NOTE: Images, tables, and charts may not display correctly. Please see PDF document for full detail 

Long-term Low-carbon 

Vision

Global Environment Committee, Central Environment Council 

March 2017 

Table of Contents 

Foreword 4

Chapter 1: Climate Change............................................................................................... 9

(1)    Scientific knowledge concerning climate change ................................................. 9

(a) Climate change is a threat to society .................................................................. 9

(b) The 2°C target and effective elimination of GHG emissions .............................12

(c) The carbon budget ...............................................................................................13

(2)    Significance of the Paris Agreement .....................................................................15

(3)    Japan’s long-term targets .......................................................................................17

Chapter 2: Global Trends Taking Place based on the Paris Agreement......................22

(1)Trends in the world’s countries ..............................................................................22

(2)Trends in local governments ..................................................................................23

(3)    Trends in private enterprises..................................................................................23

(4)    Trends in the financial sector .................................................................................24

(5)    Trends among private citizens and scientists ......................................................26

Chapter 3: The Economic and Social Challenges Facing Japan..................................27

(1)    Major internal and external challenges and the orientations of responses .......27

(a)    Major economic and social challenges ..............................................................27

(b)    Direction of responses to economic and social challenges .............................30

(2)    Main factors deserving consideration in a rapidly changing society .................33

Chapter 4: Basic Concept toward Long-Term Significant Greenhouse Gas Reduction 

with a View to Building a Decarbonized Society........................................................35

(1)  Simultaneous solution of economic and social problems, driven by climate 

change policy ...........................................................................................................35

(a) Economic Growth from Climate Change Policy .....................................................36

(b) Regional Revitalization and Land Resilience through Climate Change Policy 41

(c) Climate and Energy Security ................................................................................43

(2)  Japan Contributing to Global Emissions Reduction in addition to Domestic 

Policies .....................................................................................................................44

(3)  The Key to Long-Term Significant Reduction is Innovation .................................46

(4)  The Time to Act is Now ........................................................................................47

Chapter 5: A Vision of Long-Term Significant Reduction..............................................50

(1)    Vision of a Japanese society that achieves 80% reduction by 2050 (Figures 16 and

17 and Pages 94 and 95 of the Reference Materials) ..................................................50

(a)Sustainable growth through “creation of a decarbonization market” and realization

of an “economy of quality” ..........................................................................................50

(b) “Regional revitalization” through renewable energy industries and compact 

urban development based on natural capital .....................................................51

(c)Making a significant contribution to climate security while realizing a nation 

with improved energy security ............................................................................51

(2)    A Vision of Society with Significant Reductions in Various Sectors ..................53

(a)Buildings/Lifestyle ................................................................................................54

(b)Transportation ......................................................................................................56

(c)Industry and Business Activity ...........................................................................57

(d)Energy Demand and Supply ................................................................................59

(e)Region and City ....................................................................................................61

Chapter 6: Policy Direction towards Long-Term Significant Reduction......................63

(1)    Basic direction .........................................................................................................63

(a)    Maximum utilization of existing technologies, know-how, and knowledge ....63

(b)Development and deployment of new innovation .............................................64

(c)Full mobilization of all effective policies and measures (PaMs) ......................67

(2)    Direction of Main PaMs ...........................................................................................68

(a)Carbon Pricing: Making Best Use of Market Dynamism ...................................69

(b)    Other PaMs for Significant GHG Reduction .......................................................77

(3)    Making steady progress toward long-term significant reduction .......................84

Conclusion .........................................................................................................................87

Foreword

In order to avoid the immense climate change risks to future generations, action must be taken now based on long-term policies and strategies that look to the year 2050 and beyond. Moreover, it must be recognized that there is no reversing the movements and trends of international initiatives aimed at achieving the decarbonized society that was agreed upon in the Paris Agreement, and that no retreat is permissible from targets that have been set for future reductions of greenhouse gas (GHG) emissions. 

This “Long-term Low-carbon Vision” was prepared by the Central Environment Council with an eye to Japan’s formulation of a long-term strategy concerning climate change policy that is required of signatories of the Paris Agreement. It was compiled with the aim of putting forth ways of thinking that should form the basis of that strategy from the standpoint of environmental policy and, particularly, a philosophy that clarifies Japan’s role and a “vision” of the kind of country Japan should aim to become in the future. It is hoped that the strategy as well as the programs implemented to give shape to it will be formulated with reference to this Vision. 

Japan should make it its orientation and philosophy to become a country that contributes to international society’s sustainable growth and development and that is looked to with expectation and trust by international society through initiatives aimed at achieving decarbonization and lowcarbonization. This Vision presents what Japan must do over the medium and long term, based on a precise understanding of targets agreed upon by international society. In studying those actions, we stressed above all else the scientific knowledge that forms the foundation of the Paris Agreement and, further, placed importance on a long-term perspective.

The “Plan for Global Warming Countermeasures” that was approved by the Cabinet on May 13, 2016, already states, “Leading the international community so that major emitters will take steps to reduce their emissions in accordance with their abilities based on the Paris Agreement and within a fair and effective international framework in which all major countries participate, Japan will, as a long-term target, aim to reduce its GHG emissions by 80% by the year 2050 while balancing global warming countermeasures and economic growth.”Further, the same plan also points out that “the achievement of such a long-term significant reduction of GHG emissions will be difficult with the extension of conventional initiatives alone.” In other words, this long-term target, which presents the direction that Japan must take to achieve an 80% reduction by 2050, differs in nature from another target mentioned in the same Plan for Global Warming Countermeasures that calls for reducing emissions by 26% compared to 2013 by the year 2030. Thus, it must be remembered that, when studying the ideal future for Japan that is presented in this Vision based on the long-term target, applying the measures that are identified in consideration of the 2030 target in the plan—or more specifically, measures that involve simply building on what can be achieved by extending out already existing technologies and systems—will not be able to adequately attain the target. 

The Plan for Global Warming Countermeasures goes on to state, “Accordingly, Japan will pursue, to the maximum degree possible, solutions that are based on innovation, including the development and dissemination of innovative technologies that make possible fundamental emissions reductions, and will strive to achieve major emissions reductions within long-term and strategic initiatives while simultaneously encouraging domestic investment, raising international competitiveness, and seeking broad knowledge among the citizenry. Moreover, Japan will also contribute to global reductions.” Taking this Cabinet decision as a basis, this Vision presents a future policy direction that incorporates various recommendations, such as the fact that not only technical innovation but also innovation of economic and social systems and lifestyles are included within the scope of innovation, and the fact that climate change measures also contribute to the simultaneous solution of the various challenges facing Japan, among them economic growth, regional revitalization, and the falling birthrate and aging society. We hope that the thinking presented in this Vision will be adequately reflected in Japan’s policy and that, along with this, a strategy for medium- and longterm initiatives that incorporates effective policies and measures (PaMs) and also looks ahead to the end of the current century, as well as programs that give concrete shape to that strategy, will be formulated in the very near future. 

Chapter 1: Climate Change

Climate change is an actually observed scientific fact and could possibly lead to irreversible risks for the ecosystem and human society into the future. 

The Paris Agreement, which sets forth targets that include what is called the “2°C target” and the effective elimination of GHG emissions throughout the world, has been agreed to by 197 countries and regions. In order to achieve these targets, the building of a decarbonized society throughout the world,^[1]while efficiently using a “carbon budget”^[2][3]as the foundation for science-based initiatives, will form the bedrock of climate change policy. 

Based on the Paris Agreement, Japan has set a 26% decrease in emissions in FY2030 compared to the FY2013 level^[4]as a medium-term target and an 80% decrease in 2050 as a long-term goal that shows the desired way forward. 

(1) Scientific knowledge concerning climate change

(a) Climate change is a threat to society 

Observed changes and their causes 

According to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (hereinafter “IPCC”),^[5]which was released between 2013 and 2014, there is no room for doubt that the Earth’s climate system is warming, and many of the changes that have been observed since the 1950s are unprecedented on time scales of several decades to several millennia (see Figures 1 and 2 and Page 3 of the Reference Materials). For example, the global mean surface air temperature, obtained by combining land and sea-surface temperatures, rose 0.85°C between 1880 and 2012. Climate change in recent years is having effects that extend broadly throughout the world, including warming of the atmosphere and oceans, smaller amounts of snow and ice, rising sea levels, and ocean acidification. According to the results of carbon dioxide and methane measurements taken by the Ministry of the Environment, National Institute for Environmental Studies, and Japan Aerospace Exploration Agency (JAXA) using “IBUKI,” a greenhouse gas-observing satellite (GOSAT), average monthly concentrations of carbon dioxide for the entirety of the Earth’s atmosphere are rising year by year with seasonal variations, and the measurement for May 2016 was 402.3 ppm, which was the highest ever recorded (as of October 27, 2016) (see Page 4 of the Reference Materials). Thus, it is very highly probable (at least 95%) that GHG emissions from human sources are the dominant factor behind the warming that has been measured since the mid-20th century. 

From AR5 SYR SPM Fig. SPM.1(a),(b) (IPCC) 

Figure 1  Changes in the Global Mean Air Temperature Deviation when Land and Sea Surface Areas are Combined 

From AR5 SYR SPM Fig. SPM.1(a),(b) (IPCC) 

Figure 2  Changes in the Global Mean Sea Level when Land and Sea Surface Areas are Combined 

Future climate change: Risks and effects 

The Fifth Assessment Report includes predictions of the climate of the future that are based on four scenarios called Representative Concentration Pathways (RCP^[6]), the results of which forecast that the degree to which the global mean surface air temperature will rise by the end of the 21st century (2081 to 2100) compared to the 1986-2005 average is highly likely to fall into the 2.6 to 4.8°C range in the scenario in which no countermeasures that go above and beyond the current situation are executed and GHG emissions are extremely large (RCP8.5); and it is highly likely to fall into the 0.3 to 1.7°C range in the scenario in which strict mitigation measures are executed (RCP2.6) 

(probability of 66 to 100%). As for the oceans, it is predicted that rising seawater temperatures and acidification will continue, and that the global mean sea level will continue to rise (see Page 5 of the Reference Materials). 

The Fifth Assessment Report presents five “reasons for concern” as major future risks^[7]affecting multiple sectors and regions, namely: i) unique and threatened systems, ii) extreme weather events, iii) distribution of impacts, iv) global aggregate impacts, and v) large-scale singular events. Together with these, the report also arranges sectoral risks that include freshwater resources, terrestrial and freshwater ecosystems, coastal systems and low-lying areas, and marine systems. According to this, for example, a 1°C rise in atmospheric temperature would lead to the risks attributable to extreme events (heat waves, extreme rainfall, coastal flooding) being high, and a 2°C rise in atmospheric temperature would expose many species of organism and systems that have limited ability to adapt (particularly arctic sea ice and coral systems) to extremely high risk. If the atmospheric temperature rises more than 3°C, because of the possibility of rising sea levels caused by large-scale and irreversible ice sheet loss, the risks associated with the “tipping point”^[8]would increase (see Page 6 of the Reference Materials). 

Climate change will also give rise to new risks for human society. For major crops of tropical and temperate zones (wheat, rice, and corn), although a rise in temperature in those zones of 2°C or more compared to late 20th-century levels may be beneficial in certain locations, it is predicted that failure to adapt to climate change will have negative impacts on production. In urban areas, it is predicted that risks associated with heat stress, destructive storms and torrential rainfall, inland and coastal flooding, landslides, air pollution, drought, water scarcity, and rising sea levels and storm surges will increase. In rural areas, a changing climate may lead to global shifts in suitable production areas for food and non-food crops, but on the other hand since such areas may not have infrastructure such as water supply available, there will be accompanying risks in securing supply, leading to large impacts on food security for the country and on incomes for farmers. 

By the middle of this century, predicted climate change will affect human health primarily by worsening existing health problems. It is expected that, over the course of the 21st century, climate change will bring greater health hazards to many regions, particularly low-income developing countries, compared to a baseline with no climate change. Examples include higher possibility of disability, illness, or death as a result of stronger heat waves and fires, and greater risk of foodborne and waterborne infectious diseases. 

Furthermore, in the Fifth Assessment Report, climate change-caused increases in forced migrations of people and impacts on national security policy are predicted. Such impacts on security policy are also mentioned in a report prepared by the United States’ National Intelligence Council (NIC) in September 2016 (see Figure 3 and Page 7 of the Reference Materials). 

*However, wholly attributing each of the instances of extreme weather shown in the above figure to climate change is difficult. 

Excerpted from material presented by Yasuko Kameyama to the Long-Term Low-Carbon Vision Subcommittee (Fourth Session), Global Environment Committee, Central Environment Council 

Figure 3  Report of the US National Intelligence Council (NIC) 

The economic aspects of climate change’s impact have been reported in various studies, among them the Stern Review. In a recent calculation, Citigroup estimated that the cost of climate change countermeasures between 2015 and 2040 (190.2 trillion USD) will be 1.8 trillion USD lower than the cost of taking no countermeasures (192 trillion USD). Moreover, Citigroup estimated that lost GDP if no climate change countermeasures are implemented will amount to 20 trillion USD in the case of a

1.5°C increase, 44 trillion USD in the case of a 2.5°C increase, and 72 trillion USD in the case of a 

4.5°C increase by 2060 (all estimates with a 0% discount rate).^[9]

Furthermore, looking at climate change’s effects on Japan, the “National Plan for Adaptation to the Impacts of Climate Change” (Cabinet decision of November 27, 2015) states that extreme weather events are being observed and that floods and landslides, for example, are occurring almost every year in all parts of Japan and causing tremendous damage. It additionally notes that higher temperatures, changes in precipitation, and other various forms of climatic change, sea level rise, and acidification of the oceans are possible in the future, and also presents predictions based on a climate change assessment report^[10]of impacts to be felt in various areas. These include increased disaster risk (such as increasingly serious water shortages, floods and landslides, and storm surges and tidal waves), deteriorating water quality, further deterioration in crop quality, increased frequency of summer heat waves, and a change in the feeling of the seasons due to the change of the cherry blossom period and so on.  

