objectives. This
new system draws on the experience gained by provincial governments as well as on theexperience of the national government, which was directly involved in underground remediation
Development Bank of Japan Research Report/ No. 6iii

when privatizing ex-state enterprises in East Germany. This system should provide useful
guidelines for Japan as it preempts the reforms in the United States in some aspects.
5. In Japan, policies for protecting the underground environment have been fragmented,
primarily focused on specific functions such as groundwater and agricultural land. Not all
polluted sites have been identified. Due to the lack of established rules, the remediation market
in Japan relies on voluntary remediation needs of industries. Remediation firms that provide
comprehensive services under strict information management have undertaken related works.
It is therefore difficult to gain an overall picture of the market. One estimate based on certain
assumptions suggests that the market is worth more than ¥5 trillion, albeit with a considerable
margin of error reflecting the wide variation of remediation costs. This figure indicates theconsiderable potential of the remediation market, which is expected to be developed over theyears as land alterations progress.
6. To develop this market, the remediation industry requires expertise in various fields
including civil engineering, chemistry and biology as well as comprehensive engineering abilities
that combine relevant technologies for the optimal remediation of polluted sites. Thus, many
companies have entered the market, bringing their own expertise in specific fields. Reflecting
the characteristics of the Japanese market, each company has sought to establish an entire
remediation ability, by developing various technologies as well as exchanging and integrating
technologies among industries. The technological level of Japanese companies is now
considered almost equal to that of pioneering firms in Europe and the U.S.
7. Future development of the remediation industry in Japan depends on the creation of anopen market to utilize accumulated technologies. As the Japanese remediation market graduallychanges due to increased demand for the liquidity of real estate holdings and the trend toward
international standardization including ISO standards, the introduction of practical rules andpolicies should help unlock the huge potential of the remediation market. In this regard,
precedents in Europe and the U.S. will have major implications.
As rules are developed, specific policies are needed such as a Japanese version of thebrownfield redevelopment projects and subsidies for small enterprises.

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Development Bank of Japan Research Report/ No. 6

Introduction
Pollution of the underground environment including soil and groundwater has attracted muchattention recently. Since pollutants do not easily disperse underground, it is important that antipollution measures include a remedial process to remove the existing pollution, as well as
measures against emission sources. In this report, the remediation industry is that which
undertakes this process.
Any consideration of underground environmental pollution necessarily involves privatelyowned goods. In this context, the development of a social system to create a remediation
market is important along with technological aspects. This report outlines the characteristics of
the Japanese remediation market and the resultant remediation industry in comparison withconditions in the U.S. and Germany, the two forerunners in this field, and considers necessary
measures based on the industry’s current status and future perspective.
As a background to the discussion, Chapter 1 identifies the characteristics of undergroundpollution including soil and underground water, which constitute the remediation market.
Chapter 2 outlines the reforms of the remediation system in the U.S., the first country to address
this issue, while Chapter 3 takes a look at measures adopted in Germany, the country with themost recent soil protection legislation. In comparison with the two countries, Chapter 4
examines the current status of the remediation industry in Japan and discusses its future
perspective.

Development Bank of Japan Research Report/ No. 6

1

I. Concept of the Remediation Industry
1.

What is the Remediation Industry?

1.1 Pollution of the Underground Environment
There are various types of environmental pollution. Underground environmental pollution,such as the contamination of soil and groundwater, has attracted particular attention in recent
years. Policy response to this type of pollution has been delayed considerably, even though the
problem has long been recognized along with air and water pollution, as evidenced by the factthat soil pollution was added to the typical types of pollution during the 1970 Diet session, sincedubbed the “Environmental Pollution Diet.” Legislation for soil protection has yet to beenacted except for agricultural land. Regulations against the infiltration of hazardous substances
to groundwater including prohibition and improvement orders have only been introduced
recently compared with the pollution of other environmental bodies. And yet soil is one of themost important components of the natural environment along with air and water. Why has thepolicy response been so different?
The primary reason is the difficulty of integrating the protection of the undergroundenvironment into a policy structure focused on measures against public nuisance. Most of theenvironmental policy structure in Japan was built during the fight against industrial pollution, andits main principles were:(i) identification of causalities between damage to human health and other events, andemission sources that allegedly cause such events, and(ii) regulation of emissions from identified sources.
However, these principles are not easily applicable to the pollution of the undergroundenvironment (geology) including soil and groundwater. Since hazardous substances that havepenetrated the underground environment cause damage to human health only after a long periodof movement and accumulation in the ground and through other environmental media, policy
response is primarily confined to direct exposure channels such as air and water. Moreover,even when the underground environment is directly addressed, it is extremely difficult to identify
causalities due to the time lag and geographical gap between the polluting activities and theirconsequences.
Measures against underground environmental pollution in Japan have therefore centered on
preventing air and water pollution or waste control. Their direct coverage has been limited toagricultural land and groundwater, the pollution of which may have a direct impact on humanbody. This does not necessarily mean a delay in policy response. In the final analysis,
however, preservation of the underground environment in Japan has typically been fragmented
into specific measures such as groundwater protection (only covering part of the surface layer)and soil protection, whereas it should be treated as a single, comprehensive issue. Thus, when
considering the need for soil protection legislation apart from the issue of groundwater
protection, the reasons for removing hazardous substances that have not yet caused groundwaterpollution become unclear.
1.2 Meaning of the Underground Environment and Its Pollution
The term “underground environment” used in this report needs to be defined. In Japan, somehave discussed underground environmental pollution as a combination of separate problems
such as soil and groundwater pollution, while others have addressed the problem of geologicalpollution by examining the underground environment in its entirety. This report uses the term
“underground environment” in a meaning similar to that of geological environment, which
Development Bank of Japan Research Report/ No. 6

3

comprises strata (solid phase), ground air (gas phase) and groundwater (liquid phase). Strata
including soil, coupled with ground air and groundwater, play an important role similar to that of
the atmosphere and hydrologic cycle, and provide the basis for the survival of creatures and forthe cycle of materials. These elements cannot be considered separately when addressing
underground pollution, and must be treated as a whole for remedial action.
What types of pollution are threatening the underground environment? Pollutants ofunderground environments vary widely in their characteristics and cause different types ofpollution. Volatile organic compounds (VOCs), for example, can easily reach aquifers andcause underground pollution because they are heavier than water and highly penetrating. Heavy
metals tend to be absorbed by the soil and accumulate in the surface layer. The mechanism ofunderground pollution is shown in Figure 1-1. Various types of pollution interact and cause
dysfunction of the underground environment, which in turn affects human health directly or
indirectly.
Figure 1-1. Concept of Underground Environmental Pollution(Air pollution)
Underground pollution
Movement(Ground air pollution)
Volatilization

Soil air

Volatilization

Surface water pollution

Groundwater pollution

Soil pollution

Dissolution

Absorption
Volatilization

Groundwater

ElutionAbsorption

Dissolution

StrataAbsorption(Decomposition)(Decomposition)
Pollutants
Movement

Sources: Osami Nakasugi, Dojo Chikasui Chu deno Yugai Busshitsu no Kyodo; “Dojo Chikasui Osen no Genjo to Sono
Taisaku,” Gekkan Haikibutsu May 1999, etc.

1.3 Characteristics of Underground Environmental Pollution
This section lists some of the distinctive characteristics of underground pollution as comparedwith air and water pollution.
First, pollutants are retained for a long period once their level has exceeded the self-purifying
capacity of the underground environment, for their movement is far slower than in theatmosphere or surface water. This is why underground pollution is called a typical cumulative
pollution. In the case of air and surface water pollution, end-of-pipe measures against emission
sources are effective for pollution control, because pollutants are largely dispersed. In the caseof underground pollution, however, the long pollutant retention period requires more than suchend-of-pipe measures to halt the charging of pollutants, as the pollution has already accumulated
due to previous charging.
Second, it is often difficult to apply the polluter-pays principle (PPP) to undergroundpollution, partly due to the characteristics described above. Underground pollution is not
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Development Bank of Japan Research Report/ No. 6

different from other types of pollution in that it is essentially a problem of external diseconomies
arising from the fact that private individuals do not bear the cost of using the functions of theunderground environment, thus creating a divergence between private and social costs.
Therefore, it is natural that the PPP should be applied in this case to correct the price byattributing an additional cost (removal cost) to the polluter according to the marginal externalcost. Due to its cumulative character, however, underground pollution may result from past
activities of a person who no longer exists. In such cases, application of the PPP is extremely
difficult because the external diseconomies have a substantial time lag.
Third, the functions of the underground environment including maintenance of theecosystem and circulation have a highly public nature as in the case of the atmosphere and water,
but they basically belong to the owner of the land. Restrictions on using the undergroundenvironment, which is covered by the property rights guaranteed by the Constitution, give rise tocomplicated arguments entailing coordination between private rights and public welfare. In thisregard, discussions on groundwater in particular have continued over the years from thestandpoint of private or public water theory. However, most of these discussions have notaddressed the underground environment in its entirety. Nonetheless, this characteristic has
substantial implications as it does not allow underground pollution measures to stay within theboundary of traditional environmental conservation policy.
1.4 Definition of Remediation
These characteristics of underground pollution also influence the development ofcountermeasures. As already mentioned, pollution of the underground environment ischaracterized by the fact that a fundamental solution is impossible once pollution has occurred,unless measures are taken for cleanup or to prevent diffusion. Any end-of-pipe restriction on
the charging of pollutants does not reduce the pollution accumulated by previous charging. In
this report, remediation is defined as the pollution removal process including cleanup anddiffusion prevention, which are characteristics of underground pollution.
For the purpose of this report, the remediation industry1 refers to the industry that
undertakes the remediation process as a business. As mentioned in Chapter 4, it also includes ina broad sense the businesses that focus on the phase prior to pollution prevention.
2.

Developments Concerning Remediation

This section outlines Japan’s policy for underground pollution so far. As discussed in thefollowing chapters, most of the countries that have a policy response to underground pollution
including the U.S. and Germany have experienced key incidents that provided the momentum.
Japan is no exception. Many of the policy measures for the underground environment in Japan
have been adopted in the wake of serious pollution cases. The fundamental objective of suchpolicy measures was to address individual elements of pollution and to control those exposure
channels posing a greater direct health risk, rather than to address the functions of theunderground environment as a whole.
In the 1950s and 1960s, when cadmium and arsenic industrial pollution emerged,
countermeasures focused on stricter emission controls in order to conserve air and water quality.
In the 1970s, successive policy measures were developed for individual components of theunderground environment. When soil pollution was added to the major types of pollution in
1 The same meaning as the environmental remediation industry in the U.S. and Altlastensanierungsindustrie in Germany.

Development Bank of Japan Research Report/ No. 6

5

the 1970 Diet session, measures were taken for agricultural land, the pollution of which was ofgreatest concern regarding adverse impacts on human health and the living environment.
Subsequently, measures against emission sources were adopted including the Waste Disposal Law,as the so-called problem of urban soil pollution emerged in non-agricultural land due to thecontamination with hexavalent chromium dross. At the same time, the Water Pollution Control
Law was revised to protect groundwater. As regards uncontrolled urban soil, policy response
included the introduction of a non-enforceable guideline.
Measures accelerated in the 1990s with the emergence of pollution from advanced
technologies. Accordingly, the response to underground pollution has changed significantly
recently, and the traditional policy framework may soon be altered. The introduction ofcleanup orders for contaminated groundwater in the 1997 revision to the Water Pollution
Control Law effectively extended the scope of regulation to the cleanup of underground air andsoil. In 1999, new laws and regulations that have a major impact on underground pollution
were enacted, including the Dioxin Control Law and the Pollutant Release and Transfer Register
Law (PRTR Law). Although the Dioxin Control Law is only applicable to PCDDs, it defines
enforceable environmental quality standards not only for the atmosphere and water but also for
soil, thus institutionalizing protection of the underground environment in line with the Water
Pollution Control Law. The PRTR Law requires companies to report the emissions of some
300 chemicals to the environment, making it possible to evaluate the aggregate potential ofunderground pollution. Moreover, the law encourages the prevention of underground pollution
through stricter controls and emission reductions by companies.
Although the traditional policy framework remains, Japan is now at a turning point as
regards underground environmental protection. As discussed in Chapter 4, future
developments in the policy framework will have a considerable impact on the status of theremediation industry. This is also the case for Europe and the U.S., where the future of theremediation industry appears to be guaranteed, having been recognized as a business category.
In those countries, the progress of policy response to underground pollution has beenaccompanied by the creation of open remediation markets, thus nurturing the remediationindustry. In this context, policy response in foreign countries should be examined before
considering the problems facing the Japanese remediation industry. The following chapters
outline the measures taken in the United States, the first country to address this issue, as well asin Germany, which has recently developed relevant legislation at the federal level.

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Development Bank of Japan Research Report/ No. 6

II. Progress of Reforms of the U.S. Superfund Scheme
According to the Environmental Protection Agency (EPA), the scale of the remediation market
in the United States as of 1995 totaled ¥800 billion ($7.5 billion) on a realized basis and isestimated to exceed ¥2 trillion ($187 billion) on an unrealized basis. The U.S. market was
stimulated by the introduction of the so-called Superfund Act, a comprehensive law against
environmental pollution that led other countries in promoting the remediation industry. This
chapter outlines the series of policy measures taken by the U.S. over the years.
1.

Changes in the Superfund Act

The U.S. Superfund Act is formally known as the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA) of 1980 and its Amendments and Reauthorization
Act. As indicated by its name, the Act seeks to address threats to the health of the populationor to public welfare caused by the release of hazardous substances into the environment throughcomprehensive control of various types of pollution. Therefore, the coverage of the Act is not
limited to the pollution of soil and other underground environments. The cost of remediation
is imputed to the polluters as much as possible. If this principle is not applicable, the Act also
provides for a special fund (Hazardous Substance Superfund) financed by the general account.
The Superfund Act owes its name to this special fund.
With the Superfund Act, the United States led other countries in addressing cumulativeenvironmental pollution problems. As discussed later, however, the process was not smooth.
In particular, the severe pursuit of liabilities led to numerous lawsuits, thus delaying remedialaction, and many such cases have been reported even in Japan.
Nonetheless, there has been substantial improvement in recent years. Among the heavily
polluted sites that require remediation measures (registered on the National Priorities List (NPL),
discussed later), Figure 2-1 shows the number of sites for which remedial action has been
completed. During the 12-year period between 1980 and 1992, the action was completed for
only 149 sites, but the pace of remediation accelerated more than five-fold in the next six years,
with the number increasing to 436 sites. Figure 2-2 shows the distribution of the NPL sites bystage of remediation. As compared with the condition in January 1993, it is clear that the shareof sites under remediation or completely restored had risen significantly by the end of 1997.2

2 The share has risen further by May 1999, with the number of restored sites reaching 599.

Moreover, 185 sites have been
removed from the list with the completion of subsequent monitoring. 1,396 sites are still on the NPL.
Development Bank of Japan Research Report/ No. 6

7

Figure 2-1. Number of Completed Action
160

149

140

436

120

Sites

100
80

68

61

68

64

95

96

88

87

97

98

60
40
20
0
93

80〜92

94

FY

Source: EPA Superfund Reforms Annual Report FY1998.

