Long-term Global Warming Countermeasures Platform “Task Force for Overseas

Expansion Strategies” Final Arrangement Draft

Long-term Global Warming Countermeasures Platform “Task Force for Overseas Expansion Strategies”

March 31, 2017

Introduction

What measures should be taken to contribute to reducing global emissions by taking advantage of Japan's technologies etc.?

What measures will be required to enhance the development of a global low-carbon society, through spreading Japan's technologies, products, systems, services, infrastructure, and institutions?

What environment should be developed to promote private sector-led overseas emissions reduction projects?

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How should contributions be made to proceed with reducing global emissions using Japan’s advanced low-carbon technologies?

How should overseas expansion support be rebuilt including JCM (Joint Crediting Mechanism)?

How should we enhance the promotion of project compositions by matching technology and funds?

Issues regarding the Task Force for Overseas Expansion Strategies (from the First Meeting of the Long-term Global Warming Countermeasures Platform)

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1. Current Situation and Challenges (1) Changes in international affairs and the market

environment due to the Paris Agreement etc.

3

The game was changed by the Paris Agreement (1)

*1: Prepared by METI, based on the IEA, CO2 Emissions from Fuel Combustion (2014).

International shipping and aviation sectors are excluded from the world total. *2: UNFCCC, Updated synthesis report on the aggregate effect of INDCs (2016)

The Kyoto Protocol was a disadvantageous game for Japan. This was because, for example, only some developed countries were forced to set emissions reduction targets, major emitters assumed no responsibility, and EU countries had enough room for the reductions thanks to the unification of East and West Germany. In the Paris Agreement, developing countries also committed their emissions reduction targets (contributions) in addition to the developed countries.

Since the Paris Agreement does not impose an emissions reduction obligation on each country, there should be a mechanism to increase the effectiveness of the Agreement. It is important to work on maximizing global emissions reductions in cooperation, instead of criticizing each other about specific reduction targets. It is necessary to think that the game has now changed to become more cooperative, in which Japan has to act to contribute to global emissions reduction.

0

10

20

30

40

50

60

70

80

1990 2000 2010 2020 2030 2040 2050

GH

G排出量

(GtC

O2-

eq./y

r)

実績排出量

現状レベルの政策が継続した場合の排出見通し

2020年以降の約束草案を踏まえた排出見通し（119カ国の約束草案を考慮）

２℃安定化＿気候感度2.5℃（濃度は、一旦、580 ppmを若干超える）

2100年に２℃（一旦２℃を超える）＿気候感度3.0℃（濃度は、一旦、530 ppmを超える）

２℃安定化＿気候感度3.0℃（濃度は、500 ppm以下。2300年頃に450 ppm程度）

AR5 430-480 ppm(GHG排出は

2010年比

▲41−▲72%)

AR5 480-530 ppm(GHG排出は

2010年比

▲25−▲57%)

AR5 530-580 ppm(GHG排出は

2010年比

+7−▲47%)

Emissions scenario assuming the achievement of the contributions in the Paris Agreement

Annual Greenhouse Gas Emissions by Scenario

Although the global emissions levels to mitigate climate change (+2°C or less) have great uncertainty and may vary, the fewer the emissions, the higher the probability of suppression will be.

Scenario (1)

Scenario (2)

Scenario (3)

Kyoto Protocol (1997)

Paris Agreement (2015)

Legal binding force for emissions

reduction Yes No

Positioning of target countries and emissions

reductions

Only developed countries were

obliged to reduce

Developing countries also committed to

reduce

Global total emissions coverage

22% *1 (As of 2010)

Approx. 99% *2 (As of April 2016)

Comparison of the Kyoto Protocol and the Paris Agreement

(Source) RITE

GHG

emiss

ions

Actual emissions

Emissions forecast if measures at the current level continue. Emissions forecast based on INDC after 2020 (considering INDC of 119 countries) Stabilization of 2°C, climate sensitivity of 2.5°C (the concentration will once be slightly over 580 ppm) 2°C by 2100 (once slightly over 2°C), climate sensitivity of 3.0°C (the concentration will once be slightly over 530 ppm) Stabilization of 2°C, climate sensitivity of 3.0°C (the concentration is 500 ppm or less, and will be approx. 450 ppm around 2300.)