(b) The 2°C target and effective elimination of GHG emissions

Substantial mitigation of the various risks mentioned in (a) above will be achieved by significantly reducing GHG emissions over the next several decades and controlling global warming in the latter half of the 21st century and beyond. Given that, for the most part, rises in global mean temperature through the end of the 21st century and beyond will be determined by cumulative emissions of carbon dioxide, controlling the various climate change risks means limiting cumulative carbon dioxide emissions. 

It is considered highly probable (probability of at least 66%) that emissions scenarios in which GHG concentrations are approximately 450 ppm CO₂-eq or below in the year 2100 will be capable of maintaining a temperature rise less than 2°C in comparison to the preindustrial level. Such scenarios have the characteristic of significantly reducing annual emissions over several decades into the future, with anthropogenic GHG emissions being reduced by between 40% and 70% compared to the 2010 level by 2050 and emissions levels falling to almost zero or below by 2100 (see Page 8 of the Reference Materials). 

A range exists in scientific estimates of climate sensitivity,^[11]which is a parameter that correlates these emissions scenarios and degree of climate change, and this range produces a breadth of values in the long-term prediction of climate change when particular emissions scenarios are realized. Likewise, there is a range in estimates of the temperature rise threshold, etc., where the tipping point will occur. Additionally, in the report of Working Group I of the Fifth Assessment Report, no best estimate for climate sensitivity could be given “because of a lack of agreement on values across assessed lines of evidence and studies.” Because such ranges in values can significantly influence long-term analyses, continued accumulation of scientific knowledge will be required to ascertain actual circumstances and improve prediction accuracy. On the other hand, climate sensitivity may be lower than the 3°C presented as the best estimate at the time of the Fourth Assessment Report, but it may also be higher. In terms of risk management, it is important to advance global warming countermeasures that consider both possibilities, and it is appropriate to proceed with discussions based on knowledge obtained from the Fifth Assessment Report’s Synthesis Report while also referring to the latest knowledge made available since the report. 

(c) The carbon budget 

According to the Fifth Assessment Report’s Synthesis Report, it is becoming clear that there is a strong, consistent, and almost linear relationship between cumulative CO₂emissions and projected global temperature change to the year 2100. Limiting total human-induced warming to less than 2°C relative to the period between 1861–1880 with a probability of greater than 66% would require keeping cumulative CO₂emissions from all anthropogenic sources since 1870 below roughly 2,900 GtCO₂(2.9 trillion tons) (with a range of between 2,550 to 3,150 GtCO₂depending on non-CO₂drivers). Given that roughly 1,900 GtCO₂had already been emitted by 2011, keeping cumulative emissions to below roughly 2,900 GtCO₂will require holding global cumulative emissions at roughly 1,000 GtCO₂, or approximately 1 trillion tons, in 2012 and beyond. “Carbon budget” is a phrase that expresses this idea (see Figure 4 and Page 9 of the Reference Materials.) 

Figure 4 Cumulative Anthropogenic CO₂Emissions and Climate Change

On the other hand, the corresponding cumulative carbon dioxide emissions for limiting anthropogenic temperature rise to 2°C with a probability exceeding 50% and exceeding 33% are 3,000 GtCO₂(3 trillion tons, range of 2,900 and 3,200) and 3,300 GtCO₂(3.3 trillion tons, range of 2,950 and 3,800), respectively. In other words, in order to limit warming to 2°C with higher probability, lower emissions are required. Given that there is a range in carbon sensitivity, in light of scientific knowledge available at the present time, a carbon budget of roughly one trillion tons remaining is indicated by the IPCC as the most reliable figure. 

As stated in (a) above, it is feared that the effects of climate change may bring tremendous and irreversible damage to society in its entirety. Indeed, vis-à-vis the “environment as the foundation of human survival” (Article 3 of the Basic Environment Law), global warming will have a “serious impact on the environment of the entire planet” (Article 1 of the Act on Promotion of Global Warming Countermeasures). In light of the fact that the Paris Agreement clearly states that developed nations must take the lead by working to reduce absolute emissions throughout their economies, along with taking action to ensure that “interference with environmental conservation can be prevented in advance” (Article 4 of the Basic Environment Law) in reducing anthropogenic GHG emissions, which are the dominant factor behind the warming that has been measured since the mid-20th century, Japan must also execute countermeasures based on “preventive initiatives and methods” while working to further enhance scientific knowledge in areas that include adaptation to climate change.^[12]Moreover, Japan experienced in the Great East Japan Earthquake how important it is to be prepared for “unanticipated” events. Based on these concepts, the building of a decarbonized society by the latter half of this century, together with effective use of the remaining carbon budget at the global level, forms the foundation of climate change policy oriented toward avoiding the serious impacts of climate change and holding off its irreversible aspects. We believe it is appropriate for Japan to play a role in leading the international community in tackling climate change. 

According to a report issued by the UNFCCC^[13]in May 2016 titled “Aggregate Effect of the Intended Nationally Determined Contributions: An Update,” even when the commitment drafts submitted by all countries are aggregated, the total is not enough to achieve the 2°C goal at minimum cost, and thus additional reduction efforts will be required (the UNEP, IEA, and others have made the same point) (see Figure 5 and Page 10 of the Reference Materials). Moreover, the same report states that, when commitment drafts are aggregated, the result is that 2.629 trillion tons of CO2 will be emitted by 2030, and the remaining carbon budget is 261.0 billion tons. Thus, to limit warming to less than 2°C, countries’ current reduction efforts are insufficient; each country must improve its countermeasures as quickly as possible and take steps toward further raising the ambitiousness of its nationally determined contribution (hereinafter “NDC”).^[14]

Aggregate effect of the intended nationally determined contributions: Prepared based on “Aggregate effect of the intended nationally determined contributions: an update”(UNFCCC)

Figure 5  Gap between 2030 GHG Emissions and the 2°C Target 

(2) Significance of the Paris Agreement 

On December 12, 2015 (early in the morning of December 13 in Japan), the Paris Agreement—a new legally binding international agreement and the first in eighteen years, following the Kyoto Protocol—was adopted at the COP21 summit held in Paris, France (see Page 11 of the Reference Materials). Conditions for the Paris Agreement’s coming into force were met on October 5, 2016, and the agreement entered into force on November 4. A total of 132 of the 197 countries and regions that are parties to the UN Framework Convention on Climate Change have entered into it (as of February 27, 2017). Japan signed the Paris Agreement in New York on April 22, 2016, and, with the Diet’s approval on November 8 of the same year concerning Japan’s signing of the agreement, deposited an instrument of acceptance with the UN Secretary-General on the same day. The Paris Agreement was promulgated and announced (Treaty No. 16 and Ministry of Foreign Affairs Announcement No. 437) on November 14 and came into force for Japan on December 8 of the same year. 

The Paris Agreement is the first international agreement to set targets based on the scientific knowledge described in Section (1). Among these targets are “[to hold] the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels,”^[15]“to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century,” and “[to make] finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development.” These targets were agreed upon by Japan and the entire international community as being based on the most precise scientific knowledge available at the present time. Given that it must faithfully comply with the Paris Agreement,^[16]in order to achieve the Agreement’s extremely ambitious and unavoidable targets, Japan must consider not only the accumulation of actions it is capable of taking now, but also what it needs to do going forward. 

Aside from its stipulations concerning targets, the Paris Agreement is groundbreaking as an international framework because it contains regulations concerning the participation of all countries in a manner that exceeds the fixed dichotomy that is based on its Annex (specifically, the Annex I Parties [so-called “developed countries”] and Non-Annex I Parties [so-called “developing countries]), a mechanism for submitting and updating NDCs for a worldwide response to climate change every five years, the implementation of adaptation planning and action, and formulation and notification of long-term strategies for advancing low-carbonized GHG development. 

Another important point is that the Paris Agreement is a mechanism for advancement and improvement toward achievement of its long-term targets with re-examinations of each country’s targets, reporting and reviews, and a PDCA cycle that checks progress for the world as a whole (see Page 12 of the Reference Materials). Each country is obligated to prepare a “nationally determined contribution” that sets GHG reduction targets and other goals, and to sustain that contribution while executing domestic measures to achieve those targets.^[17]Moreover, each country is obligated to update and submit its NDC every five years, and it is stipulated that the targets of that NDC will show progress from the previous targets. Prior to that, it is also stipulated that a study of the status of execution throughout the world compared to the objectives of the Paris Agreement (called a “global stock-taking”) will be conducted every five years, and the results will furnish information when individual countries update and strengthen their initiatives. In this way, the Paris Agreement contained unprecedented characteristics—namely, that long-term targets are clearly stated in a document that forms a legal agreement applicable to all countries, and that a direction was spelled out toward improving mechanisms and ambition to promote climate change policy through international cooperation toward those long-term targets—and presented a clear message concerning the kind of society we should aim to build in the years to come. In other words, it is a turning point in international climate change policy that is founded on accumulated efforts through the UN Framework Convention on Climate Change and the Kyoto Protocol, and can be said to be a new point of departure. 

Another important point is that the agreement mentions the participation of all countries in a manner that exceeds the fixed dichotomy that is based on its Annex (specifically, the Annex I Parties [socalled “developed countries”] and Non-Annex I Parties [so-called “developing countries]). Under the agreement, each signatory must prepare, provide notification of, and sustain successive NDCs that they intend to achieve; and each signatory must execute domestic mitigation measures for achieving the objectives of its NDC. Even if a particular signatory country’s production-based emissions fall as a result of its execution of domestic measures, emissions may still rise globally if on the other hand the emissions of other countries rise with the generation of increased emissions that are associated with consumption in the signatory country and consumption-based emissions grow. The Paris Agreement aims for, as a goal that should be pursued by signatories, the achievement of a balance between anthropogenic emissions by sources and removals by sinks of GHG in the second half of this century. It goes without saying that achieving this goal will require reduction of both production-based and consumption-based emissions. In addition to reducing its production-based emissions, it is essential for Japan to also deploy its outstanding technologies, know-how and low-carbon lifestyles and systems to other countries while making behavioral changes that involve the active selection of low-carbon goods and services (see Page 13 of the Reference Materials). 

(3) Japan’s long-term targets 

Changes in Japan’s GHG emissions 

Japan’s GHG emissions in FY2015 (preliminary value) were 1.321 billion tons (see page 14 of the Reference Materials). Of this amount, CO₂emissions from energy sources accounted for 1.148 billion tons. Breaking this figure down by sector, including indirect emissions due to consumption of electricity and heat, the industrial sector accounted for 413.0 million tons (approximately 36%), the commercial and other sectors accounted for 249.0 million tons (approximately 22%), the transportation sector accounted for 216.0 million tons (approximately 19%), the residential sector accounted for 182.0 million tons (approximately 16%), and the energy transformation sector accounted for 88.2 million tons (approximately 8%)^[18](see Page 16 of the Reference Materials). Additionally, the main high-emissions industries within the industrial sector^[19]were manufacture of iron and steel with 190.0 million tons; manufacture of chemicals and allied products with 67.0 million tons; machinery manufacturing with 41.0 million tons; and manufacture of ceramic, stone, and clay products with 40.0 million tons^[20](see Page 18 of the Reference Materials). 

Looking at emissions trends in recent years, until the early 2000s, Japan’s real GDP and CO₂emissions from energy sources showed roughly similar growth. Moreover, Japan’s carbon productivity (the amount of GDP produced per unit of GHG emitted) and energy productivity (the amount of GDP produced per unit of primary energy supplied) were among the highest in the world until the mid-1990s but began declining around the year 2000 and can no longer be described as being among the best in the world (see Figures 6 and 7 and Pages 19 to 28 of the Reference Materials). On the other hand, over the course of the most recent three years, a “decoupling” trend whereby Japan’s GHG emissions are declining while its GDP is growing has become apparent (see Page 29 of the Reference Materials). 

Based on the Paris Agreement, Japan has set a 26% decrease in emissions compared to the FY2013 level^[21]in FY2030 as a medium-term target and, having traversed the path described below, will aim to achieve an 80% decrease in 2050 as a long-term target. 

GHG Data (UNFCCC), World Economic Outlook Database (IMF),  

Prepared based on the Annual Report on National Accounts for 2015 (Benchmark Year Revision of 2011) 

Summary (Flow Accounts) (Cabinet Office) 

Figure 6  Changes in Japan’s per capita GDP and carbon productivity (GDP/GHG emissions) within the OECD 

                                                            emissions                                                                 

GHG Data (UNFCCC), World Economic Outlook Database (IMF),  

Prepared based on the Annual Report on National Accounts for 2015 (Benchmark Year Revision of 2011) Summary (Flow Accounts) (Cabinet Office)

Figure 7  GDP growth rate and rate of change of total GHG emissions 

Background behind the 2050 target

Ten years ago, in May 2007, then-Prime Minister Abe proposed setting a long-term target of “cutting global emissions by half from the current level by 2050” as a common goal for the entire world in a speech titled “Invitation to Cool Earth 50.” Based on this, it was decided at the G8 Heiligendamm Summit held the following June that serious study would be given to at least halving global CO₂emissions by 2050. 