Figure 2-2. Distribution of NPL Sites by Remediation Stage

Jan-93（1,280）

End 1997（1,397）0%
Untouched

10%

20%

Investigation

30%

40%

50%

Remedial method selected

60%

Detailed design

70%

80%

Remediation

90%

100%

Reform completed

Note: Figures in parentheses ( ) indicate the number of NPL sites under EPA control at the time.
Source: EPA Home Page.

How did these changes come about? As a preliminary discussion, the following section
provides an overview of the Superfund Act.

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Development Bank of Japan Research Report/ No. 6

2.

Outline of the Superfund Act

2.1 Brief History
The Comprehensive Environmental Response, Compensation and Liability Act (hereinafterreferred to as the Superfund Act) was signed in December 1980 as previous legislation proved
insufficient in addressing the health damage caused by past dumping of hazardous waste, whichbecame a political issue with the Love Canal incident in the late 1970s.
Initially, the Act provided for a fund of $1.6 billion with a time limit of five years. It was
subsequently revised by the Superfund Amendments and Reauthorization Act (SARA) of 1986,
which basically established the present form of management. (The fund was increased to $8.5
billion to be used in five years.) Numerous discussions on further revisions have notmaterialized since that time, and the validity of the Act has been extended mainly through the
EPA Appropriation Act.
2.2 Outline of the Scheme
The aim of the Superfund Act is to address the danger to citizens’ health or public welfare causedby the release of hazardous substances from facilities or ships into the environment, or by thethreat of such release.
Here, hazardous substances include not only those defined in the Act itself but also a rangeof hazardous substances designated as such by the Clean Water Act, the Clean Air Act and the
Waste Disposal Act. In addition, the Act applies to pollutants or contaminants that are notdesignated as hazardous substances when they may pose an urgent and significant risk to citizens’
health or public welfare (Article 101 (14)).
When these substances have been released into the water, air, surface or ground in the
United States or when there is a serious threat of such release, the President is authorized to takecountermeasures based on the National Contingency Plan (NCP). Two types of measures aredefined: “remedial action” to seek permanent restoration of the polluted area, and “removal
action (in principle, not more than $2 million in cost and 12 months in duration)” to eliminate
the imminent danger. Remedial action is taken for NPL sites (discussed later) only, but removal
action may be taken anywhere at any time. In any case, there are no uniform thresholds ofvolume or density of pollutants at which the President (therefore, the EPA as his proxy) is
authorized to exercise his right.
When a suspected site has been identified, the EPA conducts an assessment. If further
investigation is deemed necessary, the site is listed on the Comprehensive Environmental
Response, Compensation and Liability Information System (CERCLIS). The system serves as a
database, and records an exhaustive list of suspected sites.
The EPA conducts a preliminary assessment (PA) for the sites listed on the CERCLIS,
followed by site inspection (SI) if necessary. Based on the information obtained, the level ofdanger is quantified using the Hazard Rating System (HRS). If the calculated hazard value
exceeds a certain level, the site is then registered on the National Priorities List (NPL) for
remedial action.
Figure 2-3 shows the previous use of the sites appearing on the NPL. Most of them wereformerly used as industrial sites or waste disposal sites. Once a site has been listed on the NPL,a remedial inspection (RI) is conducted to collect materials for judging the remedial measures tobe taken. The results are then used in a feasibility study (FS) to compare possible measures forcleanup. The tentative plan thus established is circulated among those concerned and opinions
are collected. The final draft plan for cleanup is published as a definite record. The plan is
executed after the refined design (RD) has been developed. The stage of operation andDevelopment Bank of Japan Research Report/ No. 6

9management (O&M) follows the completion of remediation, and the site is removed from the
NPL if the achievement of the planned objectives has been confirmed. The figures cited at the
beginning of this chapter indicate that an increasing number of NPL sites have recently entered
the O&M stage following the completion of remediation.
Figure 2-3. Previous Use of NPL Sites (as of 1994)
400
343

350
300

269

Sites

250
196

200

203

150
67

73

76

82

Agriculture

Housing

MiningEnergy100
500Recycling Metal works Chemicals

Waste
disposal

Source: EPA.

2.3 Characteristics
The scheme is operated as outlined in the previous subsection. The Superfund Act has somespecial features to ensure smooth operation of the scheme.
The first feature concerns the wide coverage of responsible parties and the substantial scopeof liabilities. Those who assume responsibilities under the Superfund Act are called potentially
responsible parties (PRPs). The scope of their liabilities is considerably large as the Act stresses
that cleanup costs should be borne by PRPs as much as possible.
The Act defines the following parties as PRPs:(i) present owners and operators of the polluting facilities,(ii) owners and operators at the time of the disposal of hazardous substances,(iii) generators of hazardous substances, and(iv) transporters of hazardous substances.
Numerous parties have been identified as PRPs as relevant cases have accumulated.
In addition, the liabilities imposed on responsible parties are extremely severe. Since theliabilities under the Superfund Act constitute strict liabilities, immunity cannot be granted even if
hazardous substances have been handled with due attention. The liabilities are further
magnified by the following two principles added by court cases.
One of them is the principle of joint responsibility. When two or more PRPs exist and thedamage is indivisible, the EPA can demand full compensation for the damage to any of the
responsible parties. The amount of compensation includes the costs attributable to any absent
or insolvent parties. As a result, PRPs with large financial capacities have often been forced to
pay large sums of money despite their insignificant contribution to the pollution, lending
credence to the allegation that the Act constitutes a “deep pocket” policy.
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The other principle is that of retroactive responsibility. That is to say, the liabilities under
the Superfund Act are also applicable to actions before it took effect. This is justified on the
ground that the Act itself regulates past polluting activities and that it is not a criminal law, towhich the principle of non-retroactivity applies. Thus, the number of PRPs has increased
further.
Admissible arguments in defense include:(i) forces majeure(ii) acts of war, and(iii) action or inaction of a third party.
However, these arguments have rarely been admitted in court.
As the second feature of the scheme, no clear standards have been defined as regards theobjectives to be attained after cleanup action, just as no standards existed for the EPA to exercise
its authority in terms of minimum emissions of hazardous substances. Standards to be appliedin cleanup include: (i) protection of human health and the environment, and (ii) ARARs.
ARARs are a concept added by the revision to the Act in 1986 and require that cleanups meet“legally applicable or relevant and appropriate requirements” defined in other federal laws andstate environmental laws for each substance. The introduction of ARARs was based on thejudgement that they were better suited for a flexible response than uniform standards because
pollution involves multiple hazardous substances in most cases and their contribution differs inindividual sites.
This may be one of the reasons why the Superfund Act could not easily achieve the expected
results. The EPA, responsible for making judgements on Requirement (i) above, tends toprepare for the worst by requiring the most severe standard, which should be applicable tohousing areas, regardless of how the site is used. This has resulted in unnecessary inflation ofcleanup costs, thus undermining the possibility of agreement among parties concerned andobstructing the progress of remediation.
ARARs have also caused similar problems. The requirement of different clarification levels
by state laws may lead to huge gaps in the remedial action and cost among polluted sites, eventhough the obligations under the Superfund Act are exclusively administered by the EPA.
Furthermore, the identification of ARARs is difficult in the first place because various hazardous
substances may be involved. The resultant confusion and disputes among parties concerned
have considerably delayed the required remedial action.
Third, the scheme is characterized by the existence of the Hazardous Substance Superfund(hereinafter referred to as the “Fund”), to which the Act owes its name. The EPA may conductcleanup works using the Fund when PRPs cannot be identified or when urgent cleanup is needed.
Although the legislation is widely known as the Superfund Act, the Fund has limited functions.
Its financial sources include various taxes including the oil tax, appropriations from the generalaccount, the money collected from PRPs and return on investment. The Fund is managed andoperated by the Treasury. For each fiscal year, the EPA has to submit the Fund’s draft budget
to the Congress for approval. The budget includes the direct costs of clarification as well as all
the costs borne by the EPA as regards the Fund.
As mentioned in Chapter 1, it is often difficult to apply the polluter-pays principle (PPP) to
underground pollution, which only becomes visible after a long period of accumulation. The
injection of public funds is required in some form to address such marginal problems, which the
U.S. has done by creating a special fund.

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2.4 Problems
With the above-mentioned characteristics, the Superfund Act was initially blamed for its
ineffectiveness in achieving results, but this is attributed to various factors. For example, theremediation of cumulative pollution requires a considerable time after detection. Also, the EPA
focused on addressing as many polluted sites as possible, rather than on completing the cleanupof such sites. The biggest problem, however, was the proliferation of lawsuits, which took
considerable time and money away from the required cleanup activities. As described above,the scheme identifies a wide range of persons as PRPs, which usually results in the identificationof two or more PRPs, who are likely to be involved in protracted disputes concerning the
distribution of remediation costs. Unclear cleanup objectives under the Superfund Act havealso facilitated litigation.
This problem was recognized at an early stage. The basic policy of the government has
focused on accommodation to avoid lawsuits. Thus, the Amendments and Reauthorization Act
of 1986 added a provision that requires the President to seek accommodation whenever it ispractical and promotes public benefit. Various powers were also given to the President for thispurpose. Nonetheless, the revision has failed to produce the expected results due to unresolved
problems such as the treatment of orphan shares (discussed later) and the protection of PRPs
that have accepted accommodation.
However, these are transitional problems, as the Superfund Act has had an idealistic naturesince it was the first law to address cumulative pollution. Indeed, as described earlier in thisreport, the Superfund Act has undergone considerable improvements in recent years to tackle
such problems, and the process of these improvements provides useful lessons for countries
preparing to take similar measures in the future. The following section discusses this aspect.
3.

Reforms of the Superfund Scheme

3.1 Three Rounds of Reforms
Various draft amendments have been submitted for discussion as regards the Superfund Act.
Many of them were intended to alleviate the burden of cleanup costs by denying retroactivity tomake the Fund pay for pollution resulting from activities prior to a certain date, or by denying
joint responsibility to enable flexible attribution of liabilities. Such revisions have not been
adopted so far because consensus could not be reached on paying the potentially huge
remediation costs from the national budget.
In contrast, the draft amendment presented by President Clinton to the 103rd Congress in1994 was very practical in that it focused on resolving institutional problems described above
without changing the fundamental character of the Act. Although the bill died on birth, various
draft amendments have since been presented. The current Superfund Act is thus in transition
to a comprehensive review.
In this context, the EPA has preempted the revision in the legislature by improving theSuperfund Act in terms of administrative procedures. This institutional reform launched in
1993, known as the Superfund Reform, seeks to improve the effectiveness of the scheme
through operational improvements within the existing framework that defines remediation by
PRPs as the top priority. The EPA regards it as an administrative effort for improving the Act
that should lead to an amendment in the legislature.
The reform has been conducted in three rounds.
The first round, launched in June 1993, presented 17 initiatives to improve the scheme’s
effectiveness within the framework of the current legislation. They reflect the suggestions made12

Development Bank of Japan Research Report/ No. 6

in the 90-Day Study and the 30-Day Study, which had been conducted for the Superfund Reform.
The second round, launched in February 1995, presented 12 initiatives, directly followed by thethird round, which presented a further 20 initiatives in October 1995. Those initiatives havebeen implemented progressively.
The set of reform initiatives cover various areas such as cleanup, risk assessment, economic
redevelopment, the enhancement of PRP-led activities, public involvement and advanced
technologies. As indicated by their motto, “faster, fairer, more efficient,” these initiatives seek
to make the scheme operate more efficiently. Among various aspects of the initiatives, thefollowing section examines (i) reforms for facilitating accommodation, and (ii) improvement of
the decision-making process on remedial action.
(i) Reforms for facilitating accommodation
In terms of facilitating accommodation, the orphan share compensation in the third rounddeserves special attention. This system provides an incentive for accommodation bycontributing the part of the remediation cost that cannot be attributed to any PRPs due to theirabsence or insolvency (orphan share). Initially, the EPA acted on the principle that
accommodation should be limited to the cases where the whole cost of site remediation can berecovered. In practice, however, disputes over the attribution of the orphan share prevented
accommodation in many cases, thus delaying remedial action and increasing litigation costs. To
overcome this, the amendment in 1986 provided that the Fund may contribute part of therequired cost for accommodation. This system was called mixed funding settlement. The
orphan share compensation system takes this one step further and enables the fund to assume
the orphan share.
The change in the operation of site-specific special accounts also deserves particularattention. The accounts were initially opened in the Superfund for individual sites to manage
accommodation payments. The EPA, after coordination with the Treasury and other agencies,changed the rule to retain any interest accrued on accommodation payments in individual
accounts to be used as compensation in remediation.
These changes represent an institutional reform that facilitates accommodation (and so
prompt initiation of remediation) by containing disputes over cost allocation through increased
compensation from the Fund.
Figure 2-4 breaks down the PRP-led remediation cases into those based on accommodation(consent decrees) and those based on unilateral administrative orders. The previous 50-50
parity prior to the reform has changed considerably in favor of accommodation with the progressof the reform.

Development Bank of Japan Research Report/ No. 6

13

Figure 2-4. Breakdown of PRP-Leads

93〜95

50

50

66

34

96〜98

0%

10%

20%

30%

40%

50%

nilateral administrative orders

60%

70%

80%

90%

100%

Consent decrees

Source: EPA Superfund Reforms Annual Report FY 1998.

(ii) Reform of the decision-making process on remedial action
The reform of the decision-making process on remedial action improves the uniformity andefficiency of countermeasures while reviewing past decisions to incorporate technologicaladvances. It seeks to enable more effective and less expensive remediation. Typical initiatives
in this regard include the establishment of the National Remedy Review Board (NRRB). The
Board was officially launched in January 1996 with the membership of experts in the technology
and policy departments of the EPA. Its mission is to review the options for remedial action(including urgent remedial action) in terms of cost-effectiveness without undermining legal
stability. The Board had reviewed the decisions on 33 sites by September 1998, thus
contributing to a cost reduction (including future effects) of $43 million in total (Table 2-1).
Table 2-1. Effect of Reform on the Decision-making Process on Remedial Action
FY

1996

1997

1998

Total

Number of sites covered

12

8

13

33

Cost reduction effect ($ million)

25

6

12

43

Number of sites covered

60

80

>60

>200

Cost reduction effect ($ million)

355

390

>255

>1,000National Remedy Review Board

Updating of remedy decisions

Source: Superfund Reforms Annual Report FY 1998.

