### 2. Growth through Green Innovation and Environmental Policies

## (1) The Necessity of Green Innovation and Japan’s Targets

Economic growth has contributed to health and education that are required for humans' prosperity. Looking at examples from around the world shows us that average life-spans, literacy rates, and percentages of people pursuing higher education have all grown in proportion to economic development. On the other hand, the world has not always given sufficient consideration to the environment in order to achieve economic growth. If the 9 billion people living in the world pursue today's EU average income and the income level equivalent to an annual growth each year of 2%, the basic units of emitted carbon must be reduced by more than an average of 11% per year in order to stabilize the climate. That would be equivalent to a rate of the reduction 16 times faster than the one improvement achieved since 1990.

In order to realize greater economic growth under environmental restrictions, it will be essential to bring about technological innovations in environmental fields, to achieve a low-carbon society through comprehensive policy mixes of new system design or system changes and new regulations or easing of deregulations, and also to support rapid dissemination of environmental technologies and products. It is necessary to disseminate Japan's top-level environmental technologies throughout the world, leading to the achievement of global environmental and economic sustainability. Such efforts will promote economic growth and secure employment.

With the “New Growth Strategy” established in 2010, Japan is creating and disseminating world leading environmental technologies through the promotion of green innovation, with the aim to become an “environmental and energy superpower” of the world. Based on this New Growth Strategy, the government launched 21 National Strategy Projects. For green innovation, three National Strategy Projects were launched, including “rapid expansion of renewable energy through introduction of a feed-in tariffs system,” “eco-friendly future cities initiatives,” and “forests and the forestry revitalization plans.” For these three innovation projects, goals and timetables were set for a target year of 2020 and followed (Figure 4-1-3).

## (2) Various Ways Forms and Methods of Green Innovation

Green innovation would take place in varied ways in many industrial sectors.

According to the case study of green innovation conducted by the OECD green innovation activities would be analyzed via two dimensions: "targets" and "mechanism" (Figure 4-1-4). "Targets" can be classified into the following areas "process" and "product" in producing, "marketing method," "organization" of the producer, and "systems and institutions," which are broad and societal and go beyond a single company. "Mechanism" can be divided into following areas: small-scale technological "modification," "re-design" due to a major change of a product, "alternatives" that introduces materials totally different from those in the past and substitute functions, and "creation" that introduces an entirely new product or production processes. It is believed that the effects of green innovation are brought about by the both "targets," and "mechanism," and the interaction between these two. The effects of green innovation would depend on the social and technological context, and in general, when focusing on a specific "target," "creation" has more potential for environmental benefits than "modification" does.

According to this OECD study in the automotive and transport industry sector for example, in responding to climate change, the $ CO_{2} $ emissions reduction caused by use of fuel is the target of general measures. The green innovation in this sector would target mainly the “process” and the “product,” and efforts would be made to progress technological development through “improvement” and “re-design” as methods. In the electronics sector, efforts would be made through the product “modification” and “re-design” for green innovation aimed at controlling use of energy consumption when products are used, while the innovation may occur if the organization reconsiders the promotion of product recycling to accommodate the increased demand for electronics. Based on analysis of this example in individual industries, the study found that it is the best approach to achieve ideas and activities for green innovation in the framework that goes through

Figure 4-1-3 Timetable for 21 National Strategic Projects under New Growth Strategy (Extracts)