In a June 2008 speech entitled “Japan as a Low-carbon Society,” then-Prime Minister Fukuda stated, “For its part, Japan will set a long-term goal of reducing, by 2050, 60-80% of its current level of emissions, so as to bring about a low-carbon society that we can proudly present to the world,” and this long-term goal was approved by the Cabinet as the Action Plan to Create a Low Carbon Society in July 2008. It was agreed at the G8 Hokkaido Toyako Summit of July 2008 to share a vision of halving global emissions by 2050 with UNFCCC signatories and to seek its adoption in framework negotiations. 

The leaders’ declaration of the G8 L'Aquila Summit held in July 2009 (then-Prime Minister Aso) states, “We reiterate our willingness to share with all countries the goal of achieving at least a 50% reduction of global emissions by 2050, recognizing that this implies that global emissions need to peak as soon as possible and decline thereafter. As part of this, we also support a goal of developed countries reducing emissions of greenhouse gases in aggregate by 80% or more by 2050 compared to 1990 or more recent years. [Omission].”  

Later, Japan and the United States agreed within the Japan-U.S. Joint Message on Climate Change Negotiations (November 2009) to aim to reduce their own emissions by 80% by 2050 and endorse a global goal of reducing emissions by 50% by that year. 

In the wake of the Great East Japan Earthquake of March 2011, Japan’s energy environment came face-to-face with difficult challenges. Against this backdrop, the Fourth Basic Environment Plan (Cabinet decision of April 2012) makes the following statement that was approved by the Cabinet: “Japan recognizes the need to greatly reduce greenhouse gas emissions in order to hold the rise of the average global temperature compared to the pre-industrial revolution level to within 2°C, and will strive to share the target of reducing global GHG emissions to at least half by 2050 with all nations. Moreover, Japan will strive to reduce its GHG gas emissions by 80% by the year 2050 as a longterm target.” 

Additionally, a strategy titled “ACE: Actions for Cool Earth” (November 2013) restates the goals of achieving at least a 50% reduction of global GHG emissions by 2050 and of developed countries’ reducing GHG emissions by 80% by 2050 in order to realize the vision of “Cool Earth.” Moreover, the leaders’ declaration of the G7 Schloss Elmau Summit (June 2015) states, “Mindful of this goal and considering the latest IPCC results, we emphasize that deep cuts in global greenhouse gas emissions are required with the decarbonization of the global economy over the course of this century. Accordingly, as a common vision for a global goal of greenhouse gas emissions reductions, we support sharing with all parties to the UNFCCC the upper end of the latest IPCC recommendation of 40 to 70% reductions by 2050 compared to 2010, recognizing that this challenge can only be met by a global response” (see Page 31 of the Reference Materials). 

Finally, the “Plan for Global Warming Countermeasures” that received Cabinet approval in May 

2016 presents a medium-term target of reducing emissions by 26.0% compared to the 2013 level by FY2030, stating that the target was “formulated by bringing together substantiated policies and measures and technologies with full consideration for technical limitations, cost-related issues, etc., so that it will be consistent with Japan’s energy mix.” As for a long-term target, the plan states: “Leading the international community so that major emitters will take steps to reduce their emissions in accordance with their abilities based on the Paris Agreement and within a fair and effective international framework in which all major countries participate, Japan will, as a long-term target, aim to reduce its GHG emissions by 80% by the year 2050 while balancing global warming countermeasures and economic growth. The achievement of such a long-term significant reduction of GHG emissions will be difficult with the extension of conventional initiatives alone. Accordingly, Japan will pursue, to the maximum degree possible, solutions that are based on innovation, including the development and dissemination of innovative technologies that make possible fundamental emissions reductions, and strive to achieve major emissions reductions within longterm and strategic initiatives while simultaneously encouraging domestic investment, raising international competitiveness, and seeking broad knowledge among the citizenry. Moreover, Japan will also contribute to global reductions.”  

In these ways, Japan has continually pursued long-term significant reduction with an eye to 2050 and played an important role in the international community as an environmentally advanced country. 

Setting per capita emissions of approximately 2 tons as a 2050 target for achieving a decarbonized society

With this background, Japan has made the decision to aim for an 80% emissions reduction in 2050 as a waypoint toward the building of a decarbonized society throughout the world. Given this, Japan must advance initiatives such that it leads the international community as it also continues its endeavor to achieve large-scale reductions. 

According to the long-term low greenhouse gas emission development strategies that the developed nations are currently proposing, the United States will aim for a reduction of at least 80% compared to the 2005 level, Germany will aim for a reduction of between 80 to 95% compared to 1990, France will aim for a 75% reduction compared to 1990, and Canada will aim for an 80% reduction compared to 2005. Japan’s target compares favorably with these goals. 

Additionally, under current scientific knowledge, an emissions scenario having a high probability of achieving the 2°C target established by the Paris Agreement is one in which anthropogenic GHG emissions are reduced by between 40 and 70% compared to the 2010 level by 2050 and emissions levels fall to almost zero or below by 2100. This level of reduction means that the per capita annual emissions for the entire world will be between 1.4 and 2.8 tons in the year 2050. If it is assumed that Japan’s population in 2050 will be 97 million,^[22]per capita annual emissions of between 1.4 and 2.8 tons will translate into total emissions of between 130 million and 270 million tons. Considering for example that Japan’s emissions were approximately 1.41 billion tons in FY2013, this represents a decrease of approximately 81 to 91% (see Figure 8 and Page 32 of the Reference Materials). 

Converting the targets of the long-term low greenhouse gas emission development strategies currently being proposed by the developed countries into per capita emissions, the results are 3.8 tons for the United States, 2.1 tons for Germany, 1.9 tons for France, and 3.4 tons for Canada. Additionally, although it has not registered a long-term low greenhouse gas emission development strategy with the United Nations, the United Kingdom, which has already established a long-term target of reducing emissions by 80% compared to the 1990 level in its Climate Change Act, will have estimated per capita annual emissions of 2.1 tons. In this way, the per capita annual emissions of developed countries largely fall in line with the IPCC scenario of between 1.4 and 2.8 tons per person (see Page 33 of the Reference Materials). 

*World population from World Population Prospects, The 2015 Revision (United Nations). Japan’s population from Population Projects for Japan (January 2012) (National Institute of Population and Social Security Research). 

World GHG emissions based on CO₂Emissions from Fuel Combustion 2015 (IEA) (excludes “CO₂other”) and SAR (IPCC). Japan’s GHG based on Japan’s greenhouse gas emissions data (confirmed report values for 1990 to 2014) (Greenhouse Gas Inventory Office of Japan) and GWP of AR4 (IPCC). 

Figure 8 Required reductions when per capita emissions are equalized

Chapter 2: Global Trends Taking Place based on the Paris Agreement

The scale of markets for the technologies, products, and services needed to realize a decarbonized society will be huge, and thus climate change policy can be considered to have a direct link to growth strategy. Because of the Paris Agreement, climate change policy has become a promising field in which a “promised market”^[23]requiring continuous long-term investment will be created and in which companies can actively invest with a clear view of future prospects. 

According to IRENA,^[24]it is estimated that the cost of generating power from renewable energy will fall in the years leading up to 2025 and, depending on the type, be on the same level as the current cost of generating power from fossil fuels (see Page 35 of the Reference Materials). Additionally, according to a calculation^[25]by the IEA^[26], decarbonizing the electric power sector under the 2°C scenario will require approximately nine trillion USD in additional investment between 2016 and 2050, and reaching energy conservation goals in the three sectors of building, industry, and transport will require approximately three trillion USD in additional investment between 2016 and 2050 (see Page 36 of the reference materials). Thus, today, as the world enters a major period of change, which includes the emergence of a vast market that will be sustained into the future, many actors—among them the countries of the world, local governments, private companies, the financial industry, and ordinary citizens and scientists—are pursuing initiatives toward building a decarbonized society throughout the world. We believe this trend will not waver. 

(1) Trends in the world’s countries 

Various countries are already taking action based on the Paris Agreement. For example, in their declaration at the Ise-Shima Summit, which was the first G7 summit conference held following the Paris Agreement, the G7 leaders reaffirmed their determination to ensure swift and successful implementation of the Paris Agreement, and committed to formulating and communicating midcentury long-term low GHG emission development strategies well ahead of the 2020 deadline (see Page 31 of the Reference Materials). With respect to these long-term strategies, as of January 19, 2017, six countries (the United States, Mexico, Germany, Canada, Republic of Benin, and France) have already communicated their long-term low-emission development strategies to the United Nations (see Page 37 of the Reference Materials). It is important that Japan recognize these circumstances and trends occurring in other countries, such as those presented below, and link them to the formulation of its own long-term strategy. Countries all around the world, even those that are not G7 members, are taking steps toward the steady implementation of the Paris Agreement and formulation of long-term strategies. For example, the leaders’ communique for the 

G20 Hangzhou Summit expresses the expectation of the Paris Agreement’s timely implementation in all its aspects. 

Examples of initiatives taken by countries of the world 

(Pages 38 and 39 of the Reference Materials) 

(2) Trends in local governments 

Cities and other local governments of the world are also advancing various initiatives, among them those presented below. In the case of some of the leading climate change policies, it is expected that not only will they evolve and develop as initiatives in themselves, but that they will also spread horizontally to other cities and local governments. 

Examples of initiatives being taken in countries of the world

(Pages 40 to 43 of the Reference Materials) 

(3) Trends in private enterprises 

Seeing the Paris Agreement as a new business opportunity, a variety of private enterprises are taking steps forward in implementing leading climate change policies. For example, the following international initiatives are being actively advanced. 

Examples of initiatives being taken by private enterprises 

(Pages 44 to 51 of the Reference Materials) 

(4) Trends in the financial sector 

In response to the Paris Agreement, trends in the global financial sector are also changing. As mentioned previously, according to a calculation released by the IEA, decarbonizing the electric power sector under the 2°C scenario will require approximately nine trillion USD in additional investment between 2016 and 2050. In light of this and other developments, the movement of vast amounts of capital toward society’s decarbonization is expected. Realizing this movement will require the advancement of initiatives in the financial sector. It should be noted that, outside of Japan, if the premise of major reductions is taken, there is a risk that investment in fossil fuels will result in stranded assets, and given this, major financial institutions, institutional investors, and other actors are beginning to reexamine their investments in, and loans for, fossil fuels. 

Examples of initiatives being taken in the financial sector 

(Pages 52 to 54 of the Reference Materials) 

 (5) Trends among private citizens and scientists 

Since global warming will affect a variety of people, including those of future generations, various civic groups and scientists are also engaged in independent efforts to tackle it. 

Examples of initiatives being taken by private citizens and scientists 

(Pages 55 to 57 of the Reference Materials) 

Chapter 3: The Economic and Social Challenges Facing Japan

(1) Major internal and external challenges and the orientations of responses

(a) Major economic and social challenges

Advancing population decline and depopulation 

Japan’s total population has been declining since peaking at approximately 128 million in 2008, and Japan’s working-age population is also declining after peaking at approximately 87 million in 1995. It is estimated that, in 2050, the nation’s total population will be approximately 97 million and its working-age population will be approximately 50 million^[27](see Page 59 of the Reference Materials). Although Japan’s total fertility rate rose to 1.46 in 2014, this is far below the 2.07 that is said to be the replacement-level fertility rate, and it is anticipated that the population decrease that began in 2008 will accelerate in the years ahead. 

Additionally, it is estimated that places losing half or more of their population in 2050 will account for 60% of currently inhabited areas (currently approximately 50%), and that approximately 20% of places will become uninhabited.^[28]In particular, it is estimated that the populations of municipalities that currently have populations of less than 10,000 will fall by roughly half^[29](see Page 60 of the Reference Materials). 

Population aging at a pace unparalleled in the world 

Japan’s population is aging at a pace unparalleled in the world, as its population aging rate^[30]reached its highest level ever at 26.7% in 2015. 

A comparison of the number of years needed from the time a population aging rate exceeds 7% until it doubles to 14% (doubling time) shows that, in contrast to France’s 126 years and Sweden’s 85 years as well as Germany’s comparatively short 40 years and the United Kingdom’s 46 years, Japan’s doubling time was 24 years between 1970 and 1994³⁰(see Page 61 of the Reference Materials). 

It is expected that, in a super-aged society, various challenges will emerge, among them an increasing fraction of people demanding medical care, nursing care, and welfare services and an increasing fraction of households in which elderly people live alone. The extension of healthy life span, activation of local communities, development of fulfilling lives, and other various fine-tuned actions will be required in each region. 

Economic revitalization 

Since the mid-1990s, Japan’s nominal GDP has remained largely unchanged, moving at a level between approximately 500 trillion JPY and 530 trillion JPY (see Page 62 of the Reference Materials). Japan’s per capita GDP ranking in the world has plunged since the 2000s, falling from third in the mid-1990s to 26th (20th among the OECD countries) in 2015 (see Table 1 and Page 63 of the Reference Materials). 

