Science and Technology Policy ofEnvironment and Energy Sector

in Japan

Yoshiki OgawaProfessor, the Faculty of Economics,

Toyo University

November 11, 2005

Contents of Report1. Technology development standing at the long-

term viewpoints toward 2030, 2050 or 21002. Future aspects of technology developments based

on past and present experiences3. Importance on combination and integration of

technologies4. Technology developments to strengthen

advantages in consuming area5. Development of strategic technology to be a

domestic all-mighty card6. Concluding remarks and proposals

1. Technology development standing at the long- term viewpoints toward 2030, 2050 or 2100

• Long-term energy supply-demand perspectives-- Based on recent results, the era of fossil fuel energy including oil

is expected to continue up to 2030 due to oil resources revision.-- Energy demand in world is prospected to have a steady growth up

to 2030 due to Asian DCs centering China. -- Energy demand in Japan is prospected to have a peak in 2020 and

then to turn to decline due to population and economic saturation.

• Ultimate target of UNFCCC and international discussion-- Ultimate goal of UNFCCC is to stabilize the concentration of

GHGs at the level without any risk.-- European Cs often argued to control future temp. rise within 2 ℃.

For this, we need to reduce 60% of GHGs from the present level.

• Definite gap between energy and environment perspectives

Future Perspectives on Energy and Environment

• For solving this gap, it is important to tackle technology development (TD) with long-term views strategically.

• New Earth 21 (See next slide) and TD made by RITE-- Japan proposed to implement “New Earth 21” with international

cooperation in the Huston summit (1990).-- The Research Institute of Innovative Technologies for the Earth

(RITE) started for “New Earth 21” in Japan from 1990. -- RITE is now challenging 6 projects centering CO2 fixation etc.

• Long-term project for the realization of hydrogen society -- “WE-Net” project started from 1993 as one of “New Sunshine”.-- Prime Minister Office adopted the millennium project and fuel

cell (FC) is taken up as a next generation technology in 1999-- Large efforts are focused on the realization of hydrogen society.

Two TD Projects in Japan Standing at Long-term Viewpoints up to 2100

New Earth 21 Plan and Technology Development

2. Future aspects of technology developments based on past and present experiences

• NEDO activities for past and present TD-- METI is the main supplier of R&D budget related to energy

and environment sector (See next slide).Sunshine (1974), Moonlight (1978), Global environment (1989)

New Sunshine (1993) New R&D system (2001)-- NEDO (the New Energy and Industry Technology Development

Organization) was established in 1980 for the Sunshine Project.-- The problem is how to realize TD efficiently with competitiveness.

• Introduction of environment tax and arguments on subsidy -- Environment tax is discussed as a new measure for Kyoto target,

expecting various effects (See the following slide).-- It is doubtful to produce expected effects through the thin taxation

together with the return of tax income as subsidy to measures. -- For energy saving and environment protection, the identification

of promising technologies is difficult in TD.

Evolution of TD by NEDO and Environment Tax for Subsidy Policy

METI R&D Budget Related Energy and Environment and Its Position on Total

2004 2003 Actual

(bil. Yen)Share (%)

Actual (bil. Yen)

Share (%)

Nuclear 47.24 33.7 49.17 33.7 Fuel cell 20.78 14.8 23.69 16.2 Renewable Energies 11.34 8.1 13.01 8.9 CO2 fixation 6.37 4.5 6.04 4.1 GTL and clean fuel automobile 7.28 5.2 7.09 4.9 Energy conservation 16.75 12.0 15.72 10.8 Oil 10.15 7.3 10.59 7.2 Natural Gas 7.59 5.4 8.52 5.8 Coal 7.38 5.3 6.82 4.7 Power supply 5.25 3.7 5.45 3.7

Research and development budget total 140.13 100.0 146.10 100.0 Total budget related energy and environment 960.4 100.0 951.9 100.0 Oil and energy measures special account 611.7 63.7 617.0 64.8 Power source development special account 348.7 36.3 334.9 35.2

Research and development budget 140.1 14.6 146.1 15.3

(Source) made from the data in METI [2004] and METI [2005]

Effect of Taxation for Energy-Derived CO2 Reduction

(Source) quoted from Ministry of Environment [2003]

• System for technology finding using competition-- For energy saving and environment protection, it is indispensable

to find the right option in the right place in TD -- Government can not produce the most effective results in this area.