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Development Bank of Japan Research Report/ No. 6

Another initiative involves the updating of remedy decisions at selected sites, in order toenable more cost-effective remediation by updating past remedy decisions to reflect subsequent
technological advances and scientific expertise. As shown in Table 2-1 above, the EPA andother competent authorities updated decisions on more than 200 sites between FY1996 and 1998,
potentially reducing the remediation cost by over $1 billion. In addition, the remedial period
will be reduced on many sites by using state-of-the-art technologies. This method has been
considered most effective among related reforms.
Including but not limited to these two major components, the reform package represents apractical application of the Superfund scheme that used to be idealistic. Two points should be
noted here. First, the Superfund Act, initially deprived of uniform standards, is focusing moreon the standardization and unification of procedures to improve efficiency in many aspects
including the choice of remedial action, risk assessment and accommodation procedures.
Second, the role of the Fund has been enhanced as a provider of public money to enforce theprinciple of PRP-led remediation. These observations, as well as their comparison with thedesign of the German system as will be discussed later, will provide useful information inconsidering the design of a similar system in Japan.
3.2 Brownfield Redevelopment
One of the main features of the Superfund reforms is the initiative of brownfield redevelopment,
which was introduced in the second round.
Brownfield is defined as abandoned, idled, or under-used industrial and commercial facilities
where expansion or redevelopment is complicated by real or perceived environmental
contamination. The concept encompasses decommissioned business sites that are not easy toreuse due to pollution. Such brownfield sites have increased rapidly since the 1980s and their
number is estimated to exceed 400,000 at present. This represents a negative effect of theSuperfund Act, because land buyers including developers were unwilling to reuse those sites forfear of the stringent cleanup responsibilities imposed by the Act and the huge cost thereof. The
expansion of brownfields leads to various problems such as the deterioration of local
employment conditions, as well as under-utilization of the infrastructure that served the sites
including water works, sewage works and roads. In addition, it may also cause destruction of
the natural environment because undeveloped sites (greenfields) are preferred as new businesssites due to the lower risk of contamination.
To overcome this situation, the federal government designated brownfield redevelopment asa major component of the Superfund Reforms, and various measures have been taken since 1995.
Emphasis has been placed on (i) providing incentives for redevelopment and (ii) identifying thepotential risk and its scope.
(i) Provision of incentives
The brownfield redevelopment incentives are based on a subsidy scheme for demonstration
projects. Such projects, known as brownfield pilot projects for non-Superfund sites, have beenclassified into three categories since FY1998 according to their character: (a) Assessment
Demonstrations, (b) Job Training Partnerships, and (c) Showcase Community Collaboration
Projects.
Assessment Demonstrations, which attract an annual subsidy of $200,000 for two years at
the maximum, conduct various research and demonstrations for solving brownfield problems.
227 sites had been designated by FY1998.
Job Training Partnerships aim to give brownfield management skills to the local population,
including inspection and cleanup. 11 sites were identified in FY1998, and 10 sites will be added

Development Bank of Japan Research Report/ No. 6

15

to the list in FY1999.
Showcase Community Collaboration Projects seek to demonstrate synergy between federal
support and community involvement in addressing brownfield problems. Each of the selectedareas receives a subsidy of up to ¥1 million as well as on-site support from federal staff. 16
sites were designated for FY1998.
In addition to this subsidy scheme, preferential taxation and policy finance measures havealso been taken for the cleanup and redevelopment of brownfields.
(ii) Identification of potential risk and its scope
As unidentified risk has slowed the progress of brownfield redevelopment, registration on
CERCLIS and NPL has also been reviewed. As mentioned earlier, CERCLIS was intended toserve as a database of potentially polluted sites, but it did not specify registration requirements.
Once a site is listed on this system, it may never be removed from the list even after remediation
has been completed. As a result, numerous sites were considered risky by potential investors,
even though they were not at all contaminated or could have been reused with slight remediation.
The system has therefore been accused of hindering brownfield redevelopment.
To fend off such criticism, the EPA has been improving the CERCLIS registration systemsince early 1995 as part of its Brownfields Economic Redevelopment Initiative. In 1996, theAgency developed a guideline for registration on the system, which considers the character ofindividual sites. According to this guideline, the Agency has identified for publication the sites
for which assessment and required non-NPL action have been completed. By FY1998, this“safety declaration” has been made for 75% (31,000) of the listed sites.
Likewise, as presented by the reform programs, NPL sites for which possible cleanups werecompleted have been progressively removed from the list.
Any country could face brownfield problems in seeking comprehensive solutions to soil
pollution. As described in Chapter 1, soil pollution problems typically take a considerable time
to reach the surface as they result from cumulative pollution of privately-owned goods.
Therefore, the acquisition of decommissioned business sites is generally avoided, as these areconsidered high-risk investments, thus delaying the reuse of such sites. In the United States,
this tendency has been amplified by the strict system design that does not admit in some cases
the “procurers in good faith” defense, even if a site assessment was conducted at the time ofprocurement. Nonetheless, the attempts to encourage remediation through individual policies
that focus on the redevelopment of decommissioned business sites while integrating thedevelopment of local industries are noteworthy as one way of creating a remediation market.

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Development Bank of Japan Research Report/ No. 6

III. Progress of Soil Protection Policy in Germany
In February 1998, 18 years after the United States, Germany passed a Soil Protection Law at thefederal level (effective since March 1999). Of course, this does not mean that no soil protection
policies had existed until then. Reflecting the fully decentralized system, such policies had beentaken by individual Länder (provinces). As the superstructure above those provincial laws, thenewly established Federal Soil Protection Law created uniform standards at the national level forthe first time. Why was this law needed? This chapter outlines the development of the new
soil protection policy in Germany, including the unprecedented experience of coping with soil
pollution in former East Germany.
1.

Outline of Soil Protection Policy

1.1 Current Condition of Soil Pollution
In Germany, polluted sites are defined by the concept of “Altlasten,” comprising former waste
disposal sites (Altablagerung) and former industrial sites (Altstandort). The term was first used
in a report presented in 1978 by the Specialized Committee on Environmental Issues(Sachverstädigenrat für Umweltfragen). It covered the cases where pollution existing in former
waste disposal or industrial sites posed a threat to the environment. Literally, this means thepresent soil pollution caused by past economic activities. Since then, the concept of Altlasten
has been established as one of the categories constituting soil pollution in a broad sense.
In Germany, over 300,000 sites are listed nationwide as Altlasten, including 106,000 waste
disposal sites and 198,000 industrial sites. 208,000 sites are located in former West Germany,
while 96,000 sites are in former East Germany.3 The total figure represents the sum of sites
identified under soil protection legislation in individual provinces. Such sites should not be
simply added up because each province has its own definition of Altlasten. However, thenumber can be compared with past figures calculated similarly. The data indicate that the total
number of the listed Altlasten increased steadily from 140,000 sites in 1993 to 170,000 sites in
1995. As in the United States, not all sites polluted in the past in Germany have been identified
yet.
However, it should be noted that the figures merely show potentially polluted sites.
Experience indicates that in Germany, only 10-20% of such potentially polluted sites require
actual remediation. Therefore, it is estimated that 30,000-60,000 sites have been identified as
actual Altlasten. In addition, Altlasten sites are likely to exist in arms plants destroyed during
World War II and military posts used by the former West Germany and East Germany during
the cold war (Militärische und Rüstungsaltlasten).
1.2 Policy Response
Within the German environmental policy system, there had been no uniform laws or regulations
at the federal level until the Federal Soil Protection Law was promulgated in February 1998, as
each province had the autonomy to decide its response. Immediately after reunification ofGermany, over 30 standards existed on soil pollution control, which contrasted with thesystematically established protection policies on other environmental media (e.g. the Emission
Protection Law for air and the Water System Law for water).
Under such circumstances, an effective environmental policy could not be implemented.
Also, in order to ensure smooth progress of the reuse of existing business sites (site recycling:
3 The sites in Berlin are all included in former West Germany.

Development Bank of Japan Research Report/ No. 6

17

Flächenrecycling), which is effective for protecting the surrounding undeveloped areas fromdevelopmental pressure, a clear guideline was needed for facilitating the identification of potential
risk emanating from soil pollution. In addition to these environmental policy requirements,
uniform standards have been deemed necessary from the viewpoint of industrial location policy,
as national and international investors complained of the difference in the level of soil pollution
risk.
The Federal Soil Protection Law, passed in February 1998, seeks to address these issues by
unifying relevant standards and regulations at the national level. Its original draft was presented
in 1992, and the final draft considers various court cases accumulated since then. The Law
came into force in March 1998 following the moratorium period for revising any contradictory
provincial laws and regulations. A regulatory order (Rechtsverordnung) defining quantified
objectives was published in June, three months after the Law took effect. The following section
highlights the content of the Law, the latest of its kind among the developed countries.
2.

German Federal Soil Protection Law

2.1 Outline
The Federal Soil Protection Law is officially known as the “Law for Protection against
Hazardous Soil Alteration and for Cleanup of Polluted Sites (Gesetz zum Schutz vor shädlichen
Bodenveränderungen und zur Sanierung von Altlasten).” Its aim is to maintain and restore thevarious functions of soil. As indicated by its official name, the Law seeks to achieve this goal by
preventing “hazardous soil alteration” as well as by cleaning up contaminated soil on “Altlasten”
and addressing the resultant water pollution (Gewässer-Verunreinigung).
The Law defines “hazardous soil alteration” as the damage to soil functions that causes
serious disadvantage or load. “Altlasten” is defined as:a) the final waste disposal facilities that have stopped operation and the land on whichwaste has been subjected to intermediate disposal, storage or reclamation (Altablagerungen), andb) the land on which any industrial facilities have been operated or any environmentallyhazardous materials have been handled (Altstandort).
Thus, a conceptual distinction is made between the ongoing soil contamination and the soil
pollution already caused by past economic activities. In this report, both concepts are included
in “soil pollution,” unless noted otherwise.
Article 4 of the Law requires investigation and confirmation of any possible soil pollution(for both a) and b) above) as well as cleanup action in case the existence of such pollution has
been confirmed. Cleanup activities are classified into several categories (Table 3-1). The Law
clearly stresses cleanup and remediation over containment as it provides that decontamination
action takes precedence over other measures.
Table 3-1. Classification of Cleanup Activities
1.

Measures for removal or reduction of hazardous substances (“decontamination action”: Dekontaminationmaßnahmen).

2.

Measures for preventing or reducing diffusion of hazardous substances in the long term without removing them(“conservational action”: Sicherungsmaßnahmen).

3.

Measures for removing or reducing hazardous alteration of physical, chemical or biological characteristics of soil.

4.

Restriction on use and other measures taken for prevention and reduction of danger, disadvantage and load to individuals
and the public (“protective/restrictive action”: Schutz und Beschränkungsmaßnahmen).

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Development Bank of Japan Research Report/ No. 6

Figure 3-1 shows the flow of Altlasten remediation. The whole process is conducted inthree phases: identification, risk assessment and action. Between the identification and risk
assessment phases, a traditional approach is adopted, according to which Altlasten sites are
selected progressively by repeating increasingly detailed investigations and the assessment of theirresults. Particular attention should be paid to the procedure following the “cleanup planning(Sanierungsplan)” in the action phase. According to the provision of Article 13, the competentauthorities shall require the parties responsible for cleanup to submit a cleanup investigation
report and cleanup plan, which are necessary for determining the type and scope of cleanup
action. The cleanup plan must include:a) outline of risk assessment and cleanup investigationb) past and future use of the cleanup site, andc) cleanup objectives, how to achieve them and estimated period of cleanup.
Figure 3-1. Procedure of Polluted Site Remediation in Germany
Identification
Phase I
Investigation
Potentially polluted sites
Historical survey
Phase II
Assessment

Risk assessment
Suspected sites
Orientation survey

No contamination

Assessment

Polluted sites

Confirmationof possibility

Detailed investigation
Assessment

Phase III
Cleanup,post-treatment

Cleanup investigation
Cleanup planning

Completion

Post-self-management
treatment

Self-management(under cleanup)

Source: Umweltbundesamt

Development Bank of Japan Research Report/ No. 6

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Although the German Soil Protection Law provides for the development of standard trigger
levels for cleanup action, it does not envisage the definition of cleanup objectives as standard
values (for achievement). This is based on the judgement that the definition of achievable goals
for individual cases is more practical since the condition of pollution differs substantially fromsite to site. The German system is highly flexible as it ensures that the development andachievement of cleanup goals are assumed by responsible parties as well as the assessment of thepresent situation.
Of course, care has been taken to ensure that the cleanup plan does not set intentionally
low-level objectives. The competent authorities may order the cleanup plan to be drawn up by
external experts. They are also mandated to develop or complement the plan as necessary, if
the content of the submitted cleanup plan is deemed insufficient. They may declare thesubmitted plan as binding (verbindlich) while reserving their right of revision.
Moreover, a responsible party who is required to submit a cleanup plan must voluntarily
provide information regarding its content as early as possible to other interested parties including
the owners and users of the site. Although this provision on disclosure only seems to require
simple notification after the plan has been developed, the federal Ministry of Environment
expects more substantial effects, namely, that the responsible party is expected to present
available information to other interested parties from the outset and develop the cleanup plan
based on consultations with such parties. In this way, the cost of cleanup may be reduced
eventually, as remedial action will not be delayed by any disputes among parties involved over theobjectives to be achieved.
After the completion of cleanup action, the site is reinvestigated following a certain periodof self-management. If no further problems are detected, the remediation process is considered
complete.
Thus, the German Soil Protection Law is intended to allow flexible cleanup action fit forindividual site conditions. The following subsection focuses on some of its characteristics incomparison with the U.S. system discussed in the previous chapter.
2.2 Characteristics(i) Introduction of uniform national standards
First, it should be noted that the Law harmonizes somewhat inconsistent provincial standards
and integrates issues that have been settled in court. In particular, the Law seems to have been
inspired by the lessons learned in the United States as regards the scope and liabilities of
responsible parties, cleanup process and uniform standards.
Responsible parties
The parties responsible for cleanup are defined in Article 4 and include those who havecaused hazardous soil alteration or contamination of the sites (Verursacher), successor to theircomprehensive rights (Gesamtrechtsnachfolger), land owners (Grundstückeigentümer),occupants and others who have effective control over the piece of land (der Inhaber dertatsächlichen Gewalt über ein Grundstück). The article also provides specifically for the
remediation responsibility of the corporations that control the owners of the polluted sites. As
a result, liabilities have been clarified for the controversial areas of successors of comprehensive
rights and Conzern-controlling companies, as well as for causers, owners and occupants,
traditionally held responsible under the German legal system.
No provisions are made for retroactive liabilities, which have been established through court
cases under the U.S. Superfund Act. This is because the remedial responsibility for soil
pollution is considered as a variant of danger removal under the police law, thus posing no20

Development Bank of Japan Research Report/ No. 6

difficulty regarding its retroactivity. Although it has a similar effect to that of the U.S. law, theGerman law does not apply retroactively to any owners who have not contributed tocontamination. Former owners are exceptionally held responsible if they transferred ownershipafter the Law had taken effect in March 1999 and knew, or should have known, about thepollution at that time.
Standard objectives
Article 8 authorizes the federal government to introduce standard objectives for remedialaction in the form of a regulatory order (Rechtsverordnung) after collecting views from thoseconcerned and obtaining agreement of the Bundesrat (Senate). The article envisages three typesof quantified objectives as shown in Table 3-2. The investigation value and the action value
represent the thresholds for conducting investigation or for taking concrete measures. In otherwords, they quantify the “danger and serious disadvantage to individuals or the public” generally
stated in legislation. Naturally, those values are not preconditions for issuing orders. The
competent authorities may order an investigation or remedial action as deemed necessary
according to actual evidence.
The prevention value, on the other hand, represents a standard for preventing theoccurrence of soil pollution in the first place before any investigation or cleanup action becomes
necessary. It corresponds to the responsibility of prevention (Article 7), as will be describedlater. Unlike the above two values, the prevention value constitutes a necessary condition for
defining the responsibility for prevention.
Table 3-2. Standard Values
1.