One of the reasons cited for this long-term low growth is prolonged deflation. Factors said to be behind the deflationary trend include stagnant added-value productivity resulting from inadequate innovation, and expanded and protracted use of irregular employment. It has been pointed out that, amid intensifying competition with products from emerging economies, Japanese companies have attempted to maintain their competitiveness primarily by lowering their prices through better efficiency in their manufacturing processes and overseas production, while companies in the United States and Europe are maintaining high prices by, respectively, improving profitability through the creation of new businesses and building up their product brands^[31](see Figure 9 and Page 25 of the Reference Materials). 

Japan’s economy has been showing gradual improvement in recent years; for example, in 2013, 

Japan’s real GDP recovered to the level it had attained prior to the financial crisis sparked by the 

Lehman Brothersbankruptcy. However, as the Annual Report on the Japanese Economy and Public Finance 2015 points out, “Since 2000, like European and American listed companies, which have increased their internal reserves and cash ratios, Japanese listed companies have also built up their internal reserves and, at the same time, maintained cash and deposits. Generally speaking, there are various reasons why companies build up their cash and deposits; securing working capital and funds for future investment and preparing for worsening business performance or crises, such as that sparked by the Lehman Brothersbankruptcy, can be counted among proactive reasons for doing so. On the other hand, a deficiency of investment opportunities can be considered to be a passive reason.”  Numerous other challenges also exist, including inhibited personal consumption against the backdrop of an uncertain future (see Page 64 of the Reference Materials), constraints on the labor supply attributable to the decreasing working-age population^[32](see Page 65 of the Reference Materials), improved productivity in the service industry and other sectors, a falling potential growth rate and response to the“Fourth Industrial Revolution,” capture of competitive advantage in global markets and of external demand in emerging economies and other countries, and, additionally, restoration of fiscal health and dealing with social security benefit expenses.

Table 1 Ranking of countries’ capita GDP (nominal GDP) 

Unit: USD 

World Economic Outlook Databases (IMF),  

Prepared based on the Annual Report on National Accounts for 2015 (Benchmark Year Revision of 

2011) Summary (Flow Accounts) (Cabinet Office)

Figure 9 Added-value labor productivity and physical labor productivity of manufacturing Regional challenges 

Regional economies are highly dependent on public demand,^[33]and there is a tendency for those local governments with smaller populations to have greater dependency on public demand and weaker financial capability (see Page 66 of the Reference Materials). In addition to overconcentration in Tokyo bringing about population decline and economic contraction in outlying regions, the low total fertility rate in the Tokyo metropolitan area, where much of Japan’s population is concentrated, is tied to Japan’s national population decline. Furthermore, the Tokyo metropolitan area is also grappling with many challenges that exceed the merits that come with population concentration.^[34]Moreover, there will be a nationwide increase in the number of areas that will become uninhabited by 2050^[35](see Page 67 of the Reference Materials) as well as various issues that will include the diffusion of urban areas, appearance of vacant houses and abandoned farmlands, maintenance and management of social capital, rising dependence on automobiles, and effects of skyrocketing energy prices on household budgets. 

Challenges in the international community 

Japan’s share of GDP in the world is shrinking, and it is expected to continue falling with the growth of emerging economies, among other factors. Thus, Japan’s “quantitative” presence in the international community is diminishing (see Page 68 of the Reference Materials). 

In addition, Japan’s security environment is becoming increasingly severe as the international situation becomes less stable amid growing protectionism and recent changes in the power balance that are referred to as “multi-polarization” or “unpolarization.” In an era when threats to the security of nations and their citizens from international terrorist organizations, cyberattacks, the appearance of large numbers of refugees, and the like are diversifying, no country can build a peaceful, safe, and prosperous future alone. At present, Japan in particular subsists within its connections to the world, as it imports almost all of its fossil fuels and mineral resources and more than half of its food and acquires capital in global markets (see Page 69 of the Reference Materials). 

(b) Direction of responses to economic and social challenges 

Economic growth 

Japan must respond to its unprecedented population decrease and societal aging, the advance of the Fourth Industrial Revolution, changes in the international situation, and other developments based on recognition of the various factors that were behind the prolonged deflationary trend and sluggish nominal GDP growth that have prevailed in Japan for more than 20 years. Among those factors that have been identified are the following:“The extremely rational behavior, when viewed at the individual company level, of cost reduction creates a ‘paradox of thrift’ in the form of reduced consumption and investment and stagnating accumulation of human capital and drives a vicious deflationary cycle when viewed in terms of the entire macro economy”; and “With the formation of a deflationary mindset, Japan’s ‘animal spirits’ have evaporated and product innovation that creates new next-generation demand has been lost.”^[36]Unless Japan reflects on the past and breaks through the impediments to growth it will encounter going forward, it faces the strong possibility that its stagnating growth rate will become even more pronounced and that it will feel even more serious effects of long-term sluggishness.^[37]

For this to happen, technologies that correspond to new fields and support new goods and services, social systems that include business models and institutions to support the diffusion of those technologies, lifestyles incorporating public values demanding “better” rather than “cheaper,” and innovation covering all technical and social systems and lifestyles will be essential.^[38]

™  Responses on the supply side (shifting from quantity to quality in economic growth) 

To maintain a certain level of economic growth under constraints on the supply of labor in a society experiencing population decline and under quantitative constraints in domestic demand, there must be a major shift in direction “from quantity to quality” throughout the entire economy, and improvements in added-value productivity (labor productivity based on added value) will be essential (see Page 70 of the Reference Materials). It is thought that, rather than absorbing the cost of improving productivity by simply raising prices, companies must raise their added-value rates while increasing unit prices through the development of new fields and product innovation and generate a virtuous cycle linked to high wages.^[39]Particularly with regard to the promotion of innovation, the need for investment in intangible assets, such as R&D, computerized information, design, brands, and human capital, has been pointed out in recent years.^[40]

Moreover, the implementation of sophisticated, cutting-edge, and innovative technologies through the Fourth Industrial Revolution—in such areas as IoT, AI, self-driving vehicles, and advanced robotics, for example—could have significant impacts on the economy and society in ways that include cost reduction and provision of high added-value services. 

™  Responses on the demand side (promoting investment and stimulating latent demand) 

The domestic market will face quantitative constraints as Japan’s population decreases, but the market could shrink even more depending on how responses are executed. It will be necessary to encourage investment among companies that are building up their cash and deposits due to passivity arising from a lack of investment opportunities, and, through innovation that addresses latent needs, to stimulate positive consumption behavior among consumers who control their spending out of concerns about the future. At that time, it will be necessary to identify latent needs while raising unit prices, and to link them to higher added-value productivity throughout the economy, in order to overcome quantitative constraints in Japan’s domestic market that are attributable to population decline.

™  International development (capturing external demand, etc.) 

Japan must actively capture external demand so that it can break through its domestic demand constraints at a time of decreasing population. As a developed nation beset by problems, Japan can build new competitive advantage in the global market by leading the world in bringing about advanced innovation as a social system, rather than on a company-by-company basis only.^[41]

Moreover, given the possibility that Japan’s current account surplus will shrink as the domestic savings rate decreases in line with the declining working-age population, improving Japan’s terms of trade (export prices/import prices) will be important. Skyrocketing prices of raw materials, including energy, have worsened Japan’s terms of trade, and thus reducing the nation’s dependence on those materials will be effective in preventing the worsening of those terms and in minimizing the effect that price fluctuations have on them. Raising export prices by bringing added value to exported goods and services will also be important.

Regional revitalization 

As for the direction of regional initiatives in a mature society like Japan’s, rather than taking a nationally uniform “catch-up”approach like that applied when Japan’s population was growing, it will be important for each region to demonstrate its unique identity by finding its own “special something,” starting with its historical or cultural elements that have arisen from its unique natural environment or climate, and refining it. Developing diverse and attractive regions that take advantage of such originality will necessitate the building of regional economies that are autonomous and robust. Also important will be the maintenance and enhancement of natural capital^[42]as the regional foundation as well as improvement of productivity and reduction of administrative costs within the region by utilizing ICT and other cutting-edge technologies and expansion of sales channels for regional products through direct access to the global market. 

Response to the international community 

Japan’s striving to raise its “qualitative” presence in the international community by using the kind of “soft power” it has wielded heretofore (e.g., in technology, culture, content, and interpersonal exchanges) will serve to compensate for its diminishing “quantitative” presence amid growth among emerging economies, and it will be important to continue initiatives in this area. 

Additionally, we believe that, in an increasingly severe security environment, Japan’s active contribution to the resolution of global issues by being a “proactive contributor to peace based on the principle of international cooperation,” which is the guiding principle of its national security, as well as efforts to secure shared global-scale benefits in free trade and other areas, will take on even greater importance. 

Furthermore, given that disruptions in world peace and stability could negatively impact Japan’s energy and food security, as before it will remain extremely important for Japan to strive to raise its self-sufficiency in energy and resources. 

(2) Main factors deserving consideration in a rapidly changing society 

Advancement of ICT 

Japan’s 5th Science and Technology Basic Plan (Cabinet decision of January 2016) states: “Through an initiative merging the physical space (real world) and cyberspace by leveraging ICT to its fullest, we are proposing an ideal form of our future society: a ‘super smart society’^[43]that will bring wealth to the people. The series of initiatives geared toward realizing this ideal society are now being further deepened and intensively promoted as ‘Society 5.0.’^[44]” (see Page 71 of the Reference Materials). 

ICT is advancing at a pace so remarkable as to warrant the title the “Fourth Industrial Revolution,” which is evident in the Internet of Things (IoT), in which various forms of information are linked to “things” via the Internet, artificial intelligence (AI), and “big data” technologies that accumulate, analyze, and utilize vast amounts of data. This revolution has the potential to fundamentally change conventional social rules and people’s values (see Page 72 of the Reference Materials). Great changes are envisioned in all fields and sectors. For example, the diffusion of in-home medical care and nursing care, which will be essential to the building of a regional comprehensive care system, telecommuting leading to work-style reform, and distance education may help correct population maldistribution. Other changes will likely be seen in the use of smart technology in energy use and in the maintenance, management, and upgrade of infrastructure. Although various problems exist in terms of security and other aspects, we believe that the trend toward global-scale networking will continue. 

Coexistence with nature 

Japanese culture is founded on harmony with nature. Thesatochi, satoyama, and satoumi(rural lands, mountains, and seas) of past times were places where local residents worked together and where, through people’s association with nature, sensitivity to nature was cultivated and traditional artistic culture and advanced manufacturing culture were born. However, particularly beginning with the nation’s post-war period of high economic growth, Japan increased its dependence on overseas resources as its people’s connection with nature weakened. Nonetheless, as people’s values and lifestyles diversify, we believe the creation of varied and attractive regions that utilize their local identity will be essential to maintaining and improving Japan’s national vitality. Moreover, from the standpoint of developing safe and secure regions in terms of disaster preparedness and mitigation using the ecosystem, we believe it will be necessary to renew people’s awareness of the unique values each region has vis-à-vis nature—including the forests, rural areas, rivers, and seas—and to rebuild the link between people and the natural environment (see Page 73 of the Reference Materials). 

Growing awareness of safety and security 

Based on the recognition of Japan’s unique geographical characteristics, where many types of natural disaster can occur, including the kind of major earthquake and tsunami witnessed in the Great East Japan Earthquake, there is a growing awareness of safety and security, both in people’s daily lives and also in socio-economic systems, including supply chains. 

At the same time, the diversification of lifestyles is progressing in various ways, including in the ways in which women work, the growing number of people who wish to continue working even after reaching the mandatory retirement age, the expanding shift away from “ownership” to “sharing,” the transition in preferences for “services” instead of “things,” and a growing desire to return to the countryside. 

As seen in Chapter 1 and Chapter 2, climate change is one of the major threats to society, and humankind's enormous challenge of building a decarbonized society throughout the world is beginning. Given its history of overcoming incidents of pollution that became unprecedented environmental problems^[45]when they arose and turning its experience into a source of industrial competitiveness, Japan is in an excellent position to play a leading role in pioneering paths toward significant GHG reduction and fulfilling its responsibility to bequeath this Earth to future generations. 

Moreover, a distinguishing characteristic of modern society is that its manifold activities have complex interrelationships with various fields. The problem of climate change originates from humankind’s many socio-economic activities and therefore, as shown in Chapter 3, it is essential to consider it from multifaceted and complex perspectives, among them economic growth, regional issues and other social aspects, and responses by the international community. 

Additionally, Japan is the country most affected by population decrease and societal aging, phenomena already challenging nations around the world, and it is under various constraints in terms of geography, land, and resources. Given these circumstances, by simultaneously addressing in Japan climate change and economic and social challenges, Japan will make a major contribution to the global community as a forerunner in finding answers to emerging issues. 

Based on the above, we believe Japan must fulfill the following roles. 

In accordance with this role, the following is the future vision for which Japan must strive. 

In the following we present the basic concept that will become the core of Japan’s initiatives to significantly reduce its GHG emissions, with the goals of realizing the future vision of Japan and of building a decarbonized society throughout the world. 

(1) Simultaneous solutionof economic and social problems, driven by climate change policy 

Fixing its sight on the realization of a decarbonized society throughout the world by the end of this century, Japan’s efforts to achieve a long-term significant reduction in GHG emissions by aiming for an 80% reduction by 2050 can spark simultaneous solutions to climate change and economic and social challenges. 