Ex. hybrid vehicle (P ), fuel cell (G P ), electric vehicle (G P )-- We need to prepare the arena for competition where various idea

can enter, with the system to find tech. having competitiveness.

• Separation of TD from market introduction and diffusion -- The prospects on commercialization are always required in all the

steps of TD under NEDO assessment system (See next slide).-- For 6% reduction in 2010, the rough-and-ready picture of commer

-cialization is often made in many cases in spite of the basic stage.-- We must prepare the system where technology can be developed

through the natural course, avoiding unreasonable picture.

System Required for TD in Energy and Environment Sector

Four Evaluation Axes and Checking Items in NEDO Project Assessment

1. Purpose and positioning of project 1) Appropriateness of NEDO

project 2) Appropriateness of project

purpose

2. Research and development management 1) Appropriateness of R&D

targets 2) Appropriateness of R&D plan 3) Appropriateness of working

organization for R&D project 4) Correspondence to situation

changes etc. 3. Results of research and development 1) Degree of target achievement 2) Significance of results 3) Acquisition of patents 4) Publication of papers and

diffusion of results

4. Prospects on commercializa- tion and spread 1) Commercialization possibility

of results 2) Ripple effects of results 3) Scenario to commercialization

(Source) quoted from NEDO [2005]

3. Importance on combination and integration of technologies

• Special position of FC in environment and energy sector-- FC is energetically tackling in the millennium project, because it

is very clean without air pollution materials including GHGs.-- The special investment on FC means an opportunity loss, because

this is disturbing an investment to other options.-- We need to check reasonability and grounds of such a special

treatment, because FC has a lot of difficult problems.• Evaluation of FC based on LCA

-- FC is clean if we focus just on the final disposals, but we cannot easily conclude it if hydrogen is produced from fossil fuels.

-- According to the LCA results, the CO2 reduction effect by FC is not drastically larger than that of other option (See next slide).The similar results are also reported on stationary FC.

-- Further, we need to prepare the gas infrastructure. The transport use of gases requires huge energy and cost for compression of gas.

Special Position of Fuel Cell (FC) and Life Cycle Assessment (LCA)

Comparison of Total Efficiency between Fuel Cell Vehicle and Gasoline Vehicle

Fuel Efficiency Vehicle Efficiency Total Efficiency FuelEfficiency Vehicle Efficiency)

ConvetionalGasoline V

GasolineHV

Compressed H2

FCV

Compressed H2

FCHV

FCHV(Target)

with hybrid control

(material from Toyota)The Improvement of total efficiency requires further efficiency improvement in varioussteps including fuel hydrogen

(Note) HV: Hybrid Vehicle, FCV: Fuel Cell Vehicle, and FCHV: Fuel Cell Hybrid Vehicle(Source) quoted from Advisory Group METI [2004]

• Problems for TD of renewable energies-- One way that can overcome FC problems is to produce hydrogen

from renewable energies economically. -- In past 30 years, many technical barriers were solved and the

economics of renewable energies were improved (See next slide).-- Though people have large anticipation, we need to wait natural

market participation through the heightening of competition level.• Importance on combination/integration of technology

-- For FC problems, it is crucial to produce renewable hydrogen or to complete CO2 fixation and sequestration.

-- This suggests to us the importance of technology integration by combining various technologies.

-- We must not forget that the whole activities are organized by forming a certain chain from cradle to grave.