Investigation value (Prüfwert):
Exceeding this value may trigger an investigation on individual sites to determine the (non-)existence of pollution.

2.

Action value (Maßnahmenwert):
Exceeding this value may be deemed indicative of the existence of pollution in light of previous soil use, and subsequently
trigger cleanup action.

3.

Prevention value (Vorsorgewert):
Exceeding this value signifies the possibility of hazardous soil alteration in light of geological conditions or hazardous
substances emanating from the surrounding biotope.

The establishment of a mechanism that clearly defines uniform trigger levels forinvestigation and cleanup action constitutes the core of the Federal Soil Protection Law as it
seeks to remove the obstacle of inconsistent state standards. It also preempts the reforms of
the U.S. Superfund Act described in Chapter 2.
Incidentally, the Law provides that the goals of remediation to be attained through testing
and action shall be defined by regulatory orders in the form of “requirements (Anforderung)”
rather than “values (Wert).” Therefore, the government is not given the power to determine
any quantified objectives through regulatory orders. According to Sanden (1998), one of thereasons for such qualitative cleanup objectives is that any uniform objective would undermine
the development of flexible cleanup plans in response to the condition of individual sites (Article13).4
The regulatory order – Federal Order on Soil Protection and Polluted Sites (BundesBodenschutz und Altlastenverordnung) – was adopted by the Cabinet Meeting in June 1996
(approved by the Bundesrat on April 30). The Order, comprising five chapters, provides in
4 Sanden/Schoeneck: Bundes Bodenschutzgesetz Kurzkommentar, p.187.

Development Bank of Japan Research Report/ No. 6

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detail for hazardous soil alterations, investigation procedures on Altlasten and requirements
concerning cleanup. For example, the investigation value appearing in the Appendix Table areset progressively according to land use where human beings are directly exposed to thecontaminated soil. Four types of land use are identified: a) playgrounds for children, b)
residential areas, c) parks and recreational facilities, and d) industrial sites.
The action value has only been set for PCDDs (PCDD/F) so far. Values will be developed
for other pollutants, possibly integrating into the process the standards to be set by the EU
directive on soil protection now being negotiated.
Cost imputation
Clearly, the responsible parties should bear the cost of cleanup. As regards the right toindemnity and the imputation of investigation cost, however, various arguments have been madeand a consistent interpretation has not been established in court cases. One of the major
characteristics of the Law is that it sheds light on such issues as well as on the identification of
responsible parties and standard values. It provides for the mutual right to indemnity between
responsible parties in conformity with civil law provisions, with a negative prescription of three
years. As regards the imputation of investigation cost, the Law clearly provides that the cost ofinvestigation for risk assessment shall be borne by the responsible parties if, based on actual
evidence, there is enough reason to suspect the existence of pollution.
If a responsible party is unable to bear the cost, as in the case of the orphan share in the U.S.,
public funds will be directly injected. Apparently, it was considered difficult to introduce under
the German legislation a U.S.-style fund which does not require any direct relationship between
source and use. Any injection of public funds is recorded on the register book (land ledger)
along with the amount of money injected. In this case, the responsible parties (owners) are only
required to compensate for any substantial (nicht nur unwesentlich) rise in the land price due toremediation (Article 25). Actual judgement on such a substantial rise is made case by case.
This clause is intended to collect any excessive profits gained by the owners due to cleanup using
public funds. However, the provision is highly unlikely to be applied in practice, because prior
to injection of public funds, it must be carefully checked that the owners really cannot pay thecost in any other way.
(ii) Introduction of prevention principle
Second, the Law is characterized by its provision for the responsibility of prevention in
addition to the cleanup liabilities; requiring landowners and users to prevent any risk of“hazardous soil alteration.” The federal Ministry of Environment highly evaluates theintroduction of the prevention responsibility in soil protection policy, which is primarily focusedon past contamination. In line with this preventive obligation, the competent authorities are
granted the power to issue orders for the prevention of hazardous soil alteration. From theviewpoint of legal stability, however, this power may only be exercised when requirements are
established by regulatory orders.
The Federal Order on Soil Protection and Polluted Sites quantifies the requirements in theform of prevention values. The responsibility of prevention arises when a hazardous substanceis detected in an amount that exceeds the prevention value, or when the content of otherhazardous substances is so high as to cause hazardous soil alteration judging from the material
characteristics.
(iii) Distinction of polluted site problems
Third, in light of the particularities of polluted site (Altlasten) problems, the Law provides

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Development Bank of Japan Research Report/ No. 6

for special measures to promote efficient cleanup. Namely, the Law takes into consideration
the fact that problems related to Altlasten differ from other soil pollution problems in that they
result from past economic activities. The Law and its regulatory order have several specificprovisions for the cleanup of Altlasten for the furtherance of ordinary policies against soil
contamination. As mentioned at the beginning of this chapter, the most typical of thosemeasures is the cleanup planning system that allows a flexible response to site characteristics.
The declaration that a cleanup plan is binding also contains other authorizations required for thecleanup action, effectively bypassing the red tape and enabling actual work to start promptly. In
addition to such measures for efficiency, the Law provides that the polluted sites shall be placed
under the surveillance of the competent authorities, indicating enhanced safety considerations.
Where necessary, the competent authorities may order the responsible parties to conduct
monitoring and to maintain and submit the results even after the cleanup action has been
completed.
3.

Response to Soil Pollution in Former East German Territory

3.1 Soil Pollution in Former East German Territory
This section deals with the situation in the former East Germany, which is considered to pose themost difficult soil pollution problems in the history of Germany. In addition to the industrial
development prior to World War II, the industrial policy under the post-war socialist regime
seems to have caused serious soil pollution in the territory. Waste was carried into mixed
treatment facilities (Mischdeponie) in an uncontrolled manner without distinction between
domestic waste and industrial waste. Moreover, such facilities were dispersed all over the
territory to reduce transport cost (i.e., to save fuel cost). In addition to the existence of such
relatively small polluted sites, policy measures promoted large-scale industrial concentration
symbolized by industrial complexes, which led to the existence of large-scale, densely-polluted
sites in specific areas. Initial problems such as the leakage of hazardous substances during
production, storage and transportation due to outdated facilities, reduced investment and theshortage of replacement parts were further complicated in the early 1980s, when waste from themining, chemical and energy sectors increased under the autarchy policy (Autarkiebestrebung)and were disposed of on sites that were inappropriate for reclamation both geologically andtechnically.
From a legislative viewpoint, the former East Germany had a relatively forward-looking law
against soil pollution. As the achievement of objectives was made top priority under theplanned economy, however, safety was neglected in practice when treating hazardous substances.
Following reunification of Germany, the government was obliged to address such soil
pollution problems faced by former state-owned companies. Besides grave concern over its
adverse effect on human health, soil pollution in the former East Germany required an
immediate response in order to facilitate privatization of state-owned companies, which was thehighest priority at that time. Thus, an anti-pollution scheme was hastily built from scratch.
Since the polluters were former state-owned companies, the government was forced to pay a
considerable part of the remediation cost, making efficient cleanup action essential in order tominimize the impact on the national budget. This consideration in particular may have exerted
a strong influence on the development of subsequent policies including the above-mentioned
Federal Soil Protection Law.

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3.2 Brief History of Soil Pollution in Former East German Territory
In the new Länder created prior to the formal reunification, uniform countermeasures were to be
voluntarily applied to Altlasten based on the experience in former West German provinces. On
the initiative of the state of Saxony, the Polluted Site Committee/Joint East Working Group(Arbeitsgruppe Ost des Altlastenausschusses) was organized within the Joint State Waste
Program (Länderarbeitsgemeinschaft Abfall: LAGA) as the central organ for tackling the
problem. The Committee immediately started work on identifying Altlasten by introducing amatrix used in the former West Germany to determine the possibility of soil pollution. 2,000
sites had been identified by the mid-1990s as potentially polluted sites.
As the currencies were unified with the establishment of the monetary, economic and social
union on July 1, 1990, the Framework Law on Environment (Umweltrahmengesetz) went into
force (June 20), effectively enlarging the scope of the German environmental protection
legislation to the former East German territory. Although the law officially made each provincepart of the soil protection policy, the development of legislation for soil protection did not
progress smoothly in practice.
Thus, a major role in addressing this issue was handed over to the Treuhand-Anstalt (THA),
the federal agency in charge of the privatization of state-owned companies. Although the THA
was originally a public-law entity established in March 1990 to administrate the state-owned
companies in the former East Germany, it was subsequently transformed into one of the world’s
largest holding companies owning 14,000 former state-owned companies. The federal agency
also took charge of their privatization.
The THA became involved in soil pollution problems, which were initially not within theirscope of responsibility, because they were closely related with the privatization policy.
European and American industries, which were potential investors in the former East German
territory, had come to consider the risk of potential pollution as a matter of course whenpurchasing land. Therefore, privatization could not progress without measures being taken
regarding the risk of soil pollution facing such ex-state companies. The basic position of thegovernment on this issue had already been clarified in the aforementioned Framework Law on
Environment and the Law for Removing Obstacles to Privatization(Hemmnisbeseitigungsgesetz) of 1991. These laws provided that under privatization contracts,
liabilities of investors should be limited when any such liabilities occurred in the future due to thedetection of polluted sites (Altlasten). According to this immunity clause (Freistellung), theremaining liabilities were to be assumed by the federal government (THA). Specifically,
investors were only required to pay a small part of the cleanup cost (Sockelbetrag) for any
Altlasten that had existed prior to July 1, 1999, while the THA was to bear the remaining costand up to 90% of the total cleanup cost.5
The key issue was how to administer this immunity clause. Investors wished to blame theload existing on the purchased land to past contamination in order to receive as much publicfunds as possible for remediation. As no applicable laws existed at the federal level while thedevelopment of soil pollution legislation did not progress at the provincial level, the THA
inevitably had to assume the role of provincial governments, including the determination of
Altlasten. In practice, the involvement of the THA became the first involvement of the federal
government in soil pollution problems.
The THA organized an Altlasten Committee to examine issues such as risk assessment,
provision of immunity in privatization contracts and risk-sharing between the federal and5 From the viewpoint of the PPP (polluter-pays principle), this clause has a character of subsidy since the government sector pays

a substantial part of the cleanup cost to be borne by the private sector. Indeed, the clause was examined by the EU
Commission, which found that it did not constitute a subsidy that runs counter to its policy on competition.
24

Development Bank of Japan Research Report/ No. 6

provincial governments. Altlasten was defined as “the load of hazardous substances to soil thatthreaten public safety and order.” The identification of Altlasten proceeded rapidly by utilizing
the expertise gained in the former West Germany. In the former West German territory,
Altlasten usually refers to business facilities that have already been closed. In the former East
German territory, however, investigation also covered business facilities in operation as riskneeded to be assessed for privatization. Consequently, the number of potential Altlasten
increased substantially.
In December 1992 the anti-Altlasten scheme for the former East Germany was finalized by
the conclusion of a federal-province administrative agreement (VA-Altlasten: published in March
1993). This agreement integrated into the scheme the provincial governments, which had
remained uninvolved until then. It provides that, when privatizing a former state-owned
company, the part of the remediation cost for which investors are exempted from payment shallbe distributed between the federal authorities (THA) and the provincial governments in the ratioof 6 : 4 for ordinary projects and 7.5 : 2.5 for large-scale projects.
Table 3-3 outlines the large-scale remediation projects selected for the purpose of operating
the scheme. Requirements for the designation as large-scale projects include:(i) environmental risk(ii) estimated cost (over DM100 million)(iii) existence of significant loads as compared with other provinces (brown coal mines,
chemical complexes, etc.), and(iv) scale of the employment created by the remediation.
Appearing first in the table, the Bitterfeld/Wolfen site in Saxony-Anhalt is considered to be
the largest Altlasten of all. The area was developed for a large-scale chemical complex under
the socialist regime, as the main plant of the largest German chemical company (IG-Farbe) had
been located there even before the war. In the meantime, industrial waste continued to be
dumped in a former brown coal mine, causing serious combined pollution. The complex was
closed and partially privatized following the reunification, but most of this large area is still under
remediation and the threat to the groundwater artery has not disappeared. The serious situationis reflected in the level of remediation cost, which will amount to DM0.8-1.2 billion.

Development Bank of Japan Research Report/ No. 625

Table 3-3. Large-scale Altlasten Remediation Projects in Former East Germany
DM1 million
Project

State

OutlineRemediation cost

Bitterfeld/Wolfen

Saxony-Anhalt· Caused by chemical complexes and film plants that existed
in an industrial area in central Germany.