It has been pointed out that solving the problem of climate change should be premised on economic growth and be framed centrally within the viewpoint of achieving a society that remains vibrant into the future. In the first place, it is important to bear in mind the point that human activity will not be viable unless the environment as the foundation of human survival can be preserved into the future^[46](Article 3 of the Basic Environment Law), but still the importance of economic growth in general, not only as it pertains to the issue of climate change, goes without saying. As seen in Chapter 3, if Japan does not make necessary reforms in response to internal and external changes and constraints—such as heretofore unexperienced population decrease and societal aging and intensifying global competition against the backdrop of the Fourth Industrial Revolution—it runs the risk of falling into long-term stagnation.⁴⁷Thus, Japan finds itself in a situation where it must pursue improvements in its added-value productivity. 

Likewise, the achievement of long-term significant reductions in GHG emissions will be difficult through only the extension of conventional initiatives. Reforms that cover all aspects of technology, socio-economic systems, and lifestyles must be considered. In other words, whether it is achieving long-term significant reduction of greenhouse gases or sustainable economic growth, success will require consideration of reforms that reach across the economy and society in their entirety. Accordingly, rather than thinking about climate change and economic growth individually, it is prudent to seek their solutions simultaneously, and indeed ways of thinking that are oriented in this direction are already being seen.^[47]This kind of “simultaneous solution”-based thinking will become an important concept that aspires to realize true compatibility of global warming countermeasures and economic growthand, further, to contribute to the resolution of Japan’s various challenges by tackling climate change based on its special nature as a phenomenon that originates from humankind’s many socio-economic activities. 

(a) Economic Growth from Climate Change Policy 

Although the relationship between environmental conservation and the economy has been debated ever since the era of pollution control, the view that “environmental conservation measures have a negative effect on the economy” remains persistent. Particularly from the perspective of the production sector, which is required to implement environmental conservation measures, concerns have been raised about effects on corporate earnings arising from the cost of implementing those measures, the accompanying reduction in demand, and the loss of export competitiveness, among other consequences. 

On the other hand, environmental conservation measures generate new investment and consumption demand for associated technologies, and spur innovation. In addition, imports of fossil fuels decrease under climate change policy. In the debate surrounding renewable energy, while there are concerns about the impact that rising energy prices will have, at the same time the question of whether payments for energy are being made to overseas or domestic interests—in other words, whether the income attributable to energy prices is going overseas or being returned domestically (and particularly locally)—can also be identified as an important point of contention in terms of macroeconomics.^[48]  

Particularly in recent years, the corporate sector has been composed of surplus units, and the cash and deposits held by companies continue to grow, having reached 246 trillion yen^[49]as of December 2016. As mentioned in Chapter 3, this is thought to be possibly due to passivity coming from a lack of places to spend, and indeed a deficit of investment opportunitiesis emerging. Considering the question of where Japan will invest in the future, as mentioned previously, the scale of future markets for the technologies, products, and services needed to achieve long-term significant emissions reductions throughout the world will be huge, and thus climate change policy that seeks to seize this “promised market” can be considered to have a direct link to growth strategy. 

Especially given the current economic conditions, and from the standpoint of realizing an economic society that will remain vibrant into the future, climate change policy can be viewed as a form of promising investment for new growth. Japan, a nation possessing outstanding technologies and know-how, is positioned to lead the world in climate change policy. It will generate innovation by strengthening initiatives aimed at achieving long-term significant emissions reductions within its borders, drive its economy by applying its strengths and potential to the maximum extent possible, and, in the short term, tie these results to overcoming deflation and to new growth. 

On the other hand, climate change policy can become a factor behind rising production costs. It is highly likely that if the same goods and services are supplied even when costs rise, demand for those goods and services will decrease. However, it is also possible that climate change policy will serve to trigger a shift toward the direction currently demanded (i.e., increasing productivity by elevating the ratio of value added while raising unit prices through the development of new fields and product innovation) that was described in Chapter 3.^[50]

The following sections will delve deeper into this topic using “carbon productivity” as a starting point. 

Improving Carbon Productivity 

In order to maintain a certain level of economic growth when a 2°C goal has been incorporated into the Paris Agreement and a one-trillion-ton cap has been placed on CO₂emissions—in other words, at a time when carbon inputs are limited—it is indispensable to generate high added value with low carbon inputs and to greatly increase carbon productivity (added value against carbon input)^[51](see Page 75 of the Reference Materials). Japan will need to increase its carbon productivity by at least a factor of six by 2050.^[52]It is thought that countries capable of achieving high carbon productivity will be able to achieve sustainable economic growth, and it must be recognized that international competition in the area of carbon productivity is already beginning. 

™  Carbon productivity (the denominator) 

What is needed to achieve significant improvements in carbon productivity? Naturally, significant reductions in carbon input, which is the denominator of carbon productivity, must be realized by a full-scale effort to implement all manner of reduction measures. Significantly reducing carbon input will require the promotion of thoroughgoing energy conservation (i.e., major improvement in energy productivity) and the optimization of activities (e.g., automobile travel distances and building floor space) by introducing low-carbon sources of power and heat and implementing urban structurerelated measures. 

™  Carbon productivity (the numerator) 

On the other hand, the relationship between GDP and added value, which form the numerator of the equation, and carbon input is also important in achieving significant improvement in carbon productivity. In conventional thinking, GDP growth is accompanied by an increase in “activity” in such forms as production and shop floor space, and carbon input increases in conjunction with that growth. Thus, it has been understood that decreased GHG emissions and economic growth are incompatible. However, a phenomenon called “decoupling,” whereby decreases in GHG emissions and economic growth are not linked, is not at all unusual in developed countries, including Japan. As mentioned previously, it has been pointed out that companies in developed countries have maintained high value and raised earnings by creating new businesses and building up product brands. In developed countries, there is a shift underway from the traditional economic structure in which earnings come from greater volume to one in which earnings come from quality and higher unit prices of goods and services, and it is possible that GDP growth and GHG emissions are not linked as they once were. Accordingly, seeking as the economy’s substance a structure in which earnings come from quality based on the high added value of goods and services will be extremely important in achieving significant improvements in carbon productivity.^[53]

Economic Growth and Climate Change Policy: Finding Compatibility between Added-Value Productivity and Carbon Productivity 

™Shifting from quantity to quality 

As mentioned above, improving added-value productivity to achieve economic growth under population decrease and other constraints, and improving carbon productivity to comply with the Paris Agreement, can be said to follow the same line in terms of a shift “from quantity to quality” in the economy’s character (see Figure 10 and Page 76 of the Reference Materials). 

Statistically, no correlation between added-value productivity and carbon productivity was identified in 1990, but in 2014, countries that had high labor productivity tended to have high carbon 

productivity and, although weak, a positive correlation is already being identified (see Figure 11 and Page 77 of the Reference Materials). This report noted how some have recently pointed out that innovation is important in raising added-value productivity and that the role of intangible assets as a source of innovation is large. However, regarding the rise in added-value productivity, it is thought possible that the growing role of intangible assets that have a weak connection with increased carbon input is having an influence as a factor in the emerging interrelation between added-value productivity and carbon productivity. 

It is quite likely that carbon productivity has qualities that will enable it to serve as an economic indicator for measuring the degree of progress toward the so-called “shift from quantity to quality in economic growth.” 

Figure 10 Shift “from Quantity to Quality” in Economic Growth 

Prepared based on data of OECD, UNFCCC, and others 

Figure 11 Relationship between Labor Productivity (Added-Value Productivity) and Carbon 

Productivity

™Awakening latent demand and capturing external demand: the so-called “promised market”

The climate change policies requiring continuous long-term investment by the Paris Agreement represent the so-called “promised market.” While some aspects are dependent on the design of government schemes, for companies that are accumulating cash and deposits due to a passive investment stance arising from a lack of investment destinations, it is one of the promising fields in which active investment can be made with a clear view of prospects. 

Enacted through worldwide consensus, the Paris Agreement will create a market of global scale. As mentioned previously, according to a calculation released by the IEA, decarbonizing the electric power sector under the 2°C scenario will require approximately nine trillion USD in additional investment between 2016 and 2050, and reaching energy conservation goals in the three sectors of building, industry, and transport will require approximately three trillion USD in additional investment during the same period. 

For Japan, a country particularly facing quantitative demand constraints as its population decreases, this represents an opportunity to capture vast external demand. It is hoped that Japan will lead the world in presenting problem-solving models for a decarbonized society in areas that include not only technology but also socio-economic systems and lifestyles, and will seize a competitive advantage in the world market. It must be remembered that if, conversely, Japan cannot seize a competitive advantage in the world market, it is liable to fall into a situation where it will have to import models from other countries. 

Furthermore, climate change policy will require long-term innovation in areas that include innovative reduction technologies. Innovation that grasps latent needs harbors the potential to generate positive consumption behaviors among consumers and lead to the next stage of innovation through increased income and further expansion of demand (see Figure 12 and Page 78 of the Reference Materials). 

•      Climate change policy for compliance with the Paris Agreement (i.e., major increase in carbon productivity toward decarbonization) can lead to resolution of Japan’s economic challenges.

Main thrust of efforts to resolve economic 

                                     challenges                                                                                                                                                  Main thrust of Paris Agreement compliance 

Improvement in added-value productivity in response to full-                 Major improvement in carbon productivity (upper limit on scale population decline in society (labor constraints , etc.)         carbon input) 

Growing importance 

                  Improvement in potential growth rate (supply side)        of qualitative factors    Structural separation of GDP growth and carbon input 

• Creation of innovation using intangible assets, etc.          (such as intangible         increases (numerator of carbon productivity) 

(creation of added value by shifting from      assets, etc.)                  ●Stronger creation of added value from rather than quantitative expansion accompanied by carbon inputquality improvements        quantitative expansion to qualitative improvement)^*1           ●Improvement of production efficiency (Carbon productivity 

• Better efficiency as a result of the “fourth industrial           denominator) 

                     revolution,” etc.^*2                                                                                                   *It must be remembered that increasing quality does not necessarily result in a zero increase in carbon input. The point here is that additional carbon input is considered 

to be relatively small compared to quantitative expansion. 

Awakening latent demand (demand side) 

• Discovery of latent demand while raising unit prices through development of new fields and product Provision of the Reduction of carbon input (carbon productivity innovation (creation of new products and services)^*3 “promised market”and denominator) 
• Promotion of investment by companies that are               the need for innovation that is not simply an ● Promotion of electrification and introduction of low-carbon accumulating cash and deposits^*4               extension of the           power sources, introduction of renewable heat, and 
• Appropriate allocation of profits from the above               current situation                                development of associated infrastructure (creation of new 

                     (wage increases, etc.)^*5                                                                                                                                                                    demand, promotion of production and investment, and 

capture of external demand using domestically developed technologies and know-how)

• Introduction of high-efficiency devices (same as above) 
• Transport and urban structure-related measures (creation 

                   International development                                                                                of compact urban areas, etc.) and housing and building-

• Overcoming of domestic demand constraints by related measures (same as above) incorporating external demand from emerging ●Development of revolutionary technologies (new materials, economies^*6Capture of external etc.) and their introduction and overseas application 
• Improvement in terms of trade (reduction of fossil            demand for low-                                 (including continuous product innovation throughout the fuel imports, improvement of export prices)^*7                 carbon products and           above)
• Expansion of overseas earnings                services and reduced                    *It must be remembered that negative effects may be caused imports of fossil fuels            by cost increases arising from actions to reduce carbon input. 

                    *1,5:      Ministry of Health, Labour and Welfare, “White Paper on the Labour Economy 2016” and others                                                                                                    The relationships indicated by the 

*2,6:     Ministry of Economy, Trade and Industry, “New Industrial Structure Committee, Industrial Structure Council, ‘An                  arrows are not the only ones Interim Report on the New Industrial Structure Vision’” (April 2016) and others                    possible. Items pertaining to 

                    *3:         Cabinet Office, “Keizai no Kojunkan Jitsugen Kento Senmon Chimu Chukan Hokoku”(interim report of the special 

                        study team for realization of a virtuous economic cycle) (November 2013) and others                                                                                                                        regional economies are omitted. 

                    *4:         Cabinet Office, “Annual Report on the Japanese Economy and Public Finance 2015”and others                                                                                                                                                                                                       

                    *7:         Cabinet Office, “Annual Report on the Japanese Economy and Public Finance 2014”and others  

Figure 12: Relationships between Solutions to Economic Challenges and Compliance with the Paris 

Agreement (for Conceptual Purposes) 

(b) Regional Revitalization and Land Resilience through Climate Change Policy 

Local Energy 

Looking at the balance of energy payments of individual regions, in the case of approximately 80% of local governments, funds equivalent to at least 5% of gross regional product flow out of the region, and in the case of 379 local governments, funds equivalent to at least 10% flow out (statistics as of 2010). Additionally, because fossil fuels account for the majority of current energy sources, a large portion of local energy payments flows outside of Japan as import fees (see Figure 13 and Page 79 of the Reference Materials). Although circumstances vary from region to region, improving the regions’ balance of energy payments through a climate change policy that includes the introduction of renewable energy having great potential, particularly in outlying regions, will contribute to the building of robust local economies and lead to regional revitalization.  

Moreover, projects associated with renewable energy will generate new jobs and employment and can therefore help prevent the outflow of working-age people (see Pages 80 and 81 of the Reference Materials).

