Japan to Foster Global Cooperation at the G7
In May 2023, the G7 Summit will be hosted in Hiroshima against the backdrop of a severe global energy crisis and supply chain disruptions that are stoking the fires of inflation, shaking consumer confidence, and threatening the most economically vulnerable in our society. METI will focus on three key policy areas: trade, climate and energy, and digitalization.
METI focuses on three key policy areas: trade, climate and energy, and digitalization
In May 2023, the G7 Summit will be hosted in Hiroshima against the backdrop of a severe global energy crisis and supply chain disruptions that are stoking the fires of inflation, shaking consumer confidence, and threatening the most economically vulnerable in our society.
Climate change, Covid-19, and Russia’s aggression against Ukraine are fueling global concern. In a speech given at the Center for Strategic and International Studies in January, Yasutoshi Nishimura, Japan’s Minister of Economy, Trade, and Industry, expressed his alarm, saying “the global shocks that have occurred, one after the other in the span of only a little more than two years, have truly been a wake-up call.”
All three challenges are likely to be high on the agenda at the G7 Summit and relevant ministerial-level meetings to be held throughout the year. The Ministry of Economy, Trade and Industry (METI) will take the lead at the ministerial meetings, along with relevant ministries, and aims to drive discussion and policy action in three key areas—trade, climate change and energy, and digitalization.
Revitalizing Global Trade and Investment
Trade is a key policy issue, especially given the rise of serious supply chain disruptions due to Russia’s devastating war in Ukraine.
“Russia’s aggression against Ukraine has shaken the international order, and there are concerns about a global economic slowdown,” said Takuya Kimura, principal director of METI’s Multilateral Trade System Department. “At the G7 meetings, we would like to emphasize the importance of upholding the free and fair economic order.”
Topics will include:
- Promotion of trade and investment
- World Trade Organization reform
- How the G7 will deal with unfair trade practices that distort markets
- Proposals for strengthening economic security
Even if these key issues are addressed, the global economy faces insurmountable hurdles without the existence of healthy trade and investment relationships between nations. METI’s work at the upcoming G7 Summit will include laying the foundation for future progress.
Around the world, shortsighted trade practices could lead to unfair trade. Such practices include forced technology transfer, whereby foreign companies operating in a host nation are required to carry out all processes—from design and development to the manufacturing of advanced technology products—in that nation, possibly forcing companies to share their sensitive technologies with the host nation’s companies.
Nishimura said that we must build a world where “countries will come together based on trust and strengthen their cooperation under the banner of free trade, without slipping into protectionism.”
Climate Change and Energy in Focus
Japan is looking to promote green transformation, or GX, which can rewrite the rules of the prevailing socioeconomic system by inducing transformational changes, without shoehorning emission reductions and economic growth into an either-or relationship.
“Green transformation is a major keyword in Japan,” explained Shinichi Kihara, deputy director general for technology and environment at METI. “The idea is that emissions reduction and economic growth are not in a trade-off relationship. Instead, they can coexist.”
GX will not stop at Japan’s borders, and the government will make efforts to approach countries responsible for major emission outputs while also providing appropriate support to developing nations that are in the process of transitioning to a green regime. Ultimately, Japan seeks to promote GX in all sectors, including energy and industry.
At the same time, the energy crisis has put the spotlight on global energy security. Nishimura believes it is necessary to undertake decarbonization in a way that is fully compatible with ensuring a stable supply of energy, and that it will be important to undertake various and practical pathways that fit the needs and expectations of individual nations.
Japan will make the utmost efforts to promote its clean energy transition, including installing the greatest possible amount of renewable energy facilities and using nuclear plants as much as possible.
Minister Yasutoshi Nishimura
Boosting Digitalization
Another major transformation underway is digital transformation, or DX, which has been defined as the creation of new value through innovation made possible by the adoption of digital technology that aims for the creation of a more prosperous society. The role of digitalization as a bulwark against unpredictable events has been highlighted in recent years by global challenges such as the Covid-19 pandemic and Russia’s aggression against Ukraine.