800-1200· Soil and groundwater have been polluted over a wide areawith hazardous substances dumped in a closed open-air
brown coal mining site.
Buna

Saxony-Anhalt· Caused by chemical complexes that existed over a large area
including Schkopau and Merseburg.

1000· Soil and groundwater have been contaminated over a wide
area with heavy metals and organic solvents.
Industriegebiet
Spree

Berlin

Leuna

Saxony-Anhalt· The largest industrial area in Berlin since 1879.

370· Combined pollution of ground water and soil withhazardous waste emitted from the concentration of various
industries including chemical, energy and metallurgy.
· Caused by Leuna, which was originally established in 1916
as a BASF ammonia plant and was transformed into an
integrated chemical plant after WWII.

100-200· Combined pollution of soil and groundwater with BTX andheavy metals.
Mansfelt

Saxony-Anhalt· Caused by mines (copper, brown coal, potash) that existed
in the Mansfelder Basin.

100-150· Mainly contaminated with heavy metals.
DresdenCoschuetz/

SaxonyGittersee

PCK Schwedt· Caused by a former uranium processing plant (1951-1962)
and a tire plant (1962-1992).

140· Contamination with radioactive substances and heavy
metals.
Brandenburg· Caused by the concentration of oil refining facilities
established in 1964 as well as fertilizer, feed and chemicalplants.

120-130· Soil and groundwater contamination with hydrocarbons
and naphthalene.
Region Oranienburg

Brandenburg· The oldest industrial area in eastern Germany. Soilpollution caused by past industrial waste disposal and theleakage of hazardous substances from bombings during
WWII.

RositzThuringia· Caused by a tar plant closed in 1990.

100

110-190· Combined pollution of soil and groundwater due to tar
disposal and the leakage of hazardous substances frombombings during the war.
Erdoel-Erdgas
Gommern

Saxony-Anhalt· Caused by a former oil and gas complex.
· Combined pollution of groundwater and soil with heavy
metals from the sludge buried in numerous places within
the site.

Sources: German Federal Ministry of Environment documents.

26

Development Bank of Japan Research Report/ No. 6

At least 100

3.3 Huge Remediation Costs and Role of Government
As the identification of polluted sites progressed, the discussion became focused on the costs ofremediation for business sites in the former East Germany. Table 3-4 shows the principal
estimates at that time. The estimated figure ranged widely from DM10 billion to over DM200
billion, largely due to the difference in judgement on the increase in the number of potentiallypolluted sites and on the share of the sites that actually need remediation. Reportedly, one
estimate even suggested that the costs would total at least DM500 billion. Even though thisfigure was somewhat exaggerated, it was commonly agreed at that time that it would take morethan DM100 billion to clean up the Altlasten in former East Germany. This issue was discussed
intensively because, as already mentioned, the particularities of the former East German territory
dictated that most of the remediation costs would have to be paid by the government. In otherwords, remediation was considered as an additional cost of reunification.
Table 3-4. Estimates of Soil Remediation Cost in Former East Germany
DM million
Organization

Year

Estimated cost

Notes

Institut für Oekologishche
Wirtschaftsforschung(Berlin)1990

45,200· Does not include costs related to uranium mines. The
share of Altlasten is estimated to be 48%.

Ifo-Institut (Munich)

1991· The figure indicates the minimum amount required.
10,600· Based on a 1990 investigation, the share of Altlasten isestimated to be 8%.
· Does not include costs related to uranium mines andSoviet military posts.

Wirtschaftsministerkonferenz

1991

36,000-270,000· Altlasten are estimated to represent 30% of the 30,000
suspected sites.
· Average remediation cost: DM2-15 million. Does notinclude military-related sites.

Ifo-Institut (Munich)1992

26,000

IWH (Halle)

1993

56,000-75,000

Former East German
provinces

1993

75,000-113,000· Costs are calculated separately for former disposal sites
and industrial sites by multiplying investigation,
remediation and management costs by their respective unit
prices and adding the costs for sites identified
subsequently. Does not include Soviet military posts but
includes uranium mines.

· Aggregate of the estimates conducted in individual
provinces.

Source: Volker Franzius Kosten und Finanzierungbedarf der Altlastensanierung in den Neuen Bundesländern.

Faced with the huge cost of remediation, the THA and its successor organ, the Special
Federal Agency on Unification (Bundesanstalt für vereinigungsbedingte Sonderaufgabe: BvS),
developed a concept to be applied in actual remediation activities. It separated the level ofremediation to be achieved from abstract ideas of danger and objectives. Instead, it stressedthat the remediation required by soil protection laws and regulations being developed byindividual provinces should be set at reasonable levels that can be achieved both environmentallyand economically. Typically, the concept developed a method that relies on external experts fordetermining whether pollution exists or not. If the existence of pollution is confirmed, themost economically reasonable technique is selected taking into consideration waste problems(excavation of contaminated soil), the amount of resource use (capacity of the disposal site,

Development Bank of Japan Research Report/ No. 6

27

energy use) as well as greenhouse gases and other loads generated in intermediate disposal andlong-distance transportation.
As uniform laws and regulations did not exist at the federal level, with as many as 39
definitions of Altlasten further complicating the problem, various estimates of remediation costs
made at that time applied in most cases the highest cleanup standards and costs in the former
West Germany to the eastern territory without any adjustment. The concept developed by the
THA and BvS provides a reasonable review of such practice.
The assessment and cleanup according to this concept have brought two large benefits tothe federal government (THA/BvS).
First, it was made possible to provide potential investors with estimates of remediation costs
on a uniform basis. Even though there was already an immunity clause, investors could still beheld liable for about 10% of the remediation cost. Providing them with such valuable
information helped to remove the uncertainty about investment conditions. Moreover, theremediation costs themselves turned out to be much less expensive than had been estimatedinitially. A thorough reassessment indicated that they would never exceed DM30 billion, which
was substantially lower than the earlier maximum estimate of DM500 billion. Table 3-5 shows
the status of Altlasten cleanup projects as of April 1999. In total, 4,554 sites have been
identified as Altlasten requiring cleanup. Contracts of large-scale projects have been concluded
for 557 sites, while 1,215 sites are covered by ordinary contracts. No contracts have beenconcluded for the remaining 2,772 sites. Table 3-6 indicates the estimated burden of the BvS in
conducting the large-scale and ordinary cleanup projects (as mentioned above, 75% and 60% of
total cost respectively). In addition to the DM5 billion already incurred, the BvS has committed
itself to paying over DM500 billion for some of the projects still to be contracted. Thus, thecurrent risk for the BvS totals DM5.5 billion. Figure 3-2 shows the trend of the total risk. The
fact that the cumulative payment during the same period amounts to some DM1.4 billion (Figure3-3) indicates the effectiveness of the reassessment by the new reasonable method of estimation.
Table 3-5. Altlasten Cleanup Projects in Former East Germany (Number of Contracts)
As of April 1999
Large projects

Ordinary projects

Berlin

36

94

241

371

Brandenburg

98

158

341

597

Mecklenburg vor Bommern

0

156

326

482

Saxony-Anhalt

169

134

386

689

Saxony

102

325

887

1,314

Thuringia

152

348

591

1,091

Total

557

1,215

2,772

4,554

Source: BvS.

28

Development Bank of Japan Research Report/ No. 6

Untouched projects

Total

Table 3-6. Risk Assessment by BvS (as of April 1999)
DM million
Large projects

Ordinary projects

Total

Berlin

234

238

472

Brandenburg

118

331

449

Mecklenburg vor Bommern

27

89

116

Saxony-Anhalt

1,805

825

2,630

Saxony

209

319

528

Thuringia

372

399

771

Total

2,765

2,201

4,966

Note:

The total risk assessment amounts to DM5,493 million, as a further DM527 million is likely to be spent on
untouched projects.
Source: BvS.

Second, the decline of land prices due to the existence of Altlasten could be grasped
comprehensively. This information was necessary because any sites unfit for privatization as
business sites had to be sold in the real estate market for other uses.
Figure 3-3. Trend of Payments by THA/BvS
1,600

Cumulative payments

1,200
DM million

1,411

Payments

1,400

1,034

1,000

788

800

611

600
323

400
200

110

201

0
1993

1994

1995

1996

1997

1998

1999

Source: BvS.

Development Bank of Japan Research Report/ No. 6

29

Figure 3-2. Trend of Total Risk for THA/BvS
24,000DM million

20,00016,00012,000
8,000
4,000
0
1992

1994

1996

1998

1999

Source: BvS.

3.4 Implications of Measures Taken for Former East German Territory
Thus, the attempt of the THA and BvS served as a precursor to the aforementioned federal
policy on soil protection in that it demonstrated the necessity and effectiveness of uniform
criteria in addressing Altlasten issues. Also, it clearly showed the kinds of problems faced by thegovernment when intervening in soil remediation. One of its implications is that explicit criteria
need to be established for determining the level of pollution when public funds must be injected
due to the inapplicability of the PPP. In addition, it is extremely important for the government
to internalize the ability to assess the condition of polluted sites in determining the scale of the
projects in order to avoid moral hazards. In the case of the former East German territory, forexample, investors tend to make maximum use of the indemnity clause, while state governments
would like to see its activities designated as large-scale projects.
4.

Future Perspective of Underground Environmental Protection Policy in Germany

This chapter has outlined the soil protection legislation in Germany, the latest of its kind
introduced among the developed countries, with reference to preceding efforts in the former
East Germany. The establishment of a uniform soil protection policy at the federal level will
substantially accelerate the comprehensive identification of Altlasten and cleanup costs, including
those in the eastern territory. Indeed, the unified standards have stimulated the movement
toward creating a database on Altlasten.
The systematic development of soil protection policy signifies that market conditions for the
remediation industry have improved. In Germany, the notion of the remediation industry has
been highly inclusive. In the broadest sense, remediation includes the transition fromdependence on brown coal to expanded use of renewable energies to prevent future Altlasten
from emerging. It is sometimes argued that the recycling industry should be developed so that
construction of final disposal sites (Deponie) can be halted. Even in a narrower sense, soil
cleanup activities have emerged particularly in the mining and construction industries.
Reportedly, industries have crossed the national border and are expanding cleanup activities
30

Development Bank of Japan Research Report/ No. 6

abroad, including Central and Eastern Europe. The government also considers them asimportant export industries. Although the scale of the national market cannot be identified
until the number of potential sites has been confirmed using a uniform measure, it is estimated toreach ¥4 trillion for untouched sites.6
As pointed out by an environmental group (BUND), the German Soil Protection Law does
include some problems such as its narrow scope of applicability. This problem, however, iscommon to many environmental protection laws and regulations. Considerable investment canbe expected subsequently as the Law will be integrated into the Environmental Code currently
under consideration. In any case, the underground environmental protection policy inGermany will continue to progress in the short to medium term, because it preempts the reformof the U.S. Superfund scheme including the development of progressive standards based on land
use and the admission of flexible cleanup objectives in response to site characteristics.

6 The figure is estimated using the cost per site according to the ifo-Institut based on the assumption that 20% of the 304,000

potential sites will receive actual remediation. However, this may represent an underestimate in light of the scale of theGerman economy. Indeed, the Netherlands is reported to have a remediation market of 80 billion florins (about ¥5 trillion),
although this figure is based on the assumption that all sites will be receive the highest level of cleanup applicable to residential
areas.
Development Bank of Japan Research Report/ No. 6

31

IV. Current Status and Future Perspective of the Japanese Remediation
Industry
As discussed in the previous chapters, the remediation industry has been recognized as apromising business in countries like the U.S. and Germany. In both cases, the establishment of
the industry was preceded by institutional development covering the problem of undergroundpollution to boost the potential remediation market. In comparison with those examples, thischapter examines the current status and future perspective of the remediation industry in Japan.
1.

Remediation Market in Japan

1.1 Past Developments
As in Europe and the U.S., policy response to underground pollution in Japan has beenstimulated by incidents that have had a major social impact. However, a comprehensive legal
system for the underground environment has not been developed in Japan partly due to thedifficulty in integrating it into the traditional policy framework focused on the fight against
industrial pollution. This point was discussed in Chapter 1. Policy response was limited tothat part of the underground environment which directly affects human health, such as
agricultural land and groundwater. Consequently, other problems such as so-called urban soil
pollution have mostly been left untouched, and there has not even been a nationwide site
investigation to identify the condition of underground pollution in Japan.
Currently available data include the results of a questionnaire survey for local governmentsthat is conducted every five years by the Environment Agency. According to the survey, 872
pollution cases were identified during the period from April 1, 1975 through March 31, 1997, of
which 467 cases were investigated. Pollution standards were exceeded at 171 sites (Table 4-1).
The number of identified cases is naturally far smaller than those in the U.S. and Germany, where
the identification of polluted sites is required by legislation. Nonetheless, the result shows someof the characteristics of underground pollution:(i) The pollution involves a wide range of industries (Figure 4-1).
(ii) In most cases, the pollution of surface soil coincides with that of sewage and infiltrationwater.
(iii) Different pollutants cause different types of pollution. For example, pollution by
heavy metals affects a wide area and is mostly found in relatively large-scale business sites, but its
depth remains relatively shallow.
Table 4-1. Investigation of Soil Pollution (Number of Cases)
Total cases
Investigated cases
Contamination cases

Source: Environment Agency.

32

Development Bank of Japan Research Report/ No. 6

Cumulative total

Identified in FY1997

872

46

467

44

171

39

Figure 4-1. Industrial Distribution of Contamination Cases (n=171)
Metal products

Laundries/
barbers/publicbaths

OthersChemicals
Gas
Wood/wood
products

Generalmachinery andappliances

Waste disposal
Ceramics/sand& stoneIron & steel
ElectricalmachineryNon-ferrous
metals

Note:

Categories are according to the intermediate classification in the Japanese Standard Industrial Classifications.
“Others” include 15 industries, academic research and public operations as well as unidentified cases.
Source: Environment Agency.