Problems on Renewable Energies and Importance on Combination/Integration

Present Cost Level of Power Generation by Renewable Energies

Yen/kWh

10

20

Electricity price

for residential use

Electricity price

for commercial use

Electricity price

for commercial use

Retai price of

Public UtilitiesCost for

Power Generation

+ Nuclear 5.9 Yen+ LNG 6.4 Yen+ Coal 6.5 Yen

+ Oil 10.2 Yen

+ Hydro 13.6 Yen

Biomass

Generation

Building waste

Sewer sludge

Food waste

Excreta biogas

Vergin wood

waste

Wind

Generation

Large-scale

7--11 Yen

Small- and

Medium-scale

Solar

Generation

45 Yen

4. Technology developments to strengthen advantages in consuming area

• Viewpoint of advantages in consuming area-- In spite of large consumption, NE Asia including Japan has many

energy problems and cannot always play advantages of consumer.-- The question is our thinking structure where supply side issues

such as security and diversification are regarded as important. -- We should pursue the TDs which can bring us the flexibility of

demand side, by abandoning our mistaken thinking of demand fix.• Importance on innovative technologies for energy saving

-- From this viewpoint, energy saving is the most important option.-- The extent of efforts on TDs for energy saving was relatively

weaker than that for energy supply such as nuclear, renewable etc. -- Energy saving is also positioned as the most effective option in

the recent energy outlook up to 2030. We need to strategicallytackle innovative TDs for energy saving.

Advantages in Consuming Area and Innovative Technologies for Energy Saving

• TDs to strengthen flexibility in consuming area-- Gasification plants that can produce various secondary energies

from various primary ones would be important (See next slide).-- We could get a great bargaining power by the introduction of this

plant in many industrial complexes in the viewpoint of advantages in consuming area each complex.

-- We also need to pursue other various methods to establish energyflexibilities in the demand side of consuming area.

• TDs to make energy mix by putting right one in right place-- Considering future energies in Asia, there is no energy holding all

-mighty position. Single energy cannot cover the demand in Asia.-- It is strategically important for Asian countries to make effective

use of coal which is abundant domestic resources in Asia. -- We should promote TDs to make energy mix by putting the right

one in the right place than to select a supply source under the strong concept such as the elimination of oil or coal.

TD to Strengthen flexibility in Consuming Area and to Make Suitable Energy Mix

Natural Gas

Associated Gas

Oil Residue

Coal & Cokes

Biomas

Industrial Waste

Syn Gas Production Process

Liquid Fuel Production Process Liquid Fuel Refining and Reforming Process

MethanolSynthesis

MethanolDistillation

DMESynthesis

DME

FTSynthesis

Naphtha

Waxes Hydrocracking

Reforming Gasoline

Middle Distillate

Use other than GTL

GasificationSynthetic

Gas

CO + H2

Power generation Electricity

Industrial Gas (including Hydrogen)

Chemical Materials

Use as GTL

Distillation

Distillation

Distillation

Flexibility in Consuming Area Given by Gasification Plant Technology

5. Development of strategic technology to be a domestic all-mighty card

• Substance of innovative technology in Kyoto guidelines-- The basic thought is to stabilize energy-related CO2 at 1990 level

and to achieve 6% reduction by other methods (See next slide). -- “Strengthening R&D of innovative technology” is included in the

latter but the content is gathering technologies out of main stream. -- Considering the real nature of global warming, the long-run dev-

elopments of innovative technologies is far more important.

• Importance of strategic TDs for a domestic all-mighty card-- Japan troubled a higher cost problem in domestic options is now

regarding the use of Kyoto mechanism as the last resort.-- The main reason Japan must take a weak position is because

Japan does not have any domestic potential option.-- We need to tackle strategically the TDs for effective options with

moderate cost and large volume potential as all-mighty card.

