April 6, 2022

Statement: Overcoming the Climate Crisis through the “New Capitalism”
Japan Climate Leaders’ Partnership (JCLP) is a coalition of businesses that recognizes climate change asa fundamental threat facing humanity, and a transition to a zero-carbon society as opportunities forgrowth. JCLP commends the Prime Minister Kishida’s decision to climate change as an area of focus inrealizing the New Capitalism 1, and puts forward the following statement in the hope that the Grand
Design for the New Capitalism will be truly sustainable.
Background：
1. Climate crisis is already threatening our economy and livelihoods. It is the biggest issue that needs
to be overcome by realizing the New Capitalism.
Climate change has already caused serious damages at home and abroad 2. Scientists across theworld and international organizations have long warned us that, left unaddressed, it will trigger
various catastrophes, such as food shortages, another pandemic, and financial meltdown 3. Climatechange is nothing less than a ‘crisis’ that undermines the economy and people’s livelihood. As thePrime Minister has mentioned on various occasions, it is the biggest challenge that needs to beaddressed through realization of the New Capitalism.
2. ‘The 1.5°C target’ is an evidence-based guideline to avert a climate catastrophe. We must act
swiftly now, considering the remaining carbon budget.
As the Intergovernmental Panel on Climate Change (IPCC) reiterated in its new reports 4, limiting
global warming to 1.5°C is essential to avoid dire and irreversible consequences. In order not tocross the threshold, carbon emissions need to be sharply reduced by 2030 in light of carbon budgets,or the maximum amount of cumulative carbon emissions to keep within a certain temperaturethreshold 5. This caution by scientists was explicitly acknowledged in COP26, and nations including
Japan adopted an outcome document reaffirming the need to ‘pursue efforts to limit thetemperature increase to 1.5°C above pre-industrial levels’ and to reduce ‘global carbon dioxide
emissions by 45 per cent by 2030 relative to the 2010 level and to net zero around mid-century’ 6.
In order to live up to this commitment, major advanced countries have announced new measures,such as plans to decarbonizing the electricity system by 2035 7 and stricter vehicle emissions rules 8
along with massive investments in renewable energy (hereafter, RE) and EV-related infrastructure 9,and carbon pricing mechanisms that underpins such investments 10.
3. ‘Zero-carbon transition in line with the 1.5°C target’ has become a new business imperative,influencing corporate competitiveness.
Businesses are also expected to achieve zero-carbon transition in line with the 1.5°C target, andcompanies’ climate commitments and actions have become factors that influence business
transactions and financial arrangements. About one third of the global top 30 companies by market
capitalization have set emissions reduction targets in line with the 1.5°C target 11, and a number ofglobal companies are calling on their suppliers to shift to RE and decarbonize business activities
within certain timeframes. In addition, the fact that international groups of institutional investors(total assets: 67 trillion USD, approx. 8,350 trillion JPY) aims to halve carbon emissions from theirinvestment portfolio by 2030 12 means that corporate climate actions will be closely scrutinized in1