In addition, much renewable energy is also independent distributed energy, and the addition of this independent distributed energy to the existing electric power grid will improve resilience against disasters and thus is expected to contribute to Japan’s national resilience as well.    

Prepared using the 2013 regional economic cycle analysis database (Ministry of the 

Environment)

Figure 13 Energy Balance of Payments against Gross Regional Product 

Compact Urban Areas 

Looking at lifestyles in relation to urban structure and transportation, there is a tendency whereby areas with low DID population density^[54]have higher shares of automobile use and areas with high density have higher shares of walking and bicycle use. To achieve major reductions, it is important to develop communities by applying vehicle-related measures, such as those that reduce or eliminate carbon emissions, together with transport measures that inherently reduce the amount of energy consumed (see Page 83 of the Reference Materials). Making spread-out urban areas more compact by consolidating the various service functions that support people in their daily lives (e.g., medical care, nursing care, welfare, commercial services, financial services, and fuel supply) will help curtail transportation that results in fuel use and also contribute to lower GHG emissions through more streamlined use of floor space. 

Additionally, we believe that the above-mentioned measures will also generate multiple benefits in terms of simultaneous solution of climate change and other policy challenges. These include greater labor productivity as a result of the aggregation of service functions and greater DID population density (see Page 84 of the Reference Materials), revitalization of urban areas through increased local consumption and restoration of community vitality (see Page 85 of the Reference Materials), reduced administrative costs needed to maintain and manage infrastructure and extension of healthy life span with more walking and use of bicycles (see Page 86 of the Reference Materials), and lower medical and nursing care costs. 

Natural Capital 

It is highly possible that forests, rural areas, rivers, seas, and other aspects of the natural environment will be greatly affected by changes in the ecosystem brought by advancing climate change. On the other hand, the natural environment not only supplies resources in the forms of lumber and food, but is also a source of renewable energy, such as biomass and hydroelectric power, and can help bring improvements in the local energy balance. Moreover, with proper management, it also functions as a carbon dioxide sink. Maintaining and enhancing such natural capital as a stock is a prerequisite for the enjoyment of these “blessings of nature” and for the continuation of sound economic and social activities in local areas. 

Furthermore, natural capital is a source for generating high added-value goods and services that are based on regional originality and for attracting people from outside the area. In addition to this, the presence of familiar natural environments, such as village forests and parks and green spaces in urban areas, can lead to better health-related quality of life. 

(c) Climate and Energy Security 

Climate Security 

As shown in Chapter 1 (1) (a), climate change creates various risks for the entire world, and has been a topic of discussion from the standpoint of national security since 2000.^[55]A report prepared by the United States’ National Intelligence Council in September 2016 also mentions securityrelated issues brought by climate change^[56](see Page 7 of the Reference Materials). In Japan too, various forms of damage have arisen, the most common in terms of climate being wind and water damage caused by typhoons and stationary weather fronts, for which the amount of insurance payments is also large. Furthermore, damage to rice, fruit, and other crops; health problems such as heatstroke and infectious disease; and impacts on Japan’s unique ecosystems are also actually occurring, and it is possible that these effects will grow even larger in the years ahead. Because of such threats, all nations, including Japan, must implement climate change policy that is based on scientific knowledge, and the international community must work together in tackling climate change based on a “climate security”mindset to protect not only the current generation but also generations to come.^[57]

Additionally, developing and disseminating Japan’s technologies, know-how, lifestyles, and schemes overseas can lead to improvements vis-à-vis global environmental problems. In addition to reducing emissions by 80% in Japan, those technologies and other attributes will make a “+α” (read “plus alpha,” a Japanese expression denoting “with a bit extra”)^[58]contribution to the entire world. 

There is an initiative (JCM⁶⁰) underway that contributes to global emissions reductions by assisting with initial costs and diffusing low-carbon technologies; it is important to execute this kind of “highquality” international contribution. We believe that such an initiative would lead to worldwide reductions in GHG emissions and contribute to stronger global-scale security against climate change—in other words, “climate security”—and, simultaneously, bolster Japan’s presence in the international community. Furthermore, it could also help Japan secure international competitiveness through the opening of international markets. 

Moreover, it must not be forgotten that, because Japan is a major emitter that generates more than 1.3 billion tons of GHG annually, its success in reducing emissions as soon as possible and with an eye to its carbon budget will itself be an international contribution helping to ensure the international community’s climate security. 

Energy Security 

It can be said that raising energy self-sufficiency rates by using local energy has a direct link to guaranteeing energy security. In a world of increasing uncertainty, the importance of utilizing local energy is growing. Moreover, because worldwide energy security and conflict prevention can result when regions raise their energy self-sufficiency without depending on fossil fuels, it is important to strive to accelerate initiatives toward this end, not only domestically but also through international cooperation. 

(2) Japan Contributing to Global Emissions Reduction in addition to Domestic Policies

As a nation possessing outstanding technologies and know-how for GHG emissions reduction, Japan is positioned to lead the international community. Reinforcing domestic initiatives to achieve long-term significant reduction can lead to generating all manner of innovations, including in technologies and know-how, lifestyle, and socio-economic systems for overcoming the various constraints that Japan faces in terms of its geography, land, and resources. 

Domestically, particularly in the civilian sector and transport sector, Japan has considerable room for major reductions. By advancing initiatives toward promoting transformation of consumption patterns and purchase of low-carbon products to replace convention products, eliminating emissions from houses and buildings, reforming urban and regional structures, and diffusing independent/distributed energy in a multi-layered manner, Japan can continuously generate innovation for achieving long-term significant reduction while promoting investment and creating a vast domestic market. It is important to promote these measures and, while doing so, tie them to the revitalization of Japan’s economy and, simultaneously, to the resolution of the various challenges that face the nation (e.g., regional revitalization, national resilience, energy security, etc.) by, for example, also revitalizing the economies of weak regions and improving the energy balances and disaster readiness of local areas through the diffusion of renewable energy. Furthermore, we believe that long-term significant reduction presents a great challenge that all industries of the world, both in Japan and abroad, must overcome, and that making an unceasing effort to further improve the industrial sector’s carbon productivity with an eye to such reduction has a direct link to the stronger international competitiveness of Japanese industry. 

tons and 10 billion tons) on global CO₂by the year 2050.” This is equivalent to between slightly less than 10% and 30% of global CO₂emissions from energy consumption (32.2 billion tons) in 2014. 

⁶⁰Joint Crediting Mechanism 

Even in other countries, progress in the achievement of major emissions reductions for a decarbonized society is being seen, and moreover as it is expected that competition in the “promised market” will intensify, Japan must maintain and improve a high level of international competitiveness if it is to continue making a sustained contribution to overseas reductions. Although Japan is faced with various constraints in terms of geography, land, and resources, we believe that realizing major reductions through various responses in such areas as technologies and know-how to overcome such constraints as well as lifestyle and socio-economic systems will provide a source of international competitiveness. In this sense, domestic measures in climate change policy are essential, and in parallel with its domestic long-term significant reductions, Japan must further global emission reductions by advancing its contributions to reduction through the JCM and product life cycle. 

Moreover, as a country that emits more than 1.3 billion tons of GHG, Japan is naturally obligated to greatly reduce its emissions at a time when initiatives to build a decarbonized society under the Paris Agreement are getting underway around the world. Going forward, we believe it is likely that the circumstances will become such that human beings will need to make great reductions toward building a global decarbonized society even as many nations increasingly grapple with low birth rates and aging societies. In such circumstances, we believe that Japan can, by simultaneously achieving major reductions and solving economic and social challenges through innovation of its technologies, lifestyles, and socio-economic systems, serve as a model for the world as a forerunner of finding answers for emerging issues (see Figure 14 and Page 87 of the Reference Materials). 

Figure 14  Major Reduction in Japan and Long-Term Overseas Contribution 

As a percentage of global GHG emissions, Japan’s emissions stood at 2.9% as of 2010 (see Figure 15 and Page 88 of the Reference Materials). There is a point of view that seeks to adjust the strength of measures to address emissions reduction depending on the size of a nation’s share of global emissions. Because Japan and the countries that produce fewer emissions than Japan together represent approximately 40%^[59]of global emissions, if they were to adopt this point of view, the goal of the Paris Agreement—to build a decarbonized society around the world—would become completely unreachable. In order to achieve its goal, the Paris Agreement, in addition to calling for initiatives based on the participation of all nations, clearly establishes that developed nations in particular must take the lead by working to reduce absolute emissions throughout their economies.^[60]As one of the major emitters that is ranked fifth in the world, and as a nation possessing outstanding environmental technologies and know-how, Japan is in a position of responsibility whereby it must take the lead in executing initiatives toward the establishment of a decarbonized society throughout the world.   

Prepared based on “CO₂Emissions From Fuel Combustion (2016 Edition)” (IEA) 

Figure 15  GHG Emissions by Country (1990, 2010)

(3) The Key to Long-Term Significant Reduction is Innovation 

In addition to the maximal use of existing technologies, know-how, and knowledge, achieving longterm significant reduction requires novel innovation that is not simply an extension of conventional methods. Promoting innovation improves productivity and is directly linked to economic growth,⁶³and as such the creation of innovation that is driven by climate change policy is the key to the simultaneous achievement of long-term significant reduction and of solutions to economic and social challenges. 

Technology Innovation 

Further research and technical development are essential to achieving long-term significant reduction. In addition to the development of advanced elemental technologies (i.e., technologies that bring products into being, such as those related to production, quality, and infrastructure), the combination of existing elemental technologies, organic linkage of elemental technologies using ICT and other technologies, and linkage of advanced elemental technologies of the future will lead to the innovation of technologies. It is important to drive ceaseless movement toward long-term significant reduction in Japan and abroad by continuously producing innovation that fully employs the collective achievements of Japan’s diverse industries. 

As seen in a number of past examples in which Japanese technologies conquered the world—for example, through the practical application of heat-pump technology, hybrid vehicles, and LED lighting—it is possible to create new innovation by establishing a strategy and then methodically executing development, demonstration, and human resource development.  

Economic and Social System Innovation 

Mechanisms that enable continuous and long-term generation of innovation are indispensable for long-term significant reduction. Additionally, because elemental technologies and other individual technical innovations only bring reductions when they are disseminated, mechanisms that produce incentives for enhancing demand for new technology throughout society are required. Moreover, as society experiences dramatic change as a result of ICT and other advancements, the possibility exists that traditional values will change greatly in the future, and so innovation on the institutional side that will allow nimble responses to such change is also essential. We believe that the generation of innovation in economic and social systems in themselves will strengthen companies’ desire to provide high added value in goods and services on the supply side and further spur the arrival of new markets on the demand side, and can lead to the simultaneous solution of various economic and social challenges that include overcoming deflation and achieving new growth. 

Lifestyle Innovation 

People’s values, lifestyles, and work styles have a significant bearing on GHG emissions. Changing the orientation of our own lifestyles, work styles, and selection of goods and services toward decarbonization will generate new demand, and since this will lead to innovation in terms of new goods and services, innovation in the area of lifestyle is necessary. 

Japanese culture is founded on harmony with nature. The Japanese people respect and fear nature, have developed a keen sensitivity to nature, and have made nature the foundation of their traditional artistic culture and sophisticated manufacturing culture. In addition, through the process of experiencing pollution during its post-war period of high economic growth, reflecting on the causes of that pollution, and then overcoming it, Japan may be said to have also cultivated a culture that pursues sustainability as a way of being in its corporate activities and regional society. To achieve long-term significant reduction of GHG emissions, Japan must become reacquainted with the above-noted values that underlie its society, aim to improve quality of life, and consider lifestyles with the appeal of an even higher level of “eminence.” 

 (4) The Time to Act is Now

As described below, given not only the pressing need to respond in terms of climate change policy—specifically, with attention to carbon budgeting, the carbon “lock-in” effects of infrastructure, principles of environmental policy, early diffusion of decarbonization technologies, and global trends—but in the first instance Japan’s responsibility as a signatory working for the achievement of long-term goals under the Paris Agreement, the time to engage in accelerating initiatives toward long-term significant reduction is now.^[61]

Carbon Budget 

“Carbon budgeting” is an important concept in climate change action (see Page 9 of the Reference Materials). If we are to make our socio-economic activities sustainable into the future, we must engage in these socio-economic activities while shrinking our carbon budget to the best of our ability. For this reason the concept of cumulative emissions, which promotes the reduction of CO₂“as quickly as possible, and as much as possible,” is extremely important. 

This way of thinking is applicable to all countries in accordance with their abilities. Japan, which is one of the major emitters, has set a goal of achieving a 26% reduction compared to FY2013 in FY2030 and of achieving an 80% reduction by 2050. The importance of achieving these goals is obvious, but if we consider its carbon budget, the path that Japan will take toward achieving them becomes extremely important. Specifically, the question of how Japan will achieve its mid-term target while holding down its cumulative emissions (expressed by the integrated values in the graph) through FY2030, for example, is essentially crucial (see Page 90 of the Reference Materials). 

To minimize cumulative emissions to the extent possible based on its carbon budget, Japan must achieve its FY2030 mid-term target without fail and steadily proceed with the preparations needed to achieve its long-term 2050 goal. At the same time, it has no choice but to maximize its reductions each fiscal year, and must execute full-scale initiatives toward this end immediately, continuously, and with a sense of urgency. 