1.2 Characteristics of Remediation Market So Far
As can be deduced from the survey results, information on remediation activities is extremely
limited in Japan, and not even the local authorities have sufficient data. This is because there
has been no incentive for companies conducting remediation to disclose their information.
Aside from the cases like groundwater pollution after the revision to the Water Pollution Control
Law, where pollution affects other environmental media under control, any measures against
underground pollution taken by private firms so far have preempted future regulations that do
not exist at present. For example, a company may decide to clean up a site when an
investigation has identified pollution that might affect a groundwater source, for fear of theeventual social impact and costs. In Japan, such cases are likely to be reported by the media as
scandals, thus considerably damaging the reputation of the company. For such reasons, most
remediation organizations take remedial action with great care under strict information control,and enter into confidential contracts with specific executing firms. The Japanese remediation
market constitutes a highly closed system, as such activities are conducted individually in many
places and related data is available only in narrow areas including local authorities. As describedlater, this is a characteristic of the Japanese remediation industry, which is geared to providing
integrated services covering the whole remedial process.
The absence of rules to provide a common basis for understanding has left the market
undeveloped and highly opaque. However, the number of cases investigated by theEnvironment Agency – currently standing at 467 in total, of which 171 cases require
countermeasures – will increase rapidly as the system develops. In fact, the example of theDevelopment Bank of Japan Research Report/ No. 6

33

former East Germany discussed in the previous chapter indicates that, following the initialdependence on local authorities for the voluntary identification of polluted sites, institutional
development resulted in a substantial increase in the number of potentially polluted sites.
1.3 Discussions on Scale of Remediation Market
How many polluted sites exist in Japan that require remediation? Several forecasts have been
made from different viewpoints including the theory of market scale for the remediation industry(Table 4-2). The market scale is extremely difficult to measure as indicated by the wide range of
estimated values according to different viewpoints and approaches.
Table 4-2. Various Forecasts of Market Scale for Remediation Industry
Organization

Scale

Note

Japan Society of Industrial
Machinery Manufacturers

FY 1996 actual, ¥3 billion
2010 forecast, ¥24 billion

Actual and forecast figures for related
facilities and businesses

Think tank
(Sumitomo Marine Risk
Research Institute)

Number of business facilities for which
pollution diagnosis is preferable = over
440,000 sites

Forecast of the number of sites basedon soil environment standards

Think tank
(Japan Research Institute)¥2-3 trillion

Remediation firm

100,000 sites, ¥1 trillion

WEDGE magazine

200,000 sites, over ¥60 trillion

Half of 440,000 sites x cost per site(¥300 million)

Sources: Various documents.

Since the condition of polluted sites varies substantially, the methods of investigation andremediation cannot be determined automatically. As described later, to provide optimal
solutions according to individual site conditions, most firms involved in remediation try todevelop comprehensive treatment skills and a wide variety of cleanup methods and techniques.
This is why remediation technology is called the “art of combination.” Also, the mostimportant determinant of remediation cost is the duration of the cleanup. In an extreme case,the cleanup cost for the same polluted site may differ substantially between removal of polluted
soil by excavation (despite the astronomical cost) and long-term, progressive remediation by
installing individual cleanup equipment while keeping the facilities operating. Also, the cost
may vary greatly depending on the level of remediation required.
Taking those limits into consideration, Table 4-3 shows a rough estimate of the market scale
for the Japanese remediation industry. Supposing that, as in Europe and the U.S., division oflabor has developed within the remediation industry with leading vendors for each process, anestimate should consider:(i) number of potentially polluted sites ´ unit cost of general investigation,(ii) number of sites requiring detailed investigation ´ unit cost of detailed investigation, and(iii) number of sites requiring remediation ´ costs of cleanup and monitoring.
However, no credible data exist on those figures. Moreover, the Japanese typically prefercontinuous services that integrate investigation with the remediation process. The estimate
therefore excludes the cases where only investigation is conducted and supposes that any
preceding investigation cost is included in the remediation cost.
Prior to any estimate, substitutional values must be determined for the number of sites
requiring cleanup, the amount of soil and the unit cost of treatment.

34

Development Bank of Japan Research Report/ No. 6

The number of potentially polluted business sites may be calculated as the sum of businessestablishments in the industries suspected to be polluting the underground environment. Basedon the pollution matrix used in Germany, this report focuses on the pollutants controlled by theJapanese environmental quality standards for soil pollution and the Water Pollution Control Law
in selecting the polluting industries. As indicated by the aforementioned Environment Agency
survey, the “possibility” of pollution covers almost all manufacturing industries, and the total
number of polluting industries exceeds 400,000 including laundries (excluding intermediateagencies) and gas stations. Since the figure represents potentially polluted sites, the number
should also be estimated for the sites subjected to investigation and subsequent cleanup.
Judging from the share of the investigated cases (467) in the total cases (872) identified by theEnvironment Agency survey, the number of sites requiring investigation amounts to just over
280,000. If we apply the actual rate of 10-20% in Germany, the number of sites requiring
remediation ranges from just under 30,000 to 70,000.
The next issue in considering the market scale is how much soil will have to be cleaned up in
those sites. This calculation requires data on the surface area per business establishment, thedepth of pollution and the share of contaminated soil in the total volume (contaminated soil
ratio). This report adopts as the surface area per site the land area of the manufacturingindustry given in the Report on Basic Land Survey divided by the number of manufacturingbusiness establishments reported in the Industrial Statistics. The surface area of a gas station
and a laundry is assumed to be 300㎡ and 100㎡ respectively. The depth of pollution isconsidered to be 3.8m, in line with the result of the Environment Agency survey.
The soil contamination ratio is substituted with the ratio of planned building area to total sitearea according to the Table of Results of Survey of Plant Location Trends. This is because
pollutants tend to leak where there are buildings of some kind.
Finally, it is not possible to define the unit cost of treatment in a single manner; different
techniques and methods are used according to the pollution situation. The period required forcleanup also differs substantially between on-site and off-site remediation. The fight against soil
pollution is often compared to medical treatment. This is because the process of diagnosing thecondition of individual patients to select and carry out the optimum treatment resembles that ofinvestigating suspected sites, identifying the condition of pollution and selecting the optimalcleanup method. And just as it is impossible to talk about medical costs without considering
the patient’s condition, costs related to remediation cannot be determined without considering
actual cases. According to data obtained from hearings, this report estimates the cost to be¥25,000-100,000 per cubic meter.
An estimate based on the above assumptions indicates that the scale of the remediation
market exceeds ¥5 trillion, with a considerable margin of error reflecting the variance of related
costs (Table 4-3). As indicated by other estimates, it is safe to say that there is a huge potential
market, though several points must be considered as follows.
First, as long as the pollution stays within a plant site, remediation is an issue only whensome kind of land alteration is conducted such as redevelopment after the closure of a plant.
Therefore, the several trillion yen potential of the remediation market will materialize over a very
long period as land is altered.
Second, the scale and emergence of the market largely depend on the rules concerning
remediation. The aforementioned assumptions may change considerably according to thecoverage and level of remediation required. This is also evident from the fact that, as regards
the problem of Altlasten, the cost calculated by the BvS according to its own scheme was very
different from the initial estimate of the remediation costs. This issue is examined at the end of
this chapter.
Development Bank of Japan Research Report/ No. 635

Table 4-3. Example of Calculating Market Scalea. Number of suspected sites

409,332 sites

b. Investigation ratio

53.6%

c. Number of sites requiring investigation (a´ b)219,218

d. Ratio of sites requiring remediation

10-20%

e. Number of sites requiring investigation

Environment Agency survey: investigatedcases/total cases

Estimated from Environment Agency survey
result, German cases, etc.

21,922-43,844

f. Average area per site (㎡)12,156g. Depth of pollution

3.8m

h. Volume of contaminated soil (m3)(e ´ f ´ g ´ contaminated soil ratio)

214,069,781-428,139,561

i. Contaminated soil treatment cost(¥10,000/m3)

2.5-10j. Scale of remediation market (h*i)

53,517-428,140

National Land Agency, “Report on BasicLand Survey,” Industrial Statistics, etc.
Contaminated soil ratio is substituted withplanned building area/site area
Hearings, etc.

Notes: 1. The investigation ratio is substituted with the ratio of actually investigated cases (467) to total cases (872)appearing in the Environment Agency survey (FY1997).
2. The ratio of sites requiring remediation represents the actual figure for potential Altlasten in Germany(10-20%). Incidentally, contaminated sites account for 36.6% of the sites covered by the Environment
Agency survey (171/467).
3. The area per site for manufacturing represents the land area appearing in the “Report on Basic Land
Survey” divided by the number of business establishments in the Industrial Statistics. Data for gas
stations are based on information published by the Standard Oil Report, while the average area of alaundry is assumed to be 100m2. The figure appearing in the table is a weighted average based on thenumber of business establishments.
4. The depth of pollution is estimated from average values in the Environment Agency survey.
5. The contaminated soil ratio is estimated to calculate the volume of soil actually subjected to remediation.
It is substituted with the planned building area/site area ratio (21%) appearing in the “Table of Resultsof Survey of Plant Location Trends.”
Sources: Various documents.

2.

Progress of the Japanese Remediation Industry

2.1 Technologies and Expertise Accumulated by Entrepreneurs
Having outlined discussions on the characteristics and scale of the remediation market, thissection examines corporate behavior in the market. Thus far, there have been no clear rules in
the Japanese remediation market, which has been nurtured by the closed relationships between
users and remediation firms. Due to such particularities, the firms operating in the remediation
market are organized to provide a complete set of services ranging from investigation andanalysis to cleanup and subsequent monitoring. They are also prepared to respond to every
kind of pollution, dealing in as many cleanup techniques as possible. This contrasts very muchwith the European and American markets, where open competition has led to the existence ofvarious firms specialized in individual processes. Under competition, the optimum method has
to be selected for each polluted site, as individual sites have their own characteristics in terms of36

Development Bank of Japan Research Report/ No. 6

the type of pollutants, the depth of pollution and contaminated area. In Japan, weakness in any
particular department directly leads to a disadvantage in the competition for winning orders.
2.2 Development of Various Technologies
Remediation technology is called the art of combination. This means that a wide variety oftechnologies in different industries need to be combined, including chemicals, engineering,mining, machinery and biotechnology, so as to design and execute optimal remediation that fits
the characteristics of individual sites.
Reflecting this character, many of the companies operating in this field have entered themarket with their own specialties. Most of them have come from the construction (generalcontractors) or machinery (plant makers) industries, while other firms represent a wide variety ofindustries such as mining and chemicals. Many of those companies actively entered theremediation business in the late 1980s and have sought to integrate various technologies in many
ways since then. However, the development of the business differs somewhat according to thecore businesses of the firms. Table 4-4 shows some examples of the companies operating as
remediation businesses. The following discussion focuses on those firms and determines thecharacteristics of the industries of origin.
(i) Construction
Construction firms, with their integrated engineering abilities, have commonly expanded thescope of remediation tool combinations by developing and introducing individual techniques.
This trend is most visible in Kajima. In addition to its traditional methods geared to generality,
the company has actively developed and introduced new techniques. At the same time, its
strategy seeks to enhance its integrated engineering ability, i.e. the ability to prescribe and execute
optimal remediation according to site conditions identified by investigation and analysis. In
practice, the company conducts its remediation business based on a comprehensive tie-up with amajor U.S. engineering firm to strengthen its project-making ability.
If the remediation business can be divided into the investigation/analysis stage and thecleanup stage, the former may be called “software” and the latter “hardware.” So far in Japan,
the work has not been considered as an integrated and organic process, and emphasis was placedon either of the two; this is the most difficult issue to address. The emphasis of theconstruction industry on integrated engineering including post-remediation redevelopment isoriented toward providing a solution to the problem.
As regards individual techniques, existing civil engineering techniques are directly applied tothe containerization and anti-diffusion techniques. The introduction of external techniques andtechnological development have focused on decomposition and dissolution techniques including
bio-remediation and heat treatment. Since remediation technology is considered as acomponent of integrated engineering, construction firms do not generally seek advantage inindividual remediation techniques. Indeed, a wide range of activities have been undertaken toachieve low-cost remediation on site.

Development Bank of Japan Research Report/ No. 637

Table 4-4. Examples of Firms Involved in Remediation
Firm

Industry oforiginExamples of typical remediation tools

Note

ObayashiCorporation

Construction

·
·
·
·
·

Bio-remediation
Electro-chemical cleanup technique (heavy metals)
Soil cleanup technique
Long-term stable encapsulation techniqueContainerization (sophisticated liner wall system, etc.)· Integrated response to soil cleanup and waste
disposal site problems· Responsible for oil-polluted soil treatment in Kuwait
after the Gulf War conducted by the Oil Industry
Revitalization Center

Taisei
Corporation

Construction

·
·
·
·

Soil gas suction method
Lime-mixing extraction method
Bio-remediation
Law-temperature heating cleanup & containerization(transmissive groundwater cleanup wall, etc.)· Joint development with the National Institute for
Minamata Disease (low-temperature heating cleanup
method)· Enhancement of remediation business for dioxincontaminated soil with biotechnology

Shimizu
Corporation

Construction

·
·
·
·

Classification & washing system
Vacuum extraction method, pumping aero- exposure
Containerization (earth-cut method, etc.)
Bio-remediation· Responsible for oil-polluted soil treatment in Kuwait
after the Gulf War conducted by the Oil Industry
Revitalization Center· Development of bio-treatment technology throughtechnical tie-up with Parsons (U.S.)

Kajima (ERS)

Construction

·
·
·
·
·

Soil aero-exposure method, pumping aero-exposure method
Solidification and encapsulation of heavy metals
Containerization (vertical liner facilities, etc.)
Oil pollution cleanup by bubble hauling method, etc.
Bio-remediation· Engineering tie-up with Jacobs (U.S.)· Establishment of a subsidiary (ERS) specialized inenvironmental risk assessment

HazamaConstruction

·
·
·
·
·

Pumping treatment, soil gas suction
VOC treatment by carbonic water injection
Hexavalent chromium treatment by organic starch
Removal of PCB dissolved in water by special high polymer
Containerization· Application of research result from Kyoto University
Disaster Prevention Institute· Technological fusion for organic starch withHayashibara (Okayama)

KonoikeConstruction

Construction

·
·
·
·

Pumping treatment, soil gas suction
Soil cleansing
Bio-treatment
Thermo-chemical treatment· Top-ranked contractor with public sector for soil
treatment· Tie-ups with SCC-Environment, etc. forenhancement of thermo-chemical treatment· Envisages mutually-reinforcing business tie-ups

Ebara

Machinery

·
·
·
·
·

Land application method
BCD process
Soil gas suction, pumping aero-exposure
Bio-remediation
Terrasteam, Terrawash· Introduction of technology (PCB) from EPA (U.S.)· Introduction of technique (heavy metal) from Lulugi(Germany)· Promotion of a separate zero-emission initiative

KuritaWater
Industries

Machinery

·
·
·
·
·

Fingerprint investigation method
Pumping aero-exposure method
Bio-remediation
Supercritical water oxidation system
Soil gas suction system· Technological tie-up with Groundwater Technology,
Inc. (GTI: U.S.)· Opened a Business Development Center to promote
development and commercialization of various
environmental techniques

Japan Organo(KankyoTechno)Machinery····Air stripping
Heavy metal solidification
Supercritical water oxidation system
Mobile laboratory investigation method· Establishment of Kankyo Techno as joint venturewith Tosoh Corporation· Integration of Organo’s VOC treatment techniquewith Tosoh’s heavy metal treatment technique· Consortium for diffusion of mobile laboratory
methodMaezawa
Kogyo

Machinery····Airspersing method (in-situ aero-exposure of gas and liquid)
Groundwater pumping method
Air-injecting soil gas suction method
Soil gas suction method· Combination of original technology with techniques
introduced from NWR Environment (U.S.) throughtechnological tie-up

ShinkoPantechMachinery····

Metal sodium method (PCB contaminated oil)
Solvent extraction decomposition method (containers, etc.)
Supercritical water oxidation system
Membrane separation technique· Combination of original technology withdechlorination technique of Powertech (Canada)· Expansion from PCB treatment technique to general
remediation technology

Dowa Mining

Non-ferrous
metals

·
·
·
·
·
·

Washing classification treatment
Heat treatment
Bio-remediation
Pumping treatment
Solidification
Encapsulation· Coverage of whole process with original technology
within the group including Dowa Koei Technoclean,
Dowa Clean Techs and Hanaoka Mining

Sources: Various corporate documents.