their financial procurement. Moreover, key zero-emission technologies such as EVs and storage
batteries are forecast to start proliferating internationally in the mid-to-late 2020’s 13, and this trend
is estimated to accelerate going forward.
Now that 1.5°C -compliant business models are gathering momentum globally, Japanese companies
are under increasing pressure to step up and bolster their actions.
Statement：
JCLP believes that, in order to overcome the climate crisis, the Grand Design of New Capitalism must
be drawn up in line with the 1.5°C target. With this in mind, JCLP requests that the Grand Design should
include the following points.
1. RE expansion holds the key to balancing economic growth and a fairer distribution of wealth.
JCLP calls for a new energy system based on the ‘RE-first principle 14’.
The International Energy Agency (IEA) suggests that advanced economies should achieve net-zeroemissions in their electricity sectors by 2035 to meet the 1.5°C climate goal 15 . Thus,
decarbonization of electricity, along with improvement of energy efficiency, is a pressing matter toJapan. Considering that Japan has great potential to produce RE (The potential with businessprofitability is approx. 2.6 times higher than the total electricity generation today for all RE
combined. 16 The sheer geographical potential (no taking account of business profitability) isapprox. 9 times higher than the total electricity generation today for offshore wind alone. 17) andmany of the related technologies have already been put into practical use, the next step to takeare clear: to expand Japan’s RE generation by reforming market regulations and enhance RE pricecompetitiveness through economies of scale 18.
Tapping into Japan’s RE potential will significantly benefit ‘growth and distribution of wealth 19’.
The global RE market is now rapidly expanding, and opportunities are not limited to the solar power
generation market, in which China is taking the lead now. The expansion offers Japanese companies
with a great number of business opportunities where they can leverage their strengths, such as
floating offshore wind power generation, digitized supply-demand adjustment mechanisms
interconnected with batteries and buildings, and power transmission technologies. To capitalize on
these opportunities, domestic promotion of RE-related industries must be accelerated, in order tospur developments of new technologies and business models that withstand harsh Japanese
weathers and achieve stable RE supply. Innovations of this kind will improve Japan’scompetitiveness in the global RE market, thereby driving the economic growth of Japan. Conversely,
should Japan’s RE expansion delay, Japanese companies could suffer major competitivenessdeficits considering the growing number of requests from investors and business partners to switch
to RE throughout their supply chains.
There are other important benefits. The shift to RE stimulates investments in rural communities as
they have suitable sites for clean energy generation. It also increases Japan’s energy self-sufficiency,
and decreases the national wealth outflows caused by purchasing a large amount of fossil fuels 20.
With appropriate policies, revenues from electricity sales can be turned into a source forinvestments in regional communities, accelerating a fairer distribution of wealth.
Thus, JCLP believes that the maximum use of RE holds the key to realizing the New Capitalismthat strikes a balance between economic growth and a fairer distribution of wealth, and to thatend, Japan faces an urgent need to design a new energy system based on the ‘RE-first principle’.
The following measures are particularly important: 1) upgrading the power grid system(acceleration of the government-led and ‘push’-based grid development and an adequate budget
to support the effort, and a set of rules that give RE a priority access to the grid in case of2congestion), 2) expanding the off-shore wind power industry at a faster pace (allowing windprojects in Exclusive Economic Zone), 3) improving access to farmlands (abandoned farmlands,agrivoltanics).
Also, in relation to giving a priority to RE, it should also be emphasized here that the dependence
on thermal power generation needs to be reduced immediately. Considering the carbon budget, it
is indisputable that the development of new coal-fired power plants contradicts the 1.5°C target.
As for the technologies to decarbonize thermal power plants (e.g. combustion of ammonia andhydrogen), a thorough assessment and full information disclosure are needed as to whether they
can be viable options, in terms of effectiveness in emissions reductions, cost efficiency, andtimeframes for roll-out 21 . JCLP agrees that promotion of various types of technologicaldevelopment is essential to help decarbonize the hard-to-abate sectors. However, for theelectricity sector, we ought to avoid overreliance on under-developed technologies with highuncertainties and prioritize RE.
2. The New Capitalism should incorporate a carbon pricing mechanism that will enable the market
to account for and reduce negative externalities.
As the Prime Minister points out, climate change is an issue of market failure and epitomizes theshortcomings of the current form of capitalism. To correct the market failure, social costs incurredby climate change, so-called negative externalities, need to be internalized into the market. To dothis, a carbon pricing mechanism which imposes costs on emissions and give advantages toemissions reduction is an essential tool, that should be incorporated it to the New Capitalism. This
will provide an economic rationale for companies and financial institutions to shift away fromcarbon-intensive projects and accelerate their investments in the zero-carbon transition 22.
It should be emphasized here that voluntary credit schemes alone will not suffice as the numberof participants in the schemes will inevitably be limited due to their voluntary nature. In fact, suchschemes could even cause the net-zero transition to stagnate, if they create an uneven playing field
where only committed companies wanting to reduce their emissions are asked to pay extra costs(to buy credits and certificates) and others are not. Therefore, JCLP requests a swift preparationof carbon tax and/or emissions trading scheme, which cover major emitters and provide themwith an appropriate incentive to reduce emissions. We also suggest that the scheme be designed
to prevent excessive burdens on SMEs and low-income households and the government makeefforts to inform the public well about its purposes and effects.
Finally, we propose that the revenues gained through the scheme be allocated to development of
infrastructure and installation of technologies, such as RE, EVs, and storage batteries, that will help
substantial emissions reduction by 2030. The revenues should also be directed to human capitaldevelopment programs, such as occupational training and compensations, to prepare theworkforce for the change of the industrial structure and ensure a smooth and just transition.
Japan has pledged to the world its 2030 targets to ‘reduce emissions by 46% compared to 2013’ andto ‘continue strenuous effort in its challenge towards a 50% reduction’. JCLP sincerely hopes that, bydeveloping the Grand Design of the New Capitalism in accordance with 1.5°C target, the government
will demonstrate to people at home and abroad Japan’s determination to fulfil the pledge.
JCLP member companies will also continue to make utmost efforts to our own reduce emissions andto engage with our stakeholders to further strengthen Japan’s climate action.