Infrastructure 

Urban structures, large-scale facilities, and other forms of infrastructure require large amounts of time for their maintenance, upgrade, and termination. Responses that take into account long-term environmental impacts when maintaining infrastructure which, once in place, may lead to a high level of CO₂emissions over a long period of time (the “lock-in effect”) must begin immediately (see Page 91 of the Reference Materials). Conversely, investment in facilities expected to be needed in the future is also necessary starting now. For example, study of the capital investment needed to fully leverage the potential of renewable energy, the need for which will grow increasingly in the years ahead, must begin in a proactive manner now. A perspective that seeks to identify what to do nowwith an eye to the future is required. 

Principles of Environmental Policy 

In addition, action must be taken to guarantee that “the environment as the foundation of human survival can be preserved into the future” (Article 3 of the Basic Environment Law) in initiatives tackling environmental issues, and to ensure that “interference with environmental conservation can be anticipatively prevented” (Article 4 of the Basic Environment Law) in reducing GHG emissions from human sources, which are the dominant factor behind the warming that has been measured since the mid-20th century. At the same time, there is a need to execute countermeasures based on “preventive initiatives and methods” while working to further enhance scientific knowledge in areas that include adaptation to climate change. The perspective of intergenerational equity, which is established in Japan’s history of experiencing and overcoming pollution and in the various international treaties to which Japan is a signatory, as well as prevention, preventive initiatives and methods, and the “polluter-pays principle” (PPP) are also perspectives that must not be forgotten in climate change policy. While damage is already becoming manifest, now is the time to take fullscale action to avoid and mitigate further damage. 

Time Required for Dissemination 

Outstanding technologies do not always spread quickly. Generally speaking, it takes a certain amount of time for a new technology to be disseminated (see Page 92 of the Reference Materials). Minimizing cumulative emissions based on the carbon budget requires the quick dissemination of outstanding reduction technologies, but even if the national or local governments implement policies and measures (PaMs) to drive dissemination, a certain amount of time is required until dissemination actually occurs. Thus, it must be remembered that, in addition to the time needed for technology research, development, and demonstration, a certain amount of time is required for dissemination. 

The Global Trend 

Moreover, it is not only the public sector—i.e., national and local governments around the world— that is taking accelerated steps toward long-term significant reductions based on the Paris Agreement, but also a broad variety of actors, including businesses, the finance industry, and civic communities. At a time when socio-economic activities around the world are incorporating low carbon- and decarbonization-based approaches, it must also be remembered that being slow to join this global trend could negatively affect national interests. 

Achievement of the Paris Agreement’s Long-Term Goals 

The Paris Agreement establishes as long-term mitigation goals the “[holding of] the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels” in Article 2 and “[achieving] a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century”in Article 4. As a signatory of the agreement, Japan must promote emissions reduction measures domestically and fulfill its responsibilities toward achievement of the agreement’s goals internationally. 

Chapter 5: A Vision of Long-Term Significant Reduction

(1) Vision of a Japanese society that achieves 80% reduction by 2050 (Figures 16 and 17 and Pages 94 and 95 of the Reference Materials) 

As noted earlier, with its gaze fixed on the building of a decarbonized society world-wide, Japan’s climate change policy aiming for an 80% reduction by 2050 can spark simultaneous solutions, through innovation among other ways, to Japan’s economic and social challenges. 

Given advancements in ICT and other factors, the future of today’s rapidly changing society is difficult to forecast. This uncertainty vis-à-vis the future is universal and not specific to the environmental field. By clarifying and sharing its aims regarding the climate change issue, it will be important for Japan to promote initiatives executed by the nation’s citizens as a whole. 

What would a society that achieves the target of an 80% reduction by 2050—while simultaneously making integrated environmental, economic, and social improvements and becoming a society that is recycling-based and in harmony with nature—look like? The following presents a general vision from three standpoints. 

(a) Sustainable growth through “creation of a decarbonization market” and realization of an “economy of quality”

Cognizant of the change in the epochal tide occurring in the wake of the Paris Agreement, Japan is earnestly tackling innovation that is not bound by the conventional industrial structure or customary practices, while remaining fully aware of the limitations posed by resources, energy, and national territory. Moreover, Japan has achieved enormous international competitiveness in the “promised market” concerning climate change and is a driving force of the decarbonization market. 

Added value associated with goods and services is growing greatly, and the quality of people’s lives is increasing. The sources of added value are high functionality (including environmental performance) as well as Japan’s natural beauties (including its natural landscapes), culture, and art and any other elements that bring happiness, enjoyment, and deliciousness to life. People enjoy their lives and a virtuous cycle of high wages and high added value has been generated, and social disparities have also been corrected. Japan has become an international model for tackling problems posed by its falling birthrate and aging society by achieving a growth economy that is based on a shift “from quantity to quality.” 

By translating the “Fourth Industrial Revolution” and initiatives to tackle GHG gas emissions into a virtuous circle, Japan’s carbon productivity and labor productivity have risen and its people are achieving low-carbon lifestyles and good work-life balance. 

As a whole, Japan has accomplished significant decoupling on a consistent basis in both energy and resources by achieving economic growth of sustained quality while further reducing energy consumption attributable to the saturation of artificial goods, and by realizing a circular economy while raising its resource efficiency*.^[62]

 (b) “Regional revitalization” through renewable energy industries and compact urban 

development based on natural capital 

In its rural areas, Japan has established environmentally-sound primary industries and renewable energy industries that utilize regional energy as key regional industries founded on natural capital. Various actors that include private citizens, local enterprises, and local governments participate and collaborate as supporters of renewable energy industries, leading to the creation of employment and the maintenance and improvement of regional community functions. 

Healthy and long-living regional societies are built and greater transport comfort is achieved with an increase in the share of walking or bicycling that is made possible with greater urban compactness and use of public transportation, for example. And people can enjoy safe and secure regional societies through local industry and urban development pursued with an eye to “adaptation.” The result is continually growing urban attractiveness. Additionally, the generation of new value has been intensified by, for example, the creation of new innovation through the intersection and “interaction”^[63]of people from various generations and specialties and of information. 

Each region raises quality of life, corrects disparities, and contributes to stronger national competitiveness by providing high value-added goods and services produced with its own natural capital, culture, and other attributes. Additionally, Japan’s scenic beauty is sustained with appropriate maintenance and enhancement of its natural capital. The rich natural environment is something that people enjoy and, as an attractive feature of Japan, continues to be a powerful tourism resource. 

Moreover, when disasters strike, damage caused by the effects of climate change is minimized or avoided because appropriate measures that fit with local characteristics are implemented. At the same time, the energy that is required is quickly provided by renewable energy in the form of decentralized and self-reliant power sources, and the resilience to enable a quick recovery, such as through power interchange, is secured to the maximum degree possible. 

(c) Making a significant contribution to climate security while realizing a nation with 

improved energy security 

Toward achievement of the 2°C target, Japan—in full awareness of the limitations posed by resources, energy, and national territory—is earnestly tackling innovation that is not bound by the conventional industrial structure or customary practices and is leading the world in achieving significant domestic reductions, and because of this Japan’s accumulated technologies, know-how, lifestyles, systems, and other advantages are receiving international attention and helping Japan achieve enormous international competitiveness. 

As with the present day, in 2050, the continuing diffusion of Japan’s outstanding technologies to the world through the achievement of significant domestic reductions is contributing greatly to the building of low-carbon societies and decarbonized societies throughout the world. Moreover, Japan is solidifying the Paris Agreement’s effectiveness and making a significant contribution to climate security by executing multifaceted initiatives of high “quality” that include fine-tuned practical aspects, such as means for preparing greenhouse gas inventories, improvement of adaptability, and development of human resources. 

As for energy security, Japan has raised its energy self-sufficiency through thorough energy conservation and large-scale introduction of renewable energy that makes use of regional energy. With its geopolitical risks being minimized as much as possible, Japan’s energy security has improved to the point that it is not influenced by uncertainties in international circumstances. 

Figure 16 Vision of long-term significant reduction (conceptual image of an urban area) 

Figure 17  Vision of long-term significant reduction (conceptual image of houses) 

(2) A Vision of Society with Significant Reductions in Various Sectors 

This chapter presents a vision of what society might look like if the goal of an 80% reduction by 2050 were achieved with the objective of spurring consideration of various challenges and measures on the way toward reaching that goal. Realizing significant reductions will require the advancement of initiatives in energy conservation, renewable energy, and other areas in all sectors and industrial categories, beginning with increased productivity through innovation, and is not to be premised on current production volumes or energy consumption levels. 

There are three mainstays in Japan’s effort to achieve an 80% reduction by 2050 on the way toward building a decarbonized society throughout the world. They are thorough energy conservation, maximization of low-carbonization in electric power generation through use of renewable energy and other technologies, and conversion to electrification and use of low-carbon fuels. Successfully promoting these three mainstays will require the persistent execution of various measures in diverse fields (see Figure 18 and Page 96 of the Reference Materials). 

The following presents this vision of a successful 80% reduction by 2050 from primarily technical aspects.^[64]

Excerpted from the Long-term Climate Change Strategy Advisory Group 

Figure 18  Directions to be Taken in Achieving an 80% Reduction by 2050 

(a) Buildings/Lifestyle 

™Thorough energy conservation, low carbonization in the generation of the electric power they use, and electrification and conversion to low-carbon fuels have become the norm in housing and buildings. With effective use of ICT (information and communication technology), Japan is approaching zero emissions even in terms of the average over the entire stock of existing and new buildings (see Page 97 of the Reference Materials).  

Building performance 

™Low-carbon room interiors that only use the minimum amount of energy needed are commonplace, as “passive design” with characteristics that include high thermal insulating properties and maximum use of inherent local characteristics (e.g., light, wind, etc.), in addition to seismic and fire resistance, has become the norm, and energy-saving equipment with maximum energy use efficiency has been evaluated, adopted, and come into universal use. Such room interiors help improve the quality of life (QOL) of their inhabitants by improving health and comfort (see Page 98 of the Reference Materials). 

™Such buildings have high thermal-insulating, health-promoting, and sound-insulating properties and improve daily comfort and labor productivity. Moreover, they are also resilient to disasters, as they can meet the minimum level of demand for communications, lighting, air-conditioning, and other functions required for daily life for a certain period of time even when the external energy supply has been disrupted, and as a result, a society is being realized in which safe and secure daily living is secured (see Page 99 of the Reference Materials). 

New buildings 

™New buildings achieve zero emissions as soon as possible. 

™Regarding new houses, in particular, houses that are “carbon minus” throughout their entire life cycle, from materials manufacture and construction to demolition and recycling (called life cycle carbon minus houses [LCCM houses]), become commonplace (see Page 100 of the Reference Materials). 

Existing buildings 

™As for existing buildings, the value of insulation investment and the introduction of energy-saving and energy-creating devices, which deliver multifaceted co-benefits in terms of not only price but also comfort and health-promoting qualities, have become universal. Consequently, building refurbishment technologies that contribute to low carbonization are improved and energy-saving and energy-creation investments are commonplace, and low-carbonization is maximized (see Page 101 of the Reference Materials).  

™Because building owners enjoy such co-benefits, they actively conduct remodeling to improve insulation and make other improvements, and stock building measures are being executed. 

Building measures corresponding to local characteristics 

™Buildings that fit with local characteristics are common, and local lumber resources are fully utilized and new wood materials such as cross-laminated timber (CLT) are developed and universally used (see Page 102 of the Reference Materials). Moreover, although the electrification of heating and hot-water supply is progressing in terms of national average, in some areas, energy use that fits with local characteristics (such as hydrogen, heat from renewable energy, heat from biomass, etc.) is also progressing. Such fine-tuned measures that are adapted to Japan’s diverse climates revitalize local economies and serve as a source of strength in local culture. 

Energy-saving devices 

™Highly energy efficient devices that use gallium nitride semiconductors and other such technologies have diffused widely. At the same time, energy savings in devices is reaching the ultimate level possible through the development of new materials, technologies, and production systems and energy-saving designs. Moreover, system-wide energy savings are also being achieved in ways that go beyond individual elemental technologies to include the organic linkage of elemental technologies using combinations of those technologies and ICT (see Page 103 of the Reference Materials). 

™GHG emissions from air conditioners, industrial freezers and refrigerators have been dramatically reduced through the development of new coolants that simultaneously achieve energy savings and low Global Warming Potential (GWP) and through improved recovery rates for used equipment. 

Ways of living 

™Information on the degrees to which consumed energy and used devices contribute to the lowcarbon society is easily comprehensible and readily available. As a result, low-carbon energy and devices are commonly used in daily life because people actively select them by fully utilizing such information (see Page 104 of the Reference Materials). 

™Smart lifestyles that are sensible and waste-free are popular. People are voluntarily making and enjoying low-carbon behavioral changes that are founded on behavioral science-based knowledge (see Page 105 of the Reference Materials). 

Energy use 

™Energy demand is met mainly by renewable energy that is generated on site. The portion of generated energy that exceeds demand is directed into power interchange or electricity storage or stored as hydrogen and made available for in-house consumption or power interchange whenever it is needed. As for energy supply in structures that have large energy demands, such as commercial facilities, priority is given to use of low-carbon electric power, or energy is supplied through low-carbon electricity, heat, or hydrogen from adjacent structures. 

™ A low-carbon energy system is established that effectively links the energy demand side and energy supply side. For example, electric vehicles and heat pump-type water heaters are used to adjust the supply and demand of electric power with use of HEMS, BEMS, and information communication technology. At the same time, lifestyles take root with behavior that responds to electricity market prices that fluctuate depending on the supply conditions of renewable energy introduced on a large scale (see Page 106 of the Reference Materials). 