38

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As regards technology imports, the increase in remediation tools prevalent at the initial stage
has recently been complemented by a strategic qualitative transformation of remediation
technology. For instance, Konoike Construction has reduced the emphasis on traditional
techniques such as containerization, and has shifted the focus of its remediation tools toneutralization techniques. As part of its efforts, the company has been actively introducing
thermo-chemical treatment technology such as heat desorption and fusion. Thanks to theintroduction of thermo-chemical treatment, which is fit for mass treatment and widely applicable,
the remediation tools of the company now cover a wide range of neutralization technologies,
substantially expanding its choice for efficient remediation planning.
The trend toward efficient remediation is also significant in terms of technologicaldevelopment. For example, Obayashi Corporation has used its experience in heavy metal
treatment to improve the practical encapsulation technique in parallel with more traditional
techniques such as decomposition and dissolution. Against VOC and oil pollution, thecompany focuses on bio-remediation and has been developing various stimulation andaugmentation techniques. This approach is intended to achieve the most efficient remediation,
since it is often impractical to completely clean up heavy metal pollution and because theremediation cost for VOC and oil pollution varies substantially according to the technique used.
There have also been various developments to improve the efficiency of application, as
companies such as Taisei Corporation and Hazama have expanded the applicability of traditional
methods. Other noteworthy techniques include the hexavalent chromium reduction method
using polysaccharides (food additive) and the removal of PCB in water with synthetic rubber,whose molecular structure is very similar to that of adipose, a major accumulator of PCBs.
These examples are also significant in that they involve the integration of technologies fromdifferent industries.
Finally, technological cooperation is moving further upstream to include preventive
techniques. For example, Shimizu Corporation, in collaboration with Toshiba and Hokuriku
Advanced Technology Institute, is promoting the IMS international joint research project (on asophisticated environmental monitoring system in production areas) to prevent contamination, inparallel with the development of remediation technology. This case indicates the large andgrowing potential of remediation technology.
(ii) MachineryIn most cases, the machinery industry including plant makers utilizes water treatment
technology to promote technological innovation. Geared toward making technologicalbreakthroughs, they focus on advantageous areas including VOC treatment, to which theirexpertise in water treatment and chemical plants is directly applicable. Typically, they also
introduce remediation tools against other pollutants including heavy metals.
The technological innovation ranges from upgrading existing methods to developing newtechnologies.
A typical example of upgrading existing technology is how Maezawa Kogyo improved theAirspersing method. Upon entering the remediation business, the company chose thistechnique that was emerging in the United States, in addition to existing methods such as
pumping aero-exposure and soil gas suction. The company intends to commercialize themethod through a technological tie-up with the U.S. firm. In addition to various improvements
to make the technique commercially suitable for the Japanese market, the company is currently
improving its efficiency for traditionally unfavorable geology including clay layers. The researchis based on using the Airspersing method to activate microbes by injecting air into soil. If theexperiment succeeds, a new in-situ remediation method will emerge in combination with bio-Development Bank of Japan Research Report/ No. 6

39

remediation. Elsewhere, Ebara has introduced the Terrasteam method from a German firm,
Lulugi, for heat-treating heavy metals; the technique is currently applied to large-scale
remediation projects. The company has also introduced the BCD process from the U.S.
Environmental Protection Agency mainly for PCB treatment, and is now preparing for its
practical operation. Thus, foreign technology has been assessed and improved for use in thedomestic remediation business.
New technology also includes the supercritical water oxidation technique, which is apotential next-generation remediation technique, as well as various bio-remediation techniquesdeveloped by individual firms in their own way. For example, Organo is using its expertise in
VOC-related techniques based on water treatment technology, as it has a large market share inpumping aero-exposure facilities (paced tower method). The company is establishingcomparative advantage by concentrating managerial resources on this field and developing thesupercritical water oxidation technique. This case shows how remediation firms from themachinery industry tend to specialize in core businesses to achieve technological innovation.
Kurita Water Industries is also focusing on bio-treatment in parallel with the development andapplication of water treatment technology. In the field of bio-stimulation, the company has
established a practical technique, having completed the demonstration test for anaerobes as well
as for aerobes. The company is also stepping up research and development on bioaugmentation for practical use in the future. The company is thus building on its corebusinesses while ensuring synergy with other environment-related businesses, and it created new
R&D centers in 1998 for remediation and other environmental technologies, and reorganized its
R&D system accordingly. Likewise, Ebara has been developing land applications and otherremediation techniques utilizing the results of pollution prevention techniques being developed
separately under the zero-emission initiative. Machinery manufacturers also typically enter the
remediation market after establishing an original technique. Thus, Shinko Pantech is growing
its underground remediation business based on expertise gained in developing technology fordecomposing PCB in waste oil or adhered to containers, which was conducted both in-house andin collaboration with a foreign firm.
Furthermore, efficient investigation and analysis tools have been developed for linking suchtechniques with a comprehensive remediation plan. For instance, Ebara has established asystem for identifying the optimum remediation plan by conducting a preliminary test using
samples of contaminated soil and comparing various remediation methods (treatability test).
Organo has developed a mobile laboratory method, which enables soil gas to be analyzed quickly,
accurately and with high sensitivity. The company is now promoting this technique as a suitable
investigation tool in view of the subsequent remediation process.
(iii) Non-ferrous metals (mining)
The mining industry differs somewhat from other industries such as construction andmachinery, which add other techniques to their fundamental technologies as necessary. The
mining process flows from the detection of ore deposits to excavation, to selection and refining.
Ore deposits can be regarded as pollution created by nature as they contain huge amounts ofimpurities such as heavy metals. In principle, the expertise of the mining industry for locating,
excavating and separating such deposits with minimum impact on the surrounding environment
and then reusing clean earth and sand, can be applied directly to the pollution caused by humaneconomic activity. Dowa Mining, a company actively involved in the remediation business, calls
this aspect the “parallel movement of technology and facilities.” As regards underground
remediation, the company has established a system by which firms within its group can undertake
the whole remediation process, ranging from investigation to planning and execution. Using its

40

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techniques developed for mining, the company offers comparative advantage in off-site
treatment including washing classification. This advantage is attributable not only to theindividual techniques themselves but also to the well-established system of the company. The
company is also involved in the shipping business, and can thus reduce transportation cost,which is the biggest disadvantage of off-site treatment.
2.3 Emergence of Technological Innovation and Integration
As described above, many Japanese remediation firms have used their existing technology toenter the market in the past decade, and have expanded their technological base by introducing
and developing expertise from other sectors in collaboration with domestic and foreigncompanies. The industry is also characterized by technological integration, as companies seek
to provide comprehensive services according to market needs. The seeds of remediation
technology vary considerably, ranging from traditional ones to original, innovative ones. The
fact that some European and American firms are now interested in modern technology
developed in Japan is clear evidence of the substantial progress made by the remediation industry
in Japan since its inception in the early 1990s.
Future developments will include joint ventures between companies as well as the pursuit ofcomprehensive services by individual firms. There has already been cooperation on individual
projects between machinery and civil engineering techniques, as firms may find it difficult tocope with individual site conditions on their own. Such cooperation is expected to become
more organized in the future; indeed, the trend has already begun as Organo formed aconsortium for promoting the aforementioned mobile laboratory method. Konoike
Construction is also considering entering into strategic tie-ups with other companies that haveskills and techniques which can help them to provide more cost-effective remediation.
Collaboration also exists within public institutions as well as between private companies.
For instance, the Research Institute of Technology on Earth’s Environment (RITE), working
with firms including Ebara, Organo and Kajima, has started an experiment on the cleanup ofVOC-contaminated soil by microbes in Kimitsu, Chiba Prefecture. This is the first
demonstration test in Japan on bio-augmentation according to a safety assessment mechanism
established by the Sub-Committee on Class 2 Use Technology of the Technical Group on DNARecombination Technology in the wake of the MITI guideline on microbe use published in May
1998. It is also reported that a research team of the National Institute for Environment Studies
has succeeded in removing pollution caused by mercury-contaminated water using DNArecombined microbes. Tie-ups between the private, academic and public sectors are expected
to increase, as the results of research conducted by national universities have been successively
reported in the media.
Separately from this movement, technologies are also being developed for preventing
contamination before it can occur. Promising new pollution-prevention technologies haveemerged such as the (semi-)dry metal cutting technique developed in the metalworking
machinery industry, as well as new cleaning devices that do not use VOC. Although these areas
may be included in the remediation industry in a broad sense, the business viability of suchtechnologies is not known due to the cost of introducing preventive technology. However, inview of the huge remediation cost once pollution has occurred, preventive technology could
develop rapidly if appropriate rules are introduced, as discussed in the following section.

Development Bank of Japan Research Report/ No. 6

41

3.

Development of the Japanese Remediation Industry

3.1 Pending Issues
In response to the aforementioned peculiarities of the market, companies with various
technological skills have entered the Japanese remediation industry. The technological level ofthe industry has risen as the companies have broadened their abilities by introducing andcombining various techniques as well as developing their own technologies.
If the response to environmental problems is divided into technical aspects and social
aspects, the industry has reached a sufficient level regarding the former. Therefore, it remains
to design systems and rules for creating an open market that ensures the efficient use of suchtechniques.
However, the Japanese remediation market is already changing, with some firms taking amore forward-looking attitude toward remediation. Although such cases have been limited so
far to leading electrical machinery companies, there have been many media reports on cases ofactive remediation with information disclosure about the existence of pollution. This is largely
due to the guidance issued by the Ministry of International Trade and Industry in fiscal 1997
following public interest in the contamination of groundwater with VOC. This movement is
expected to spread to other industries due to recent changes in the managerial environment.
Such changes are the result of international standards as well as pressure for greater liquidity ofreal estate holdings as business restructuring and specialization in core businesses proceed.
In a real estate transaction, the vendor assumes the risk of guarantee against problems incase the property is already polluted, regardless of the existence of legal provisions concerningsoil protection. Moreover, contracts usually provide for measures to be taken in such cases(cleanup by the vendor, termination of the contract), regardless of whether the parties include
any foreign affiliates. As pressure for liquidity mounts in all industries on idle business sites inparticular, the number of cases will increase where remedial action must be considered also inview of maintaining land prices.
An increasing number of firms are obtaining ISO14001 certification for environmental
management. As environmental management becomes more established, the more difficult it
becomes to avoid tackling pollution issues. Moreover, the standardization of site assessment
methods by ISO14015 is scheduled to take effect by the summer of 2001. Although thestandard will not be legally binding, this international standardization of pollution risk assessment
will have a substantial impact as corporate acquisitions and related real estate transactions
become increasingly internationalized.
Thus, the number of cases where remediation is necessary is expected to increase, but thelack of rules defining pollution thresholds and the level of required remediation will make it
difficult for firms and local authorities to address the problem. As is clear from cases inGermany, the inability to prove the cleanliness of a business site based on rules will be adisadvantage in international competition for industrial locations, thus discouraging investment
by foreign companies. The development of rules as a social system will not only help regulate
the remediation market but also help companies to respond to changes in the managerial
environment described above. This is why underground environmental protection policy is
considered as an industrial policy as well as an environmental policy in both the U.S. and Europe.
3.2 Direction of Practical Response
What kind of rules and regulations are necessary? Much can be learned from the cases andexamination processes in Europe and the U.S. described in the previous chapters. The
Superfund reform in the U.S. and the Federal Soil Protection Law in Germany both show the42

Development Bank of Japan Research Report/ No. 6

importance of building a flexible system. Here, flexibility means the diversity of standards andthe existence of auxiliary tools for operating the system.
Clearly, regulation has to require remediation under certain conditions. The first issue is
how to develop such standards. As in Germany, standard values will have to be madeprogressive according to land use. At least two sets of standard values should be required: thelevel that triggers remedial action and the level to be achieved as a result of remediation. Since
actual pollution levels vary substantially as well as the levels that can be achieved economicallyand technically, standards that are too rigid are likely to be impractical.
Although many firms in the remediation industry agree on this point, there is disagreementon the actual levels of trigger standards and objective standards. Some argue that the current
soil environmental quality standards should be used as trigger standard values, while objective
standard values should be defined as multiples of these. Others argue against introducing any
standard values that are not supported by WHO or other reliable institutions. Views also differ
as to whether the same standards should be applied to small enterprises with little financial
capacity. In order to clarify such issues, suspended discussions on trigger levels for remedialaction need to be resumed promptly.
Under the German system, a remediation objective is set for each site following a specified
procedure, which enables practical response to individual cases. In Japan, it is difficult to
introduce such flexible objectives under the present regulatory system in view of equity andequality. With the upcoming administrative decentralization, however, a system design thatreflects the characteristics of local communities should be considered, as in the case of noise
regulation. Many questions remain to be answered, such as who determines its orientation andhow to respond to criticisms regarding equity. One possible solution would be to define an
objective for each site through a transparent process of collecting the views of local residents.
Another important issue is how to develop auxiliary methods to operate the system, which
involves two main aspects. The first is the “insurance” aspect. As in the case of the Orphan
Share in the U.S., applicable rules should be established for when responsible parties do not exist
or cannot be identified, to enable compensation for the unallocated remediation cost to be
defined. The second aspect concerns providing incentives to companies that actually conduct
remedial activities.
In the former case, where responsible parties do not exist, cannot be identified or are
insolvent, the injection of public funds in some form is unavoidable. This is also true in the U.S.
and Europe. Whether it takes the form of a special account or ad-hoc budgetary arrangement is
a fiscal choice that requires separate discussion.
More importantly, clear rules should be defined for cases where the injection of public funds
is authorized, the decision-making process on remedial activities in such cases, as well as claims
for compensation for any substantial rise in land prices after remediation.
As regards providing incentives to companies conducting remediation, some would argue
that such incentives are not necessary if the PPP is to be applied. However, it may not be
possible to determine whether the current operator is responsible for the pollution. Moreover,voluntary remediation activities should be encouraged even if the pollution has not reached thelevel that triggers remedial action. Although the provision of such incentives should be
restricted for regulatory purposes, subsidy measures should be considered including thededuction of a certain percentage of the remediation cost from taxable income.
The discussions on introducing soil protection regulations intensified temporarily following
the mid-term report presented by the Working Group on Soil and Environmental Conservationin 1995. But the discussions have died down recently and shifted toward a response through anenhanced guideline. However, as described earlier in this report, these issues have a strong