The free flow of data in the face of arbitrary restrictions and ensuring data integrity are essential if the digitalized world is to operate as intended.
In a move that has garnered positive international feedback, Japan proposed a guiding principle, Data Free Flow with Trust (DFFT), which seeks to enable cross-border free flow of data while addressing privacy, data protection, intellectual property rights, and security concerns. The principle was first suggested by then-Prime Minister Shinzo Abe at Davos 2019, and later endorsed at the G20 Osaka Summit in June 2019. Since then, the DFFT has been widely accepted as a primary principle for international digital policy coordination in various international forums.
Reaching a global consensus or convergence on the rules that involve privacy and security will take time. The G7, currently under Japanese presidency, is expected to formulate the priorities in operationalizing the DFFT so that countries can work together despite their varied approaches to data governance. Vigorously moving the DFFT into its operational phase, the Japanese government has announced that it will establish an institutional arrangement to promote interoperability across data regimes, implement the priorities that have been identified by the international forum, and advance solutions for cross-border data transfer through public–private cooperation.
It is also important to redesign governance for a digitalized society. DX technologies, such as artificial intelligence, the Internet of Things, and the metaverse, now have the ability to fundamentally reshape the way companies operate and how individuals relate to society.
It is vital to explore new governance options, including involving multiple stakeholders in discussions on how to flexibly update governance systems in response to changes in the operating environment.
International Cooperation Is the Only Way Forward
At the end of the day, the G7 is not just about the interests of advanced industrialized nations, but about building a way forward together with the entire international community.
“In 2023, Japan will host the G7 Summit, and the United States, India, and Indonesia will chair APEC, the G20 Summit and ASEAN, respectively,” Nishimura said. “While working in cooperation to deal with global-level issues, we will lay out for the international community a path forward for building a new economic order.” It will be also essential for Japan to work in coordination with the Global South to tackle various global challenges. “Japan, working within that partnership, is fully determined to fulfill its significant responsibilities.”
Setting the Stage for Green Transformation
If renewable energy production is not doubled by 2030, power outages and energy system disruptions could become everyday affairs. To help the international community rise to what may be this generation’s greatest challenge, and to showcase some of the technologies that will assist the world in meeting it, the Ministry of Economy, Trade and Industry (METI) organized Tokyo GX (Green Transformation) Week. The 10-day event ran from September 26 to October 7.
Japan gathers leaders and experts for key conference on decarbonization
If renewable energy production is not doubled by 2030, power outages and energy system disruptions could become everyday affairs. The World Meteorological Organization’s State of Climate Services annual report, released on October 11, has found that nations around the world are far off the 7.1-terawatt target needed to keep global temperatures from rising 1.5 degrees Celsius above pre-industrial levels.
Setting 2050 net-zero goals is well and good, but it is clear even more immediate action is needed.
To help the international community rise to what may be this generation’s greatest challenge, and to showcase some of the technology that will assist the world in meeting it, the Ministry of Economy, Trade and Industry (METI) organized Tokyo GX (Green Transformation) Week. The 10-day event, which ran from September 26 to October 7, was a series of 10 international conferences focused on the many aspects of GX. The conferences covered everything from clean energy sources to carbon capture, highlighted some of the latest technological developments in a wide variety of fields, and explored joint policy frameworks in Asia.
Tokyo GX Week wrapped up a month ahead of the 2022 United Nations Climate Change Conference (COP27), which was held November 6–20 in Sharm El Sheikh, Egypt. The GX Week conferences looked ahead to the issues that this key global gathering would address. Japan will also host the G7 meeting next year, and world leaders can build on the groundwork established during Tokyo GX Week to reach ambitious and sustainable strategies that will influence the future of our planet.
Inaugural Meeting
More than 140 countries aim to be carbon neutral by 2050, but achieving this goal is no simple matter. GX offers a way forward. The strategy is a bold one, and seeks to bring about a change in economic, social, and industrial structures, so that they are driven by clean energy and spur economic growth and development through emissions mitigation.
