Following the abdication of Emperor Akihito, Japan announced that its new imperial era would be called Reiwa (“beautiful harmony”). But if the Reiwa era is to live up to its name, Japan’s government must follow the lead of the country’s energy investors and utilities, and begin to exit coal and move into renewables.
The choice between continuing to waste capital on environment-destroying coal in the coming decades and ushering in a new era of clean energy that taps Japan’s huge solar- and wind-power potential should be a no-brainer. It has been shown time and again that carbon-capture technology is nowhere near where it needs to be to deliver “clean” coal power.
Even with the highest-efficiency coal plants, we would blow past internationally-agreed emissions targets, with devastating consequences for the planet and human welfare.
But powerful Japanese lobby groups linked to the business group Keidanren continue to fight for coal. And Japan’s government seems to be bowing to the pressure: it is currently the only G7 country that is adding to its domestic coal power-generation capacity, with roughly 45 new coal plants in the pipeline as of 2017.
Moreover, Japan, along with China and South Korea, is among the biggest financiers of foreign coal projects.
Japan is currently the only G7 country that is adding to its domestic coal power-generation capacity, with roughly 45 new coal plants in the pipeline as of 2017.
Yet, even as Japan’s government keeps planning for a coal-based future and touts clean-coal myths, its private investors are increasingly rejecting coal. The corporate giants Mitsui & Co. and Sojitz led the way: in 2016, they began to limit their new coal investments, citing long-term business-sustainability considerations and environmental concerns. More recently, Sojitz announced its plans to divest from coal projects.
As the Institute for Energy Economics and Financial Analysis has shown, this shift away from coal gained significant momentum last year. Three of Japan’s largest insurance firms—Dai-ichi Life, Nippon Life, and Meiji Yasuda Life—announced that they would no longer write policies for coal projects. Sumitomo Mitsui Trust Bank became the first Japanese bank to discontinue lending for new coal plants anywhere in the world, while other major banks introduced new restrictions on such funding.
And, in December, Mitsubishi Corporation sold its stake in two Australian coal mines, thereby fully exiting from upstream thermal coal.
Since then, several utilities—including Chugoku Electric Power, JFE Steel, Kyushu Electric Power, Tokyo Gas, Idemitsu Kosan, and, most recently, Osaka Gas—have canceled plans to build coal-fired power plants. Of the 50 new units that were planned in 2012, 13 have been scrapped in the last two years.
According to Yukari Takamura, a professor at the University of Tokyo’s Institute for Future Initiatives, this combination of stricter limits on coal financing from Japanese megabanks and appeals from major industrial companies for greener energy has put significant pressure on investors. This process is creating a powerful snowball effect.
Meanwhile, the Japanese government is falling further and further behind. To catch up, it would do well to take a cue from Norway, which, like Japan, has a world-leading government pension fund with assets exceeding $1 trillion.
The Norwegian finance ministry recently announced that it will divest $4 billion more from coal assets, which it began dumping in earnest in 2015, and that it will invest up to 2 per cent of its global portfolio, or over $20 billion, in solar, wind, and other renewable projects.
This move is based on a government-commissioned analysis indicating that the global renewable-energy infrastructure market will grow to an estimated $4.2 trillion by 2030, driven mainly by solar and wind.
Rather than allowing Japan to be left behind, the country’s Government Pension Investment Fund should pursue a similar course. Given the size of their pension funds and the reach of their international connections, Japan and Norway could help to drive change in energy policies worldwide.
Politically, momentum for such change is already growing, exemplified by a growing push for a Green New Deal—a set of economic reforms and public-works projects that form the basis of a new, sustainable economy.
In the United States, progressive lawmakers like freshman Congresswoman Alexandria Ocasio-Cortez are working hard to get their ambitious proposals to the top of the political agenda. The idea is also gaining traction in Europe, especially in the United Kingdom and Spain.
This is a response to growing demands by citizens—at the ballot box and on the streets—to accelerate the shift away from fossil fuels. Not long ago, groups committed to direct action, like Extinction Rebellion, would have been dismissed as climate “extremists.” But last month, activists stopped traffic in moving protests across the City of London to draw attention to the finance industry’s role in fueling climate change—a show of peaceful disobedience that was met largely with public acceptance.
People have heard the warnings issued by the Intergovernmental Panel on Climate Change and others. They fear climate chaos, and will keep searching for new ways to hold their leaders accountable. Between their demands and market forces, the pressure on governments to pursue genuine decarbonisation efforts will continue to intensify.
Japan is a global investment giant and a prominent member of the international community. In the run-up to next month’s G20 summit in Osaka, it should shake itself free from entrenched lobby groups and establish itself as a world leader in the shift away from coal and toward renewables.
Jan Erik Saugestad is CEO of Storebrand Asset Management.
Copyright: Project Syndicate, 2019.
Thanks for reading to the end of this story!
We would be grateful if you would consider joining as a member of The EB Circle. This helps to keep our stories and resources free for all, and it also supports independent journalism dedicated to sustainable development. It only costs as little as S$5 a month, and you would be helping to make a big difference.