Development Bank of Japan Research Report/ No. 6

43

impact on industrial policy as well as on environmental policy, and so serious discussions will beresumed soon. The arguments outlined above will be considered from various viewpoints andin light of developments in foreign countries so far.
3.3 Japanese Brownfield Redevelopment Projects
In parallel with the preparation of rules, the development of large-scale projects using
remediation techniques developed so far should be considered. These could be regarded as aJapanese version of brownfield redevelopment projects. In other words, they should be open
remediation and redevelopment projects involving the national and local governments, theremediation industry, owners of former business sites subjected to remediation and NPOs
specialized in environmental issues.
The projects should be selected through public bidding from the former business sites forwhich redevelopment has been delayed for more than a certain period due to pollution. The
competition should be conducted openly as regards the identification and remediation of thepollution, with the most cost-effective company being selected to undertake the work. Before
starting the project, innovative techniques should be chosen from those submitted by venturebusinesses through public bidding to form an additional demonstration segment. This process
should involve representatives from local authorities to give them opportunities to learn on-siteabout the expertise in selecting investigation and remediation methods. And to help provide
business facilities for the site which will be an open experiment, the project should be subsidized
at a certain percentage of total cost. Such a nationwide project with disclosure of the processes
and results in a database would greatly assist the development of the remediation industry inJapan.
The project would bring benefits such as the reduction of developmental pressure on
undeveloped areas, as good business sites would be supplied from existing developed areas; theaccumulation of local authority expertise in conducting remediation projects; the promotion ofprogress in environmental protection measures to national and international investors; and theprovision of opportunities for venture businesses keen to demonstrate their expertise. More
importantly, however, the attitude of companies participating in the projects will be positively
evaluated. This mechanism could break the vicious cycle in which accusations againstcompanies involved in remediation scare other firms into inaction, resulting in the worsening ofpollution that could otherwise be mitigated.
In addition to this overall plan, measures should be considered for small enterprises
including laundries and gas stations in urban areas. Since many such enterprises cannot afford
the huge cost of remediation, the costs need to be reduced. Effective measures include lowpriced rental of remediation equipment purchased by local authorities, a system that has alreadybeen launched in some local areas. Support for such initiatives should be considered.
In summary, the Japanese remediation industry has the potential for rapid growth given an
open market that allows accumulated remediation technologies to be used effectively. This
market can be formed by (i) introducing systematic and rational rules and (ii) developing ad hoc
policies to support the application of such rules. In light of potential markets in the rapidly
industrializing Asian region, comprehensive discussions on this issue must be started immediately.
The remediation industry should be recognized as a promising industrial sector in the frameworkof environmental policy, which represents one of the pillars of the Millennium Project launchedby the government.
Underground pollution concerns not only environmental policy but is related to many policy
issues including industrial location and urban policies. And it is a problem that many companies
will have to face due to international standardization and the changing environment for

44

Development Bank of Japan Research Report/ No. 6

corporate management. The approach will therefore affect the development of major policies
in Japan in the 21st century including industrial renovation and the Life Space Doubling Program.
Appropriate measures will encourage work on these policy issues, whereas mismanagement willproduce obstacles.
The ministries are now collaborating on technological assessment of the remediationindustry. Further inter-ministerial discussion and coordination will be needed including thedevelopment of relevant rules.
[Keisuke Takegahara (E-mail: ketakeg@dbj.go.jp)]

Development Bank of Japan Research Report/ No. 645

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Homepages and documents of related organizations and companies.

48

Development Bank of Japan Research Report/ No. 6

List of Back Numbers (Including JDB Research Report)
No.6

Current Status and Future Perspective of the Japanese Remediation Industry: Technology and Market for
Underground Remediation (This Issue)

No.5

Recent Trends in the Japanese Economy: The 1990s in Retrospect, March 2000

No.4

Destabilized Consumption and the Post-bubble Consumer Environment, February 2000

No.3

The Slump in Plant and Equipment Investment in the 1990s: Focusing on Lowered Expectations, the Debt
Burden and Other Structural Factors, January 2000

No.2

Survey on Planned Capital Spending for Fiscal Years 1998, 1999 and 2000, November 1999

No.1

Corporate Strategies in Japan’s Semiconductor Industry: Implications of Development in Other AsianCountries, November 1999

JDB Research Report
No.96

Recent Trends in the Japanese Economy: Focused on Fixed Investment and Capital Stock, August 1999

No.95

Efforts to Protect the Natural Environment in the United States and Germany: Environmental Mitigation
and Biotope Conservation, July 1999

No.94

Survey on Planned Capital Spending for Fiscal Years 1998 and 1999, June 1999

No.93

Towards the realization of ‘environmental partnership’: A survey of Japan’s environmental NPO sector
through comparison with Germany, June 1999

No.92

The Impact of Demographic Changes on Consumption and Savings, March 1999

No.91

Recent Research and Development Trends in Japanese Enterprises: Technology Fusion, March 1999

No.90

Recent Trends in the Japanese Economy: Prolonged Balance Sheet Adjustment, January 1999

No.89

Impact of Asset Price Fluctuations on Household and Corporate Behavior: A Comparison between Japanand the U.S., December 1998

No.88

Survey on Planned Capital Spending for Fiscal Years 1997, 1998, and 1999, December 1998

No.87

Foreign Exchange Rate Fluctuations and Changes in the Input-Output Structure, November 1998

No.86

Structural Changes in Unemployment of Japan: An Approach from Labor Flow, November 1998

No.85

Recent Trends in the Japanese Economy: Characteristics of the Current Recession, August 1998

No.84

R&D Stock and Trade Structure in Japan, August 1998

No.83

Survey on Planned Capital Spending for Fiscal Years 1997 and 1998, August 1998

No.82

The Significance, Potential, and Problems of DNA Analysis Research: Establishing Public Acceptance isEssential, May 1998

No.81

The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996, 1997 and 1998
Conducted in August 1997, March 1998

No.80

Recent Trends in the Japanese Economy: Growth Base of the Japanese Economy, January 1998

No.79

Information Appliances: The Strength of Japanese Companies and Tasks for the Future, January 1998

No.78

Challenges and Outlook for the Japanese Machinery Industries: Impact of ISO14000 Series andEnvironmental Cost, January 1998

No.77

Current Conditions and Issues of Computerization in the Health Care Industry : For the Construction of a
Health Care Information Network, January 1998

No.76

Household Consumption and Saving in Japan, December 1997

No.75

The Direction of Japanese Distribution System Reforms: Strengthening the Infrastructure to Support
Diverse Consumer Choices, November 1997

No.74

Foreign Direct Investments by Japanese Manufacturing Industries and Their Effects on International Trade,
October 1997

No.73

The Impact of the Changing Trade Structure on the Japanese Economy: With Special Focus on the Effects
on Productivity and Employment, October 1997

No.72

An Analysis of Foreign Direct Investment and Foreign Affiliates in Japan, August 1997

No.71

Recent Trends in the Japanese Economy: Stock Replacement and New Demand as Aspects of Economic
Recovery, August 1997

No. 70 Corporate Fundraising : An International Comparison, June 1997
No. 69 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996 and 1997
Conducted in February 1997, May 1997
No. 68 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1996 and 1997
Conducted in August 1996, August 1997
No. 67 An International Comparison of Corporate Investment Behavior: Empirical Analysis Using Firm Date fromJapan, France and the US, April 1997
No. 66 Housing in the National Capital: Analysis of the Market for Housing using Micro Data, March 1997
No. 65 The Environment for Locating Business Operations in Major East Asian Cities, January 1997
No. 64 Direction of Reconstruction of Business Strategy in the Chemical Industry, January 1997
No. 63 Reflection on Discussions Concerning Regulation of the Electric Power Industry: Deregulation of theElectric Power Industry in Japan and Implication of Experiences in the United States, December 1996
No. 62 Current Status and Future Perspective of the Japanese Semiconductor Industry, November 1996
No. 61 A Breakthrough for the Japanese Software Industry?: Responsiveness to Users’ Needs is the key, October
1996
No. 60 Recent Trends in the Japanese Economy Focusing on the Characteristics and Sustainability of the Current
Economic Recovery, September 1996
No. 59 Analysis of the Primary Causes and Economic Effects of Information: Related investment in the UnitedStates and Trends in Japan, August 1996
No. 58 Selected Summaries of Research Reports: Published in FY 1995, June 1996
No. 57 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1995 and 1996
Conducted in February 1996, May 1996
No. 56 Recent Trends in the Japanese Economy, May 1996
No. 55 Issues Concerning the Competitiveness of the Japanese Steel Industry, February 1996
No. 54 Changes in the Financial Environment and the Real Economy, January 1996
No. 53 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1994, 1995 and 1996
Conducted in August 1995, October 1995
No. 52 Current Economic Trends: Focusing on the Appreciation of the Yen and its Effects, October 1995
No. 51 Problems Concerning the International Competitiveness of the Petrochemical Industry, October 1995
No. 50 An Economic Approach to International Competitiveness, October 1995
No. 49 Selected Summaries of Research Reports Published in FY 1994, July 1995
No. 48 Strategies for Improving the Efficiency of the Japanese Physical Distribution System: Part2, July 1995

No. 47 Issues on International Competitive Strength of the Auto Industry, June 1995
No. 46 Problems Concerning the International Competitiveness of the Electronics and Electric Machinery Industry,
June 1995
No. 45 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1994 and 1995
Conducted in March 1995, June 1995
No. 44 Strategies for Improving the Efficiency of the Japanese Physical Distribution System, March 1995
No. 43 Capital Spending Recovery Scenario Cycle and Structure, August 1994
No. 42 Progress of International Joint Development between Industrialized Countries on the Private Level, May
1994
No. 41 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1993, 1994 and 1995
Conducted in August 1994 , November 1994
No. 40 Selected Summaries of Research Reports Published in FY 1993, June 1994
No. 39 Recent Trends in Japan’s Foreign Accounts, April 1994
No. 38 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1993 and 1994
Conducted in March 1994, April 1994
No. 37 Economic Zones and East Asia Prospect for Economic Activity Oriented Market Integration, December
1993
No. 36 Japanese Corporate Responses to Global Environmental Issues, December 1993
No. 35 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1992, 1993 and 1994
Conducted in August 1993, September 1993
No. 34 Structure of Profit to Capital in the Manufacturing Industry, September 1993
No. 33 Comparison of the Japanese and The U.S. Labor Markets, October 1992
No. 32 The Relative Competitiveness of U.S., German, and Japanese Manufacturing, March 1993
No. 31 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1992 and 1993
Conducted in March 1993, April 1993
No. 30 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1991, 1992 and 1993
Conducted in August 1992, December 1992
No. 29 Flow of Funds in the 80s and Future Corporate Finance in Japan, November 1992
No. 28 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1991 and 1992
Conducted in February 1992, April 1992
No. 27 An Analysis of Foreign Direct Investment in Japan, March 1992
No. 26 Projection of Japan's Trade Surplus in 1995: Analysis of Japan's Trade Structure in the 80s, February 1992
No. 25 Intra-Industry Trade and Dynamic Development of The World Economy, November 1991
No. 24 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1990, 1991 and 1992
Conducted in August 1991, September 1991
No. 23 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1990 and 1991
Conducted in February 1991, March 1991
No. 22 Trends of the Petrochemical Industry and its Marketplace in East Asia, March 1991
No. 21 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1989, 1990 and 1991
Conducted in August1990,September 1990
No. 20 Deepening Economic Linkages in The Pacific Basin Region: Trade, Foreign Direct Investment andTechnology, September 1990
No. 19 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1989 and 1990
Conducted in February 1990, March 1990
No. 18 Petrochemicals In Japan, The US, and Korea an Assessment of Economic Efficiency, February 1990
No. 17 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1988, 1989 and 1990
Conducted in August 1989, October 1989
No. 16 Impact of the EC Unification on Japan’s Automobile and Electronics Industries, August 1989
No. 15 Industrial and Trade Structures and the International Competitiveness of Asia’s Newly Industrializing
Economies, August 1989
No. 14 The Japan Development Bank Reports on Capital Investment Spending: Survey for Fiscal Years 1988 and1989 Conducted in February 1989, March 1989
No. 13 The Japan Development Bank Reports on Capital Spending: Survey for Fiscal Years 1987, 1988 and 1989
Conducted in August 1988, September 1988
No. 12 Growing Foreign Investors’ Activities and the Future of Internationalization, September 1988
No. 11 Futures Tasks and Prospects for the Japanese Machine-Tool Industry, July 1988
No. 10 International Division of Labor in the Machine Industries Among Japan, Asia’s NICs and ASEANCountries, June 1988
No. 9

Trends of the Petrochemical Industry and its Marketplace in East Asia around Japan, May 1988

No. 8

The International Competitiveness of Japan and U.S. in High Technology Industries, April 1988

No. 7

The Japan Development Bank Reports on Private Fixed Investment in Japan, March 1988

No. 6

Economic Projections of the Japan’s Economy to the Year 2000, February 1988

No. 5

The Japan Development Bank Reports on Private Fixed Investment in Japan, September 1987

No. 4

Current Trends in the Japanese Auto Parts Industry in Overseas Production, July 1987

No. 3

Current Moves for Foreign Direct Investment into Japan, May 1987

No. 2

Overseas Direct Investments by Japanese Corporations, May 1987

No. 1

Current U.S. Consumption Trends, May 1987