AR5 530 to 580 ppm (GHG emissions: +7 to -47%, compared to 2010)

AR5 480 to 530 ppm (GHG emissions: -25 to -57%, compared to 2010)

AR5 430 to 480 ppm (GHG emissions: -41 to -72%, compared to 2010)

The game was changed by the Paris Agreement (2)

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Intended Nationally Determined Contributions (INDC) for Emerging Countries in the Paris Agreement *1

Philippines Aims to reduce GHG emissions by 70% by 2030 compared to BAU emissions from 2000 to 2030. The reduction depends on the amount of financial assistance including technology transfer that the country can obtain.

Mexico

Aims to reduce GHG emissions and other short-lived climate pollutants by 25% by 2030 compared to the BAU emissions (22% GHG only). However, depending on the conditions of funding and technical assistance, it can reduce the emissions by up to 40% (36% for GHG only).

Indonesia To reduce GHG emissions by 29% by 2030 compared to BAU emissions. If international support such as technology transfer and funding are available, it can reduce by up to 41%.

Bangladesh Aims to reduce GHG emissions (CO2 equivalent) by 12 million tons or 5% by 2030 compared to BAU emissions. If additional international support is available, it can reduce 36 million tons (CO2 equivalent) or by 15%.

Iran Aims to reduce by 4% by 2030 compared to BAU emissions. If international financial assistance, technology transfer, and emissions trading are available, it has the potential to mitigate an additional 8%.

India Aims to reduce GHG emissions per unit GDP by 33-35% by 2030. However, it added that the achievement will depend on ambitious global agreements including provision of the means of implementation by developed countries. (Source) IEA, World Energy Outlook 2016

Forecast for Investment Related to Energy Supply and Energy Saving

(Cumulative total from 2016 to 2040, 450 Scenario *2)

Fossil fuels $17.3 trillion

Renewable energy

$12.6 trillion Power

transmission and

distribution networks

$7.2 trillion Other low-carbon $2.8

trillion

Energy-saving

$35.0 trillion

$75 trillion

*1 The COP decisions at COP21 stipulated that any INDCs that had been submitted by a country ahead of the Paris Agreement shall be considered as the NDC (Nationally Determined Contribution) of said country upon the conclusion of the Paris Agreement. Countries in this table have already concluded the Agreement, excluding the Philippines and Iran.

*2 A scenario that the GHG concentration will stabilize at around 450 ppm after 2100. It is said that under such conditions, the goal to control the rise of the average long-term global temperature to 2°C or below (the so-called “2°C goal”) will probably be achieved. (Source) IEA, World Energy Outlook 2015

Share of greenhouse gas emissions by

country

* As of 2010. (Source) IEA, CO2 Emissions from Fuel Combustion (2014)

Others Annex I Parties

Korea

Iran

China Others

Non-Annex I Parties

Non-Annex I Parties

Canada

Democratic Republic of

Congo

United States

Japan Brazil

Indonesia Russia

India

Annex I Parties (see Note)

2000 to 2010: +9.3 billion tons Total emissions in 2010: 48.75 billion tons Annex I Parties: -600 million tons Non-Annex I Parties: +9.9 billion tons

Note: A list of countries obliged to reduce emissions by the Treaty.

Japan occupies only 2.8% of the global greenhouse gas emissions, and the countries that occupy the rest (97.2%) have great expectations for Japan’s funds and technologies. As part of the Paris Agreement, many countries around the world including developing countries committed to their reduction targets, and many such targets of developing countries are based on the premise that they can receive funds and technical support from developed countries. Such expectations have produced various business opportunities with the expectation of huge investments from developed countries to help achieve the reduction targets.

It is necessary to cooperate with other countries to maximize the reduction of global emissions and lead to the fundamental solution for global warming.

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Emissions reduction potential analysis (1): 2030 A calculation was made for 10 countries including JCM partners and resulted in about 2.86 billion

tons for 2030. This is equivalent to twice the amount of Japan’s total emissions; therefore, Japan has the potential to contribute to emissions reduction through technologies and funds.

Reduction potential by country or sector (2030)

0%

20%

40%

60%

80%

100%CCS

Consumer

Transportation

Industry

Solar light

Wind

Geothermal

Hydraulic power

Thermal power0

1

2

3

16

20100 million t-CO2

(Source) The Institute of Energy Economics, Japan

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Market potential analysis (2): 2050 A calculation for 2050 resulted in 9.71 billion tons, which was seven times the amount of Japan’s

total emissions. The reduction potential of CCS (Carbon Capture and Storage), which is expected to be a promising low-carbon technology after 2030 is the third-largest after industry and thermal power. The reduction potential is large in Saudi Arabia and Mexico, etc.

