By Adam Child
Japan’s fourth stimulus package, announced back in April, offered critical support in key sustainable areas: JPY 2 trillion (USD20 billion) for healthcare, reinforcing over JPY700 billion (USD 7 billion) announced in previous fiscal injections. Crucially, these resources have been heavily weighted towards R&D and increasing the efficiency of the system through investments in IT. Also, we note provisions specifically targeted at the elderly show increasing willingness to tackle the issue of a rapidly aging population head on.
Nonetheless, the low-carbon revolution touted by Prime Minister Aso at the start of the year is not yet in sight. On solar energy – a key component of the package and an area in which Japanese firms have traditionally been dominant - the stimulus will create demand for 80-100 megawatts, which we estimate would only offset around 5% of the projected minimum 2 gigawatt global oversupply for 2009. In addition to the solar package, the stimulus includes funding for green autos, railways and energy efficient household appliances. Nonetheless, this hardly represents a new model for growth – Japanese emissions are among the highest in the G-20. At UN-sponsored talks on climate change held in June, Japan pledged a 15% reduction in carbon emissions by 2020 from 2005 levels. This falls short of measures agreed by Democrats on the US House Energy and Commerce Committee to reduce emissions by 17% over the same time period. Similarly, the EU is taking more ambitious steps in its policy to curtail emissions to 20% below 1990 levels. Far from leading the revolution, Japan was branded a ‘laggard’ by the WWF conservation group.
If Japan’s alarming deficit can finance yet another round of spending, it may be a case of fifth time lucky for the green recovery that analysts have been predicting since late last year. Elections are due at the end of August, and the opposition Democratic Party, ahead in the polls, has proposed increasing investments in clean energy. More importantly, they have pledged to enforce more ambitious emissions targets and set up an emissions trading system in line with similar developments in the EU and the US. Legislative adjustments such as these are an intelligent step. In our opinion they could yield better results for clean tech than another round of stimulus spending that may in any case barely offset the collapse of debt financing for renewables.
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