Finding accord in the fight

by Takamitsu Sawa

On July 7, when leaders of the Group of Eight industrialized nations gathered at Toyako Lake, Hokkaido, for their annual summit, I happened to be in Istanbul for the opening session of the multinational Global Conference on Global Warming.

Although a message from the Turkish president was read in proxy, speeches were delivered in person by the prime minister, the minister of energy and resources and the mayor of Istanbul. They expressed their views enthusiastically well beyond the time originally allocated to them.

Istanbul was selected as the venue for this international conference after Turkey officially decided to join other advanced nations obliged to reduce or control greenhouse gas emissions one way or another under terms of Attachment I of the Kyoto Protocol. Adhering to those conditions is one of the prerequisites for Turkey to become a member of the European Union.

Upon my return home, I was able to catch up on how environmental issues were discussed at the summit: * It was gratifying that leaders of the industrialized world agreed on a long-term target for reducing greenhouse gas emissions by 2050. This target was contained in the “Abe initiative” (named after former Prime Minister Shinzo Abe). As for the medium-term target, summit participants agreed only to work aggressively, showing how difficult it was to work out a compromise between the EU position of reducing emissions 20 percent from 1990 levels by 2020 and the American insistence on not starting emissions reduction until 2025.

There is little possibility that Japanese industrial circles will accept whatever medium-term target the government commits to. Therefore, the “Fukuda vision,” announced by Prime Minister Yasuo Fukuda on June 4, was fuzzy about the medium-term target.

Environment Minister Tetsuo Saito says Japan should at least propose a medium-term goal of 25 percent reduction, pointing out that the Intergovernmental Panel on Climate Change calls on advanced nations to curtail greenhouse gas emissions 25 percent to 40 percent. * As for the expanded use of renewable energy sources, I am of the view that solar generation of electricity should be encouraged through the “fixed price” scheme practiced by Germany, whereby solar-generated surplus power is purchased by utilities at three times the electricity rate.

According to what I have read in newspapers, a majority of people seem to favor resumption of government subsidies. The problem with providing subsidies is that it entails huge administrative costs of opening and staffing offices nationwide. In stark contrast, the “fixed price” formula would require only some modification of computer software for billing. * Even though the G8 leaders agreed in their statement on the need for “carbon pricing” through environment taxes and emissions trading, industrial circles in Japan still strongly oppose such measures, making it extremely difficult to induce economic incentives to reduce carbon emissions. It is highly likely that the United States, under the new president to be sworn in next January, will introduce emissions trading. Should the American and European markets link up through such a trading formula, Japan could be isolated.

I do not understand why some economists so staunchly oppose emissions trading and bitterly criticize the Emissions Trading Scheme (ETS) adopted by the EU. Those who designed the EU-ETS are fully aware of its shortcomings; its significance lies in the actual adoption of the scheme. Shortcomings can be addressed through trial and error. It’s always difficult to introduce the ideal form of a new system. As the second best alternative, I would recommend starting with the allocation of emission volumes. * G8 leaders were extremely cautious about calling on China and India to join the global campaign to reduce carbon emissions, apparently for fear of antagonizing them. It is worthy of note that the summiteers agreed on a funding mechanism contained in the “Abe initiative.” Under the mechanism, international cooperation for developing innovative technologies will be pushed and financing for technological transfers from advanced countries to developing nations will be provided. * G8 leaders agreed that the Japanese approach of establishing reduction targets sector by sector would be effective. They did not go far enough, though, in recognizing Tokyo’s proposal as a method for establishing reduction targets for different countries.

Japan should rightly be given credit for serving as a bridge to fill the gap between the EU and the U.S., given the fact that the Kyoto Protocol was bulldozed through by the European and American delegations without full consultation with Japan.

In 1972, the Club of Rome warned that the economic growth would be limited by the finite supply of resources. Ironically, the perceived insufficiency of resources and foods is forcing the human race to take action against global warming. Rising prices for fossil fuels is the most effective way to cut CO2 emissions.

There are said to be three ways to combat global warming: (1) Voluntary action from corporations and households, (2) measures that impose prohibitions and obligations, and (3) economic measures that include environment taxes and emissions trading.

Many people used to claim that economic measures would not be effective. Due to the recent rise in the price of gasoline, however, traffic congestion has almost disappeared from the streets of Kyoto where I live. Traffic on expressways in the Tokyo area is also said to have fallen 10 to 20 percent. So, I would call on those who do not believe in economic measures to reconsider the human sensitivity to price fluctuations.

Takamitsu Sawa is a professor at Ritsumeikan University’s Graduate School of Policy Science and a specially appointed professor at Kyoto University’s Institute of Economic Research.