3References
1.

Also translated as “new form of capitalism”. It is Prime Minister Kishida’s vision to achieve a capitalismthat will help to redress the harmful effects of neoliberalism and create “a virtuous cycle of growth anddistribution”. For more information, refer to Kishida’s speech at the Diet.

2.

One of the world’s largest brokers, Aon said in its 2021 annual report that Insured losses from global
natural disasters totaled 130 billion USD (approx. 15.97 trillion JPY) last year.

3.

The IPCC found that the increased frequency of extreme weather events could risk jeopardizing global
food security. The World Bank also reported that climate change-related water shortages, decreased
crop yields, sea level rise could force 216 million people to move within their own countries.
- IPCC, “AR6 Climate Change 2021:The Physical Science Basis” (August, 2021)- IPCC, “AR 6 Climate Change 2022: Impacts, Adaptation and Vulnerability” (February, 2022)- World Bank, “Groundswell Part 2 : Acting on Internal Climate Migration” (September, 2021)
Over 230 medical journals called on governments to take immediate action to address global warming,pointing to established links between the climate crisis and adverse health impacts. Also, the UN
reported that climate change is one of the factors that heighten risks of infectious diseases thattransmit from the animal world.
- The Lancet, “Call for emergency action to limit global temperature increases, restore biodiversity,and protect health” (September, 2021)- UN Environment Programme, “Preventing the next pandemic - Zoonotic diseases and how tobreak the chain of transmission” (July, 2020)
The Bank for International Settlements, a group of the world’s central banks, warned about the risks
to the financial systems arising from climate change, calling the situation ‘The Green Swan’.
- The Bank for International Settlements “The green swan: Central banking and financial stability inthe age of climate change”(January, 2020)

4.

IPCC ,“AR6 Climate Change 2021:The Physical Science Basis” (August, 2021)
IPCC, “AR 6 Climate Change 2022: Impacts, Adaptation and Vulnerability” (February, 2022)
IPCC, “AR 6 Climate Change 2022: Mitigation of Climate Change” (March, 2022)

5.

IPCC defines the term ‘carbon budget’ as ‘the maximum amount of cumulative net global
anthropogenic CO2 emissions that would result in limiting global warming to a given level with a given
probability, taking into account the effect of other anthropogenic climate forcers’.

6.

UNFCCC, “Glasgow Climate Pact” (Signed on the 13th November, 2021)

7.

The US and the British governments have set a goal for carbon free electricity by 2035, while theGerman government decided to phase out domestic coal-fired power plants by 2030 eight years earlier
than previously planned.

8.

EU countries, the UK, the state of California, and other central/reginal governments have been
gradually tightening regulations on ICE cars, aiming for the end of the sales. The US federal government
has also been stepping up regulations for emissions from cars.
- International Council on Clean Transportation, “Update on government targets for phasing out
new sales of internal combustion engine passenger cars” (June, 2021)- The Japan External Trade Organization, ‘US EPA announces the strictest regulations for emissions
from vehicles’. (December, 2021)

9.