To drive this strategy, METI hosted the inaugural Global Green Transformation Conference (GGX) on October 7, the final day of Tokyo GX Week. GGX was the first time that leaders and industry experts gathered to begin charting a path towards global GX.
The GGX addressed everything from how to incentivize the public and companies to turn to green products and services to introducing a new way to evaluate the reduction in CO2 emissions by using these products and services. It also tackled the tough questions related to establishing a more workable framework for decarbonization and rule-making that will help the whole world thrive.
Drawing the World
The conference was held in a hybrid format and more than 1,300 people attended online and in person. Given the significance of the event, it drew an impressive selection of participants. Speakers and panelists included representatives from five G7 countries, two international organizations, and 12 universities as well as research institutes and private companies.
Keynote speeches were delivered by prominent speakers from around the world:
- Shinichi Nakatani, state minister of METI
- John Kerry, special presidential envoy for climate from the United States
- Peter Bakker, president and chief executive officer of the World Business Council for Sustainable Development (WBCSD)
- Frans Timmermans, executive vice president of the European Commission
- Mathias Cormann, secretary-general of the Organisation for Economic Co-operation and Development
- The Right Honorable Lord Callanan, parliamentary under secretary of state (minister for business, energy, and corporate responsibility) of the United Kingdom
- Fatih Birol, executive director of the International Energy Agency
In his keynote address, Nakatani pointed out that the time for the world to act is now and highlighted some of the ways in which Japan has set a rigorous path for itself.
“First, by the end of the year, we will formulate a 10-year roadmap for GX investment, which aims to realize ¥1.1 trillion in investment through public–private sector cooperation over the next 10 years,” he explained. “Second, we will establish the GX League, a voluntary emissions trading framework for companies with ambitious reduction targets, which will be fully operational by 2023. And third, we will promote transition finance in the industrial sector, particularly high emissions industries.”
State Minister Shinichi Nakatani delivers his keynote address.
Nakatani also introduced the key topic of “mitigation contribution”—a means of evaluating the positive effects of a company’s influence on decarbonization that may lie outside its supply chain or national boundaries. The topic was subsequently referred to as “avoided emissions” at COP27. He explored this by presenting the example of a company selling heat pumps. If inefficient gas heating systems are replaced by efficient heat pumps the company produces, this may lead to a reduction in total global emissions. However, the company’s own emissions may rise due to the increased production of the heat pumps. While such a company is positively contributing to global emission reduction, it may be criticized for increasing emissions. This does not undermine the crucial importance of emission reduction from the company, but clearly indicates the need to recognize a new perspective.
Currently, mainstream frameworks focus on the reduction of greenhouse gas (GHG) emissions of a specific organization or entity, and it is key to continue to support the efforts based on these frameworks. But if a mechanism can be created to appropriately value avoided emissions, and resources such as finance can be directed to entities that are promoting these efforts, it will encourage the diffusion of green products and services and promote the achievement of net-zero emissions through economic growth.
Avoided emissions are being explored in the private sector through international partnerships, but if governments begin to support the concept and encourage more companies to incorporate it in their decarbonization efforts, it can lead to greater innovation across a wide swath of industries.
Looking ahead to the G7 in Hiroshima next year, Nakatani was optimistic.
“While each country has its own position, Japan will support the world’s GX while furthering international goals so that developing and developed countries will work in unison to promote initiatives that transcend barriers,” he said.
The G7 and other international forums will also offer the Japanese government opportunities to further discuss and refine the avoided emissions concept.
In his initial remarks, Peter Bakker put the task of the conference in stark relief, given the need to develop a strategy to combat climate change.
“We need full-fledged system transformation … We need to change everything,” he said. “The energy we use, the food we eat, the transport solutions that we look for. Therefore, being here at the Global Green Transformation Conference is a unique opportunity to engage with all of you about what needs to happen.”
