European Green Deal
toward Carbon Neutrality by 2050
Graduate School of Public Policy
The University of Tokyo
December 3, 2021
Yasuo Tanabe

Managing Director, EU-Japan Centre forIndustrial Cooperation
Councilor, IEEJ
Consulting Fellow, RIETI1

Self Introduction• 1978 Joined MITI (now METI)• Education• 1989 Seconded to the World Bank
-1978 BA, Law, University of Tokyo• 1991-2004 Director positions for North American
Trade Policy Planning, Petroleum Exploration and -1985 MA, International Relations,
Production Division, Europe/Russia/Middle East
Stanford University
Division, Recycling Promotion Division,
International Energy Affairs Division• 2004 Vice President, RIETI• 2006 Deputy Director-General for Economic Affairs,
MOFA• 2010 Joined Hitachi, Ltd.
• 2011-2019 Senior Vice President and Executive
Officer, etc.
• 2019 CEO, Global Link Lab. Ltd. (present)• 2020 Managing Director, EU-Japan Centre forIndustrial Cooperation (present)2

Total energy
supply inEurope

Source: IEA

Renewables3

% share of power generation in EU

Source: Ember and Agora

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EU's
pathway to2050
Aims to achieveboth sustained
economic
prosperity andclimate neutrality
Source: European Commission

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"European Green Deal (Dec. 2019)"

Source: European Commission

6

"Fit for 55"
package(July, 2021)

Source: European Commission
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"Fit for 55"
at glance
1. Carbon Pricing
2. Setting tighter Targets
3. Stricter Rules
4. Enhanced financial
SupportSource: European Commission

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The EU Emissions Trading System• Started in 2005
• operates in all EU countries plus Iceland, Liechtenstein and Norway• limits emissions in the power sector and manufacturing industry, as well asairlines operating between these countries,• covers around 40% of the EU's greenhouse gas emissions.
• 'cap and trade' principle. A cap is set on the total amount of greenhousegases that can be emitted. The cap is reduced over time.
• Within the cap, installations buy or receive emissions allowances, which theycan trade. The limit on the total number of allowances ensures a value.
• The Commission has proposed a separate, stand-alone Emissions Trading
System focusing on companies that supply heating and road transport fuels(gas, diesel, petrol) to start by 2025. The maritime and aviation sector will fallunder the original ETS.
Source: based on European Commission

9Source: Carbon Credit

202110"CBAM"
Carbon BorderAdjustment Mechanism

Comply with WTO

Mirror EU carbon
pricing through newmechanism forimports into EU

and be fully in linewith international
trade rules

Complement the EU’sEmissions Trading System(ETS) measures

CEMENT
Source: European Commission

IRON & STEEL

Focus on carbon
intensive sectors

ALUMINIUM

FERTILISER

ELECTRICITY
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CBAM
Objectives

Prevent carbon leakage toensure effectiveness of EU
climate policy
Change behaviours• Incentivise 3rd country
producers to reduce theiremissions
Generate revenues
Possible EU Own Resource• Incentivise 3rd countries toadopt green policyframeworks

Source: European Commission
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CBAM
How does itwork?

Who do what• EU importers will need to pay a carbon adjustment for importsof certain goods, corresponding to the price they would have
paid if the goods had been produced under the ETS.

Carbon Pricing already paid in originating countries• If a non-EU producer can show that they have already paid acarbon price for production of the imported goods in a thirdcountry, that amount can be deducted for the EU importer.

Gradual phase-in• CBAM will be gradually and progressively introduced withtransitional phase of 2023-25 to allow businesses to adapt.
Source: based on European Commission publications
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CBAM
Who would
be impacted?

Source: UNCTAD based on UN COMTRADE. The list does not include Iceland,
Norway and Switzerland because they participate in, or are linked to, the ETS.
Therefore, it is likely that these countries are exempt from the mechanism.

Exports to the European
Union 2019 in CBAM sectors.
20 most exposed countries interms of aggregated value ofexports (billion $)14

Frans Timmermans (EVP, European Commission)

CBAM"Given the fact that Japan is actually aligned with theon Japan? European Union in its ambition to decarbonize its
economy by 2050, I think it is highly, highly unlikelythat we would ever have a discussion about CBAM
between the European Union and Japan because [of]the risk of carbon leakage," he said in an interview.
"If you all move in the same direction at more or lessthe same pace, the risk of carbon leakage is absent.“(Asia Nikkei, September 23, 2021)

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NEWS ARTICLE 27 May 2021 Directorate-General for Climate Action

The EU and Japan commit to a new Green Alliance to work towards climateneutrality
The European Union and Japan announce their intention to form a Green Alliance to accelerate thetransition of both economies towards becoming climate-neutral, circular and resource-efficient in thecoming decades.
the European Commission’s Executive Vice-President for the European Green Deal Frans Timmermans said:"This is the EU’s first Green Alliance. It is a true milestone in our efforts to create a global coalition for net zero by themiddle of the century. Japan and the EU will increase their cooperation so that our combined efforts bring us closer toour goal of living up to the commitment made under the Paris agreement. Together Japan and the EU can further
increase a global momentum that is gathering pace. If we pull together, net zero can be achieved.“five priority areas:
1. cost-effective, safe and sustainable energy transition, including renewable energy, renewable hydrogen, energy
storage, and carbon capture, utilisation and storage
2. environmental protection, circular practices in production and consumption, biodiversity
3. regulatory cooperation and business exchange
4. consolidating existing collaboration on research and development
5. international sustainable finance to help converge on a definition of sustainable investments and ensure consistency
and transparency about sustainability-related disclosures
Source: European Commission

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EU-Japan Business Roundtable-Official business dialogue to provide policy
recommendations to the EU and GOJ
authorities since 1999
Co-chaired by Mr. Philippe Wahl (Le Groupela Poste) and Mr. Masaki Sakuyama(Mitsubishi Electric Corporation)
The 23rd. Annual meeting was held on
November 4, 2021
Agenda: EU-Japan Green Alliance, EU-Japan
Digital Partnership, etc.
17Key Messages- The EU has led the world by embarking the ambitious goal ofCarbon Neutrality by 2050.
- The EU has proposed work programs of “Fit for 55”, including
expanding the ETS, introducing CBAM and banning ICEautomobiles.
- The EU has approached Japan to form the first “GreenAlliance”.
- Japan has performed very well in energy policy, in particular,
technologies of energy efficiency and renewable energy.
- Toward the goal of Carbon Neutrality, there are a lot the EUJapan Green Alliance should do and offer to the world.

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STAY TUNED with EU-Japan Centre for Industrial Cooperation
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