Importance of Strategic TDs Standing at Long-term Viewpoints

Ground Design for Target Achievement of Kyoto Protocol in Japan

-8

-6

-4

-2

0

2

4

6

8

10

12

14

Break Total Break Total Break Total Break Total Break Total Break Total

Energy derived Non-energy derived &Alternative flon

2003 Actual 2010 Trend 2010 Target 2003 Actual 2010 Trend 2010 Target

up/ down from 1990 level (%)

11.4% up

5.4% up

0.6% up

3.1% down

0.6% up

6.6% down

Achiving Kyoto Target

Industry

Resid &Commeci

Transport

Alternative flon

Non-energy derived

Sink

Kyoto Mechanism

Industry: 8.6% downR & C: 10.7% up from 1990Transpoet: 15.1%up

(Source) made from Prime Minister Office [2005]

• Potential of CO2 fixation and sequestration-- CO2 fixation and sequestration is one of the potential candidates

for TDs for a domestic all-mighty card.-- According to the RITE results, the potential of storage sites in

Japan is estimated at about 75 years in terms of 1990 emissions.-- Adding the cost and potential of CO2 fixation and sequestration in

GHG reduction cost curve by ME, we can easily understand the importance of this technology (See next slide)

• Strategic implication of CO2 fixation and sequestration-- Japan should make efforts to achieve several subjects for the

commercialization of CO2 fixation and sequestration .(1) To elucidate the environment impact of CO2 sequestration(2) To establish international rules(3) To reduce the cost and to improve the energy efficiency of it

-- Japan should strengthen bargaining power through this technology.

Potential and Strategic Implication of CO2 Fixation and Sequestration Technology

Position of CO2 Fixation in Japan Considering from Cost and Potential

0 50 100 150Reduction amount of GHG (1 mil. t-CO2)

+7% +6% +5% +4% +3% +2% +1% 0% -1% -2% -3% -4% -5%

Reduction amount (%) in the case of base year 100

Add

ition

al r

educ

ing

cost

(1,0

00 Y

en /

t-C

O2)

all power average thermal power average

Reduction by CO2 fixation Cost: 5,221 Yen / t-CO2 Amount: 120 mil. t-CO2 / Year

Reduction by dish washer (50% diffusion) Cost: 5,181 Yen / t-CO2 Amount: 1.8 mil. t-CO2 / Year

Reduction by recovery of car-aircon coolant Cost: 6,000 Yen / t-CO2 Amount: 1.7 mil. t-CO2 / Year

Counterpart Option

6. Concluding remarks and proposals

• Japan need to tackle the long-term TDs in order to overcome the gap between the energy thinking that the fossil fuel era will continue up to 2030 and the global environment thinking that the stabilization of GHG concentration in the air should be achieved in the long-run.

• If the special treatment is given to TDs strategically like fuel cell, the reasons for the necessity should be analyzed by careful observations and should be explained to public thoroughly.

• The special treatment by subsidy policy is not always an effective tool to develop technologies in environment/energy sector efficiently. On the contrary, there are some possibilities to bring inefficient results with higher expense.

• TDs related to energy saving and environment protection should be made on the arena for competition prepared by constraints which our society could agree to avoid, rather than made through special treatments by subsidy from government.

Concluding Remarks and Proposals (1)

• Japan should make TDs to strengthen advantages in consuming area strategically, though the supply side was regarded as important in the past TDs.

• Japan should concentrate large efforts on innovative technologies for (1) saving, (2) flexibility and (3) suitable mix, as a field of TDs to strengthen advantages in consuming area.

• In addition, Japan should tackle the development of CO2 fixation and sequestration which has the moderate cost and the large volume potential as a domestic promising option.

• Japan should develop technologies having true competitiveness efficiently and strategically. Japan also should practice the programs aiming at the long-term up to 2100, not drawing all eyes on only the target achievement of Kyoto protocol in the short-term of 2010.

Concluding Remarks and Proposals (2)