Reduction potential by country or sector (2050)

0%

20%

40%

60%

80%

100%CCS

Consumer

Transportation

Industry

Solar light

Wind

Geothermal

Hydraulic power

Thermal power

(Source) The Institute of Energy Economics, Japan

* Bangladesh, Ethiopia and Kenya are excluded from the analysis since it is difficult to estimate the potential of the power generation and transportation sectors.

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4

6

8

10

60

70100 million t-CO2

Worldwide 53.4 United States -5.3 Canada 0.2 France -0.8 Germany -0.6 Italy -1.4 Japan 0.1 United Kingdom -1.2 China 37.3 India 9.4

Year

Increase in CO2 emissions by country (100 million t-CO2) (2005 to 2014)

Changes in total CO2 emissions by country

Changes in the energy mix of the United States

(2001) (2013)

(Source) Energy White Paper

200

220

240

260

280

300

320

340

0

20

40

60

80

100

120

140

160

180

200

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

China

India

The UnitedStatesJapan

Germany

Worldwide

G7-US, J

(100 million t-CO2) The right axis is worldwide.

Changes in CO2 emissions by country

Kyoto Protocol First commitment period

(Source) IEA CO2 Emissions from Fuel Combustion (2016 edition)

In the last 10 years (2005-2014), global CO2 emissions increased by 5.34 billion tons. On the other hand, emissions declined by 530 million tons in the United States, which represents the largest reduction worldwide. The reduction of CO2 emissions may be the result of energy conversion caused by the shale gas revolution.

Under the Kyoto Protocol, some developed countries such as Japan and the European Union were imposed with a reduction obligation. However, due to the rapid economic growth of emerging countries such as China and India, total carbon dioxide emissions around the world are continuing to increase during the commitment period.

Under the surge of these emerging countries, a framework that aims to set obligations of total emissions reduction like the Kyoto Protocol is not very effective. Therefore, it will be essential to balance economic growth and emissions reduction by supporting business-based projects that can lead to emissions reduction.

The U.S. announced their

withdraw.

Conclusion of Kyoto Protocol

Hydraulic power

Nuclear power

Other renewable energies

Natural gas

Oil

Coal

Other renewable energies

Coal

7

Hydraulic power

Nuclear power

Natural gas

United States

9.5

10

10.5

11

11.5

12

12.5

13

13.5

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1990 FY2008 FY2009 FY2010 FY2011 FY2012

■

(1) Emissions in Japan: 1,278 million tons (+1.4%)

(3) Credit purchase by the national government

-20 million tons (-1.6%)

(4) Credit purchase by private companies -59 million tons (-4.6%)

Goal 1,185 million tons

■ 0 5-year

average

Kyoto Protocol First commitment

period

(2) Forest absorption -49 million tons (-3.9%)

-6%

Results 1,151 million tons

-8.7%

(Note: (1) to (3) are the amounts for one year)

1,261 million tons (Base year)

(100 million tons)

(The total figures may not match due to rounding.)

Achievement of reduction targets for the first commitment period prescribed in the Kyoto Protocol

Under the Kyoto Protocol, Japan was imposed with a reduction target of 6% using a top-down approach as its international obligation.

From the outset, it was expected to be difficult to achieve the goal by only accumulating domestic measures, so the government decided to compensate the shortfall of 1.6% with credits. It spent a budget of 160 billion yen or more to purchase credits of approx. 100 million tons (approx. 20 million tons/year).

Private companies resulted in purchasing credits of approx. 290 million tons or more (approx. 59 million tons/year) at their own expense to accomplish their voluntary action plans.

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(Source) Left (Emissions reduction through yen loan projects in China): Cited in “Review of JICA-Loan Projects Related to Greenhouse Gas Emission Reduction Research in China (2009)” Japan’s credit acquisitions shown in the left and right figures have been investigated by METI from NEDO materials etc.

CER entered into force through projects implemented by China

(Japan’s acquisition) Approx. 86 million t-CO2

(206 cases)

Amount of credits acquired by CDM Projects in China

Japan’s contributions to emissions reduction in China

0.0 0.5 1.0

AAU (75 million tons) CER (22 million tons)

(10 million ton/CO2) Private sector

acquisition

Government acquisition

0.0 0.5 1.0 1.5 2.0 2.5 3.0

AAU (150 million tons) + ERU (20 million tons)

CER (120 million tons) + CER (3 million ton)

(100 million ton/CO2)