(b) Transportation 

™Most passenger cars are electric motor-driven, and for the most part their energy source is lowcarbon electric power or hydrogen produced from renewable energy. Electric vehicles charged at home help residents adjust their electric power supply-and-demand balance and cope with disasters through charging and discharging. As for large vehicles, such as cargo vehicles, the consumption of petroleum products as a source of power for transportation is largely reduced through improved fuel efficiency and the diffusion of electric motor-driven vehicles that run on biofuels, electric power, or hydrogen derived from renewable energy (see Page 107 of the Reference Materials). 

Fuel performance 

™Fuel efficiency is greatly improved by making vehicles lighter yet safer with the increased availability of cellulose nanofiber and other strong and lightweight materials and with the introduction of aerodynamic car bodies and low-resistance gears and tires, the use of bio-mimicry, and the development and popularization of single-passenger vehicles (see Page 108 of the Reference Materials). 

Self-driving 

™Self-driving has been achieved with the use of ICT and big data. Eco-friendly driving and optimum congestion-free routes are automatically selected, and safe and economical driving is the norm (see Page 109 of the Reference Materials). 

™In a society in which regional comprehensive care systems are in place, self-driving electric vehicles have become a means by which senior citizens can travel safely when they need to go from their home to a hospital or other facility. At the same time, electric vehicles are effectively used in elderly households; for example, their storage batteries serve to regulate electric power supply and demand when not in use (see Page 110 of the Reference Materials). 

Sharing 

™Vehicle occupancy has increased through ride-sharing, and mechanisms such as car-sharing that give people access to vehicles only when they need them have become even more common. Throughout society, means of transportation are made available rationally and to the extent that they are needed. (see Page 111 of the Reference Materials). 

Freight Transport 

™Regarding freight transport, through the reduction of cargo volumes by shortening distances between production centers and consumption areas, the computerization of logistics by the application of AI and IoT, the cooperation between shippers, the improvement of loading rates, and the changes in mindset of distribution service users, efficient low-carbon distribution has been achieved (see Page 112 of the Reference Materials). 

Railroads, aircraft, and ships 

™Energy-saving functions in railroads, aircraft, and ships have been improved, and efficient use corresponding to specific purposes (e.g., long-distance transport, etc.) is commonplace. Moreover, operations have been optimized for greater operational efficiency, and the lowcarbonization of sources of motive power has been realized with the introduction of hydrogen derived from renewable energy and biofuels (see Page 113 of the Reference Materials). 

Shift in modes of transportation 

™The transportation of people and cargo has become more comfortable and greatly streamlined with the use of walking and bicycles within certain distances as urban structures become more compact, combining efficient transport means, developing and enhancing the convenience of public transport, and promoting a modal shift to low-carbon public transport systems (see Page 114 of the Reference Materials). 

(c) Industry and Business Activity 

International competitiveness 

™Companies are endeavoring to provide low-carbon products and services and linking them to stronger economic growth in Japan through their dissemination, and capturing world markets by marketing such products and services internationally (see Page 115 of the Reference Materials). 

™Due to the spread of renewable energy, money that had been flowing out of Japan for the purchase of fossil fuels has become the capital that drives domestic corporate activities to develop and disseminate low-carbon products and services. This is generating a virtuous cycle whereby such activities improve Japan’s position in the world market (see Page 116 of the Reference Materials).

Use of information and communication technology 

™Paperless operations and working at home have become common as a result of advancements in information and communication technology (ICT). Work styles that fit with individual lifestyles have become possible, and both labor productivity and carbon productivity are improving as a result. Improvements in productivity that come from using IoT, AI, and other forms of ICT are also arising in forms that contribute to carbon reduction while also producing benefits in terms of efficiency, safety, and health and longevity not only in office work but also in, for example, manufacturing, the infrastructure industry, nursing care, and welfare. 

™Due to advancements in such technologies as IoT and AI, weather data is being effectively used in industrial activity and energy supply and contributing to the building of a decarbonized society through better productivity (see Page 117 of the Reference Materials). 

Financial industry 

™Carbon prices are incorporated into the market economy, and business assessments that include carbon risk have become the norm not only in investment decisions by businesses but also in investment and loan decisions by banks and institutional investors. Businesses routinely disclose carbon information together with financial information, and from institutional investors to individual investors, society as a whole is directing funds so that they contribute to significant contributions with an eye to decarbonization through “ESG” (environment social governance) investment (including green bonds and renewable energy funds) (see Page 118 of the Reference Materials).  

Cross-industry technologies 

™Thorough cross-industry energy conservation is being achieved in industrial activity with the implementation of ultra-efficient components (e.g., gallium nitride semiconductors, etc.) in various devices, the use of highly efficient industrial heat pumps, and the switch to low-carbon energy sources. Conversion from coal and petroleum to natural gas is progressing for heat utilization in high-temperature areas that require fossil fuels (see Page 119 of the Reference Materials). 

Materials industry 

™The development and diffusion of lightweight yet strong materials (e.g., cellulose nanofiber, etc.) to replace materials previously used in structures, cars, and other products are significantly reducing energy consumption in the life cycles of those products and delivering higher efficiency during their use. Such materials are recognized as bringing high added value and are maintaining Japan’s advantage in the materials industry (see Page 120 of the Reference Materials). 

™The effective use of recyclable resources, including those from so-called “urban mines,” is thoroughly practiced in Japan. Japan already has a large supply of resources accumulated in its social infrastructure and other artificial structures, and it has established a recycling-based society that responds to new demand by appropriately recovering latent resources. Regarding export materials that cannot be covered by recovered sources, Japan must pay attention to maintaining its international competitiveness. Thus, in addition to recyclable resources recovered domestically, Japan recycles waste imported from other countries through its sophisticated and low-carbon manufacturing processes, and the nation’s entire industrial structure is shifting toward low-carbon and recycling-based industries (see Page 121 of the Reference Materials). 

™As much as possible efficiency is being achieved in Japan’s high energy-consumption industries with the introduction of the world’s most efficient technologies, installation of innovative technologies, and thorough application of energy cascading. At the same time, the installation of carbon capture, utilization, and storage (CCUS) equipment is progressing and its operation is beginning (see Page 122 of the Reference Materials). 

Service industry 

™In the service industry, which includes the restaurant and tourist industries, and local industries, productivity is rising with the supply of goods and services given high added value using locally produced materials and distinctive local resources (e.g., human resources, cultural assets, natural environments and energy, food and drinks, shopping streets, and factories). The result is the realization of regional societies with stable local economies that attract outside money (see Page 123 of the Reference Materials). 

™Businesses have evolved that provide diagnoses and specialized advice for achieving energy savings and energy creation in various situations (see Page 124 of the Reference Materials). 

Daily goods 

™The low-carbonization of daily goods is progressing. For example, the use of disposable containers has been greatly reduced and bioplastics are coming into widespread use. At the same time, those containers that are disposed of are appropriately recycled. Consequently, net CO₂emissions are on the negative side. Additionally, a style of using daily goods that is growing in popularity is one in which many people share high-quality products, using the minimum amount necessary, and each individual benefits from the products’ functions and services (see Page 125 of the Reference Materials). 

Non-energy-related business activity 

™Regarding GHG emissions from non-energy sources, emissions are being dramatically reduced through the development and diffusion of CFC-free and low-GWP products that achieve both energy savings and environmental performance, the low-carbonization of waste processing, and the low-carbonization of the agriculture, forestry, and fishery industries (see Page 126 of the Reference Materials).  

(d) Energy Demand and Supply 

™Low-carbon power sources (renewable energy, thermal power generation with CCS,^[65]and nuclear power) account for more than 90% of electricity generation. 

™The basic framework for electricity supply has moved away from “supply in response to demand” to “wise use and storage based on supply.” In particular, more and more households do not purchase electricity but rather engage in “self-consumption” of electricity from renewable energy sources. Electricity is handled as a “regionally circulated” asset that is supplied within the region as needed (see Pages 127 and 128 of the Reference Materials). 

Power grid systems 

Based on the self-consumption model, power grid systems are operated in a stable state through the optimization and operational improvement of intra-regional and inter-regional power networks, the control of supply and demand with advanced information systems, and the utilization of the large-scale reserve capacities of pumped storage power and other hydroelectric power plants and thermal power plants that have been improved with low-carbon technologies (see Page 129 of the Reference Materials). 

™Most notably, R&D on various technologies that contribute to supply-demand adjustment and frequency adjustment (e.g., storage batteries, hydrogen, heat storage, digital grid, etc.) is proceeding for stable power supply in a society into which renewable energy has been introduced on a large scale, and those technologies are becoming widespread throughout society. Additionally, power demand in industrial activities is also managed in accordance with regional circumstances. For example, businesses that consume large amounts of power are concentrated into areas that produce power from renewable energy, minimizing the burden on the supply-and-demand system. 

Diffusion of renewable energy 

™Regarding renewable energy, regional resources that are highly efficient and alleviate burden on the environment—such as solar power in close proximity to consumers, wind power having high potential, stable hydroelectric power, geothermal power, and biomass—are utilized to the maximum degree, and at the same time, power generation from marine resources is being demonstrated, developed, and utilized. Moreover, power is being generated from renewable energy in ways matched to regional circumstances, and the produced electricity is supplied via an optimized grid. 

™ In terms of both physical hardware and “soft” aspects, renewable energy-related industries are maintaining price competitiveness through lower facility costs attributable to technical development of renewable energy and large-scale introduction, as well as lower construction costs related to work and maintenance to ensure safety during disasters (see Page 130 of the Reference Materials). 

™As renewable energy-related industries spread and become established throughout the country, stable employment is being generated in regional areas, the GDP share of such industries is growing, and income disparities among regions are shrinking (see Page 131 of the Reference Materials). 

™Energy systems that are matched to regional circumstances are being established in, for example, regions where renewable energy heat (i.e., solar heat, biomass, geothermal heat) is used to the maximum extent possible, and in regions engaging in cogeneration using hydrogen made from renewable energy and or supplying that hydrogen to urban areas (see page 132 of the Reference Materials). 

™Hydrogen that does not emit CO₂at any stage, including when it is used and in all processes leading up to hydrogen manufacture (CO₂-free hydrogen), is supplied (see Page 133 of the Reference Materials). 

CCS, CCU^[66]

CCS and CCU technologies have been installed in the fossil fuel consumption in some industries and almost all thermal power generation used as reserve capacity (see Page 134 of the Reference Materials). 

Fossil fuel consumption 

™Electrification and conversion to low-carbon fuels are proceeding in all sectors, and much of final energy consumption is covered by electric power, with fossil fuels being used in some industries and transport. Conversion to lower carbon-emitting fuels is also progressing in private power generation. 

Research and development 

™Needing to build a stable energy supply system with even lower carbon emissions, industry, academia, and government are collaborating to promote efficient and effective R&D for creating innovation through continuous R&D investment made from a long-term perspective (see Page 135 of the Reference Materials). 

(e) Region and City 

™Healthy and long-living regional societies have been built with an increase in the share of walking or bicycling that is made possible with greater urban compactness, for example, and people can enjoy safe and secure regional societies through local industry and urban development pursued with an eye to “adaptation,” resulting in continually growing urban attractiveness (see Page 136 of the Reference Materials). Additionally, energetic production activity is taking place with, for example, the creation of new innovation through the intersection and “interaction” of various people and information (see Page 137 of the Reference Materials).  

Local energy 

™Energy use is being optimized not only at the national level but also the local level. For example, looking at energy supply in structures that have large energy demands, such as commercial facilities, priority is given to use of low-carbon electric power, or energy is supplied through lowcarbon electricity, heat, or hydrogen from adjacent structures. 

™Because renewable energy sources have been introduced into each region as a form of independent/distributed energy resource, consistent progress has been made in terms of national resilience and low-carbonization. Such progress includes the ability to immediately supply the energy needed when disasters strike (see Page 138 of the Reference Materials). 

™Turning to waste disposal facilities, given the need to build systems that serve as regional energy centers while also lowering the carbon emissions of those facilities, initiatives that include upgrading facilities to give them high energy recovery efficiency and improving key facilities, making local use of recovered waste heat, networking power generation among disposal facilities, and using waste biomass are progressing in forms that fit optimally with local characteristics and facility size. Initiatives that make full use of the energy held by waste are also progressing. 

Urban areas 

The comfort of urban areas has increased as a result of, for example, alleviation of the “heat island” phenomenon through reductions of anthropogenic heat coming from higher energy efficiency and through the integration of such natural capital as waterfronts and green areas (see Page 139 of the Reference Materials). 

Mountainous and rural areas 

™Society has become one in which people and nature can interact in a sustainable manner. This has been achieved through the introduction of highly efficient equipment and lighting in the agriculture, forestry, and fishery industries; practice of appropriate farm management based on the development and application of fertilizer and water management technologies with low GHG emissions; and efforts to achieve low-carbon animal husbandry by changing feeds (see Page 140 of the Reference Materials).  

™Particularly in mountainous areas, owing to forests being appropriately preserved and managed and the use of timber and other domestically produced materials being promoted, the forestry industry has been sustained and developed. Such domestically produced materials are being used in housing and buildings as well as roads and all other forms of social infrastructure (see Page 141 of the Reference Materials).