An infrastructure investment act passed in the US Congress in November, 2021 plans to allocate 73billion USD (approx. 9 trillion JPY) for infrastructure investments to expand RE such as upgrading the4electrical grid, and 7.5 billion USD (approx. 922 billion JPY) for building EV charging stations. The Build
Back Better Act, which includes provisions related to climate change and social policy, is underdiscussion now, and aims to invest more than 555 billion USD (approx. 62 trillion JPY) in tackling climatechange.
EU has announced it will collectively address climate change by tapping into about 30% of the total
budget from the EU’s 2021-2027 mid-term budget and ‘the Next Generation EU’, a socio-economic
recovery plan from the pandemic (750 billion EUR, approx. 101 trillion JPY), and about 40% of ‘the
Recovery and Resilience Facility’, an initiative to financially support the member states’ recovery plans(672.5 billion EUR, approx. 91 trillion JPY).
10. World Bank “State and Trends of Carbon Pricing 2021”（May, 2021）
11. The figure refers to the ratio of the companies that have set 1.5°C goal-aligned emissions reduction
targets through the Science Based Targets initiative to the global top 30 companies by market
capitalization.
12. Net Zero Asset Owners Initiative “Target Setting Protocol, Second Edition” (January, 2022)
Net Zero Asset Managers Initiative “The Net Zero Asset Managers Commitment”（December, 2021）
13. SYSTEMIQ “The Paris Effect - COP26 Edition” (November, 2021）
14. The Sixth Basic Energy Plan states that maximum introduction of renewable energy should is thetop priority and policies should be developed according to the “renewable first principle”.
15. IEA “Net Zero by 2050 A Roadmap for the Global Energy Sector” (May, 2021)
16. The Ministry of the Environment reported in ‘Japan’s renewable energy potential’ that Japan’spotential to generate RE with certain level of economic efficiency amounts to 2,618.6 TWh.
17. According to ‘Offshore Wind Outlook (2019)’ published by IEA, Japan has a physical potential(9,074 TWh/ year) for offshore wind energy.
18. Masato Yamada, MHI Vestas Offshore Wind, ‘The global trend of offshore wind energy and Japan’schoice (February, 2018)
Miho Kurosaki, Bloomberg NEF, ‘Utilizing renewable energy as a main source of power, stablesupply and cost reduction’ (May, 2021)
19. Prime Minister of Japan and His Cabinet, “Policy Speech by Prime Minister KISHIDA Fumio to the208th Session of the Diet” (January, 2022)
20. Trade Statistics of Japan shows that the trade value for mineral fuels in 2021 adds up to about 17
trillion JPY (approx. 137 billion USD).
21. Foreign research institutes and experts are leading the assessments.
- TransitionZero, ‘The role of advanced coal technologies in decarbonising Japan’s electricity sector’(February, 2022)- Stocks et al. “Global emissions implications from co-combusting ammonia in coal fired power
stations: An analysis of the Japan-Australia supply chain” (February, 2022)
22. The World Bank also reported that carbon pricing and emissions trading could provide an incentive toencourage investments.
- World Bank, “Report of the High-Level Commission on Carbon Pricing and Competitiveness”(September, 2019)5

Japan Climate Leaders’ Partnership (JCLP):
JCLP is a coalition of businesses in Japan (206 companies as of April 2022) that aim to create a carbon neutral
society, built on the idea that decarbonization is essential to economic development. The group’s total sales
are 120 trillion JPY (970 billion USD) and electricity demand together amounts to approx. 60 TWh. It was setup in 2009 to encourage the business sector to develop a sound sense of urgency on climate action. Since
April 2017, JCLP has been the Climate Group’s Regional Delivery Partner on RE100, EP100 and EV100
initiatives in Japan.
URL: http://www.japan-clp.jp/For inquiries: Tel: 046-855-3814

Email : info-jclp@iges.or.jp

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