■AAU (Assigned Amount Unit): Surplus emissions rights acquired from foreign countries through emissions trading (so-called “Hot air”) ■CER (Certified Emission Reduction): Credits issued by the United Nations as emissions reduction through CDM Projects ■ERU (Emission Reduction Unit): Credits issued by the United Nations as emissions reduction through JI Projects

Acquisition by projects in China National government: Approx. 10 million t-CO2 Private sector: Approx. 76 million t-CO2

Emissions reduction through yen loan projects in China

Approx. 447 million t-CO2

Japan’s contributions to emissions reduction (cases in China) Japan acquired credits of approx. 90 million t-CO2 through CDM Projects implemented in China from

2000 to 2015. Besides this, a calculation of reductions due to yen loan projects in China resulted in a reduction of approx. 450 million tons from 2000 to 2015. It shows that reductions by using official finance are much larger than by using purchasing credits.

Currently, only those credits produced by JCM have been qualified, and Japan’s total contributions to emissions reduction overseas are unknown. Later, we should be able to know and disseminate Japan’s total overseas contributions by visualizing the quantification results.

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2. Future Direction

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Connotations of an 80% reduction by 2050 A reduction of 80% can be achieved with the following three conditions, which can only be accomplished by the

agriculture, forestry and fisheries and two to three other industries: (1) all business and household sectors change to use only electricity or hydrogen, (2) all vehicles used in the transportation sectors change to zero-emission types, and (3) all electricity becomes produced from 100% non-fossil fuels (renewable energy, nuclear power, and CCS).

To achieve such a reduction level in Japan based on the current technology, a huge cost burden to replace all the social infrastructure and a painful, drastic change in the industrial structure will be required. (It is essential to secure compliance with various policy objects, such as foreign affairs and defense, sound finances, and energy security.)

<Emission results of the industrial sector>

(100 million tons) 360 million

tons

Others

Paper mill Ceramics, stone & clay (cement etc.)

Chemical

Iron and steel

FY2013

<Greenhouse gas emissions>

Other gases

Transportation

Households

Business and others

Industry

Conversions

FY2013 FY2050

*1: Here, the secondary energy supply is considered as direct emissions that are not distributed to each sector.

*2: Emissions in the agriculture, forestry, and fisheries sectors make up 40 million tons. ・ CO2 (agricultural machinery, fishing boats, etc.): 3 million tons ・ Methane (livestock including cattle belching, rice cropping, etc.): 28 million tons ・ N2O (livestock dung, agricultural soils, etc.): 10.3 million tons

(100 million tons)

Japan’s overseas emissions reduction initiatives have been deployed through a multi-layered approach. In addition to JCM, it has deployed its advanced low-carbon technologies overseas utilizing official finance. The private sector has also worked on reduction from its own perspective. Technical development and financing need to be enhanced for global emissions reduction in order to lead to further economic growth. In doing so, Japan should take the initiative in quantifying contributions to emissions reduction by each country to seek their actions to maximize global emissions reduction by competing with each other for their contributions.

Global total emissions

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Achievement of global emissions reduction and further economic growth (conceptual image)

Emissions reduction by JCM

Emissions reduction by the private sector

Emissions reduction by the public and private sectors

2.8%

Japan’s total emissions

Both public and private sectors should wage an all-out war to achieve carbon-neutral status (achieve zero-emissions in Japan, taking contributions in reductions overseas into account)

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Building a support system for developing countries to achieve their reduction targets (1)

(Materials) xx

Promote further cooperation with oil-producing countries centered on CCS (Carbon Capture and Storage). Formulate a long-term master plan looking out to 2050 regarding joint research for low-carbon energy system technology agreed in the Saudi-Japan Vision 2030, in order to advance the conversion of fossil fuels into low-carbon energy with mutual cooperation of the two countries.

In addition, promote EOR and CCS project formulations mainly for oil-producing countries such as the United Arab Emirates and Mexico.

Industrial cooperation through CCS

Japan has strengths in the CCS core technology. It can enhance technology development and demonstration to win in overseas markets through mutually beneficial industrial cooperation.

CO2 capture CO2 storage

CO2 distribution evaluation using crosshole elastic wave

tomography

Japan is one of the world’s leading countries for performance, research

and development of CO2 capture technology.

Saudi-Japan Business Forum (in March) Saudi Arabia and Japan concluded an agreement on joint research cooperation regarding low-carbon energy system technology (e.g., CCS, hydrogen) in the “Saudi-Japan Vision 2030.”

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Apply the above support initiatives used to achieve reduction targets in Vietnam to other countries, and enhance the creation of public-private dialogue and technical cooperation through providing support to prepare a master plan to achieve their reduction targets, which consequently, leads to receiving orders for Japan’s low-carbon technologies and services.