First Movers
GGX was also groundbreaking because it marked the first event in Asia for the First Movers Coalition (FMC) of the World Economic Forum (WEF). The coalition was launched in November 2021, following COP26, with a distinct aim to decarbonize key economic sectors—such as materials and long-range transportation—which are critical to organizations around the world, but which generate 30 percent of annual GHG emissions.
More than 50 companies are members of the FMC and, as Nancy Gillis, program head for Climate Action and the FMC with the WEF, explained, their participation sends a message.
“When a company joins the First Movers Coalition, what they are doing is signing a demand commitment,” she explained. “That means that they are making a commitment to buy products and services [as] they do now. But instead of buying the products and services that they’ve bought historically, they choose those with more GHG emissions consequences.”
Gillis said the FMC is a natural fit for Japan, given the country’s dedication to innovative, green technologies. She added that transportation company Mitsui O.S.K. Lines, Ltd. made an ideal member of the FMC, and its commitment to decarbonization can drive innovation in many fields. Toshiaki Tanaka, the company’s representative director and executive vice president, explained that the time was right to join the coalition: “What we need now is to take concrete actions to reduce our value chain emissions. But at the same time, we are going beyond the value chain and taking urgent action to mitigate emissions outside of our value chain by supporting emerging [carbon dioxide removal] technologies. Therefore, we decided to take part in the First Movers Coalition, a platform where we can leverage our collective purchasing power to develop and scale zero carbon technologies.”
From left: Nancy Gillis, Shinichi Nakatani, Acting Deputy Chief of Mission for the US Embassy in Japan Philip Roskamp, and Toshiaki Tanaka at the FMC in Japan panel discussion.
Towards a Greener Society
Other panel discussions during GGX tackled the ways in which GX can be implemented in markets, the setting of standards, and international cooperation. “Designing a Green Market” explored methods for reducing emissions from the perspectives of supply and demand. Panelists agreed that there is no single policy that will lead to net-zero GHG emissions, but that it is necessary to create an environment which leads to the greater diffusion of green products.
The topic of avoided emissions was a recurring theme during the conference, and in the panel discussion “Standards and Evaluations Promoting Green Products/Services,” participants explored it in detail. They concurred that it is important to expand evaluation frameworks beyond the reduction of supply chain emissions to consider how countries and companies are helping cut GHG emissions through indirect means.
One key point that needs to be addressed when it comes to avoided emissions is to which products and sectors efforts can be applied. Participants in the discussion brought up the idea that it is important to establish clear differences between avoided emissions and existing GHG protocols and nationally determined contributions (NDCs), because the concept’s importance lies in additionally evaluating the contribution to global emission reduction, rather than undermining the efforts of a company to reduce its own emissions.
Panelists also pointed out that it is necessary to establish a strict method for evaluating avoided emissions. For example, subtracting avoided emissions from NDCs and Scope 1–3—that is, a company’s direct and indirect emissions—would be a form of greenwashing, and should be avoided when establishing these guidelines.
Finally, in the panel discussion “International Cooperation for Developing a Green Society,” participants delved into the thorny topic of working across borders to develop decarbonization strategies. The participants pointed out the importance of recognizing each country’s circumstances in setting cross-border policies. Considering the increasing dichotomy between the positions of developed and developing countries, the importance of developing a society which realizes both economic growth and emission reduction was also raised as an important topic. Business is an important enabler for these societies, and frameworks such as the Joint Crediting Mechanism—a system by which developed nations collaborate with developing nations to reduce greenhouse gas emissions—and business in adaptation could offer win–win actions for both developed and developing countries.
Following on the insightful conversations at GGX, METI hosted an event at COP27 about avoided emissions. During the session, the WBCSD—which founded the Scope 1–3 standards—gave an overview of their developing guidance for the concept. METI has also included countries such as the United Arab Emirates, host of COP28, and the United States, as well as representatives of the financial sector, including members of the Glasgow Financial Alliance for Net Zero, in the discussion.
Conversations that began at GGX are expanding to a wider group of stakeholders, and next year, when Japan hosts the G7 meeting, METI will escalate the dialogue on these key issues that will help future generations live on a greener Earth.