Did the Japanese Patient Follow the Doctor's Orders? Mostly No! A Public Choice Analysis of Greenhouse Gas Emissions Trading Schemes in Japan Before and after the Earthquake

Abstract

2"One of the dangers with ivory tower theorizing is that it is easy to lose sight of the actual set of problems which need to be solved, and the range of solutions. ... [T]his loss of sight has become increasingly evident in the theoretical structure underlying environmental economics, which often emphasize elegance at the expense of realism. ... [B]oth normative and positive theorizing could greatly benefit from a careful examination of the results of recent innovative approaches to environmental management" (Hahn 1998: 95). While Japan's energy efficiency is still among the highest in the world, the rate of improvement has significantly slowed down since 1990 (IEA 2009: 40ff). Japan is responsible for 4.3% of global greenhouse emissions. Total emissions in 2007 4 were 1,374 Million Tons of carbon dioxide equivalents (CO 2eq ), 9% above 1990 levels (MoE 2009a: Ch. 2).After intense and successful efforts to increase energy efficiency in the aftermath of the oil price shocks of the 1970s due to cost reasons, Japan's specific national climate policy already started in 1990 and is today based on the Kyoto Protocol Target Achievement Plan implemented in 2005 and revised in 2008 (GoJ 2008). 5 At the third Conference of the Parties (COP 3) to the United Nations Framework Convention on Climate Change (UNFCCC) in Kyoto in 1997, Japan, successfully taking a mediator position between the ambitious EU and the reluctant USA positions, committed to emission reductions of 6% by 2008/2012 based on 1990 levels. In addition, at the climate summit in Copenhagen, Japan committed to a 25% reduction by 2020 and intends to reduce its emissions by 60-80% by 2050 with 1990 as base year (GoJ 2010: 38). The Kyoto Protocol target is divided into greenhouse gas emission reduction from forest sinks (3.8%), the use of project-based Kyoto mechanisms (1.6%), and domestic reductions (the residual). Altogether, comparing 2007 emissions and the Kyoto target, Japan is about 15% short of its commitment.On the policy instrument level, Japan's Kyoto Protocol Target Achievement Plan focuses on voluntary action. In 1997, Japanese industry adopted the Voluntary Action Plan, today comprising 35 industry groups and 80% auf greenhouse gas emissions from industry and utilities (Wakabayashi/Sugiyama 2007). The overall target was fixed to stabilizing greenhouse gas emissions at 1990 levels by 2010. However, besides absolute volume targets, intensity targets are allowed and the project-based Kyoto mechanisms can be used in order to compensate greenhouse gas emissions. Thus, even the 0.5% overall reduction of greenhouse gases between 1990 and 2006 are in fact not due to domestic absolute volume reduction efforts by Japanese companies. Market-based instruments, on the other hand, are only mentioned in the Kyoto Protocol Target Achievement Plan of further research. Carbon taxes, thus, have politically failed several times since 2004; however from 2011 onwards, the now ruling Democratic Party of Japan (DPJ) intends to use low-level carbon taxes. Carbon markets have...