Building a support system for developing countries to achieve their reduction targets (2)

Electricity generation

sector

Industrial sector

Consumer sector

Transportation sector

・ Coal-fired: ○○ tons ・ Gas-fired: ○○ tons

・ Iron and steel: ○○ tons ・ Cement: ○○ tons

・ BEMS: ○○ tons

・ Vehicles: ○○ tons ・ Railways: ○○ tons

Sector Field

Support for formulating an INDC* implementation plan

Financing

Technical cooperation

Human resource development

International verification

System development

Top sales by the public and

private sectors

Contribution to emissions reduction

+

○ Support Scheme (Conceptual image) Implementation

support

* The COP decisions at COP21 stipulated that any INDCs that had been submitted by a country ahead of the Paris Agreement shall be considered as the NDC (Nationally Determined Contribution) of said country upon the conclusion of the Paris Agreement.

Building a support system for developing countries to achieve their reduction targets (3)

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The importance of new maintenance management businesses using IoT is increasing, in addition to controlling the performance of the equipment itself for low-carbon technologies. We will launch emissions-reduction projects in new areas using IoT, and verify their effectiveness in order to establish a new additional value axis.

In September 2016, TEPCO Fuel & Power decided to introduce OS Predix for industrial use from GE.

<GE Initiatives>

In 2015, a new organization named “GE Digital” was created (the business model profits from related services in addition to the products). “Digital Twin” Improves the efficiency of operation and maintenance, by building a digital model of the equipment which incorporates the operational data, weather forecast data, and other information. In addition, takes advantage of the accumulation of such data as part of the product design.

<MHPS Initiatives (re-posted)>

Through the further utilization of sensors, big data analysis, and AI, the system prevents non-conformance, optimizes the operation and maintenance, and improves operability at power plants, in order to improve power generation efficiency and therefore reduce CO2 emissions.

Data collection

Proposal for optimum system operation

Analysis

(Source) GE 2015 Annual Report

Predix

Prepare optimized parts according to the age of the equipment.

Implement over firing at peak-times and control operations when demand is reduced by remotely controlling the main equipment.

Formulate optimized operations through economic simulations according to demand/supply pre-dictions.

Conduct simulations of equipment in the near future by accumulating fault data to detect failure symptoms.

Install the sensors in optimized positions, utilizing EPC knowledge.

From now on, the government should focus on providing support for cost-effective pioneering projects and those that can contribute to the spread of Japan’s energy-saving technologies which will lead to the promotion of private sector-led projects without needing to rely on grants.

In particular, it should support mainly large-scale emissions reduction projects.

In so doing, flexible credit acquisition needs to be enabled during the term of the business according to specific needs.

Assuming private sector-led issues including the use of official finance

Large acquisition of credits

<Conceptual Image>

Demonstration and support

project

Private-based project Ripple effects (Aiming for private sector-led promotion and deployment)

Limited to the introduction of initial issues which contain risks for the target country (only provide support for initial issues)

Private-based project

Private-based project

Private-based project

Exit strategy Toward private-based projects

Building a support system for developing countries to achieve their reduction targets (4) JCM operational improvements

<Expected emissions reductions (image)>

Kenya Geothermal power generation

2.51 to 3.07 million tons

Mexico High-efficiency gas-fired

power generation 0.33 to 2.72 million tons

India High-efficiency coal-fired power generation (USC) 0.41 to 0.87 million tons

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Other initiatives Promotion of project formulations utilizing every piece of available official finance.

In addition to Japan’s official finance which includes ODA, JBIC, NEXI, and NEDO, accelerate the formulation of projects by exploiting all available global environmental financing mechanisms such as GCF and CTCN in order to contribute to global emissions reduction beyond Japan’s total emissions.

Carefully improve the bridge-building between research and development, and commercialization. The NEDO demonstrations overseas regarding innovative low-carbon technologies have often ended up as just one time and do not necessarily lead to receiving orders for the next project. In the future, the public and private sectors will work together to promote and expand these technologies leading to commercialization without fail, creating a global market on an equal footing through continuous demonstrations overseas, institutional arrangements, and other supports.

Creation, accumulation, and the sharing of successful examples Quantifying the emissions reductions achieved by different projects which have utilized official finance including JCM, ODA, JBIC, and NEXI, actively disseminates these results worldwide as Japan’s contributions. In so doing, seek actions from other countries to maximize global emissions reduction by competing for their contributions to emissions reduction.

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