1 Assessment Criteria for VA and Performance of Voluntary Action Plan in Japan The Institute of Energy Economics, Japan Hiroki Kudo, Seonghee Kim, Tohru Shimizu, Osamu Ogawa, Hiroko Nakamura August 6, 2014
2 Assessment Criteria for VA -Development History of VA 1 Voluntary Approaches enterprises voluntary improvement efforts on environmental issues spread widely during the 1980s and into the 1990s Direct regulation providing criteria of emissions and environmental quality and specifying an application technique, so-called Command and Control Market Mechanism ETS, Green tax ( academically developed by economists ) Voluntary Approaches ( practical countermeasures for policymakers and industry ) an advantage due to its flexibility in selecting the compliance method
3 Assessment Criteria for VA -Definition and classification 2 Definition Voluntary approaches are defined as an instrument that promises to improve environmental performance regardless of the laws and regulations (OECD,1999) Classification 1Public Voluntary Programmes: a certain level or a common framework in accordance with administrative guidance and guidelines by authority. 2Negotiated Agreements: based on decision (agreements) by negotiations between authority (such as nation, local, and federal) and industrial bodies or individual corporations. 3Unilateral Commitments:voluntary environmental improvement plan, proposed by entities such as individual trade associations or individual corporations without authority involvement, for private interested parties including polluters and sufferers. 4Private Agreements:based on the agreements between individual industrial bodies or individual corporations and residents without authority involvement the name of VA and meaning of related terms differ for each country and region.
4 Assessment criteria of VAs Example of international experiences of VA 3 The Netherlands Germany UK South Korea Japan Title Long-term agreements on energy efficiency (LTA) / benchmarking covenants Declaration by German Industry and Trade on Global Warming Prevention Climate Change Agreements (CCA) GHG and Energy Target Management Scheme (TMS) Voluntary Action Plan for the Environment Time of adoption LTA1 (1992) Benchmark Covenant (1999) / LTA2 (2001) LTA3 (2008) 1996/2000/ / (Targets, determined in 2010; goals, set in 2011; the system, implemented in 2012) 1997/2013 Targets LTA1: 20% reduction of energy intensity (by 2000 from 1989 levels) LTA2: no sector-wide targets Benchmarking covenants: world toplevel energy efficiency (within top 10%) 35% reduction of GHG emission intensity (by 2012 with reference to 1990 levels) Targets voluntarily set by industry. Mostly energy consumption intensity. Choice between CO2 emissions, energy consumption or energy intensity. Targets determined by negotiation. Most companies use energy consumption intensity targets. CO2 emissions, CO2 intensity for electricity sector Linked with 2020 national target; targets negotiated and renewed annually Reduce emissions in to 1990 levels Individual targets set by trade organizations
5 Assessment criteria of VAs - Assessment criteria of voluntary agreements by EU 4 Assessment Criteria Details Cost-effectiveness Representativeness Quantified and staged objectives Disclosure of information Monitoring and reporting Sustainability Policy compatibility Administrative costs burdened by implementing institution in comparison as compared to command and control Representative of the vast majority of the relevant economic sector Clear and unambiguous quantified objectives and target periods Wide publicization of relevant information and openness to comments and proposals from general public. Well-designed monitoring system with clearly identified responsibilities for industry and independent verifiers Consistency with economic and social dimensions of sustainable development. Policy consistency with other incentives (regulations and taxes at national level) to avoid undermining of expected results due to contra-dictionary signals
6 Performance of Voluntary action plan in Japan -History 5 July 1996 Keidanren Appeal on Environment Declaration on Voluntary Action of Japanese Industry Directed at Conservation of Global Environment in the 21st Century June 1997 Announcement of Keidanren Voluntary Action Plan on the Environment 37 industry groups formulated voluntary action plans, widely ranging from manufacturing to energy, distribution, transport, finance, construction and foreign trade. Aimed to reduce CO2 emissions from participating industries in the industrial and energy conversion sectors in fiscal 2010 to below the levels of fiscal In December 1997, the Minister of International Trade and Industry decided that the Industrial Structure Council would conduct follow-ups on the voluntary actions plans formulated by participating industries. Revised in 2008, The Kyoto Protocol Target Achievement Plan stated that the voluntary actions plans was playing a central role in countermeasures in the industrial community. The Voluntary Action Plan on the Environment, launched in fiscal 1997, was continued for 16 years until fiscal 2012, when its target period came to a close. In fiscal 2013, the policy was renewed as the Commitment to a Low Carbon Society.
7 Performance of Voluntary action plan in Japan -Voluntary Action Plan participation trends Initial participants Participants in 2012 Total Energy conversion 4 4 Industrial Commercial and other 5 40 Transportation Voluntary Action Plan participation trends Total Energy conversion Industrial Business/ commercial Transportation *Compiled based on submissions by trade organizations, except for JR group companies, based on information provided by MLIT. 6 Source: Compiled from responses from industries to questionnaire survey on the Voluntary Action Plan (industrial voluntary approaches for climate change issues) and submissions for Voluntary Action Plan follow-up Participating industry group increased by threefold from initial stage of Voluntary Action Plan Substantial increase in participating industries, especially in commercial and other sectors, from
8 Emissions coverage under the Voluntary Action Plan and the Commitment to a Low Carbon Society 7 The Voluntary Action Plan covered over 80% of CO2 emissions from the industrial and energy conversion sectors. The Commitment to a Low Carbon Society covers a comparable ratio of CO2 emissions from the industrial and energy conversion sectors, excluding the Federation of Electric Power Companies of Japan (FEPC), which is currently unable to set targets based on projections of a future energy mix. In the business/commercial sector, 20% of CO2 emissions were covered by the Voluntary Action Plan, whereas only 10 % is covered by the Commitment to a Low Carbon Society. The Voluntary Action Plan covered 51% of total CO2 emissions of energy origin, while the Commitment to a Low Carbon Society covers 45%. Industrial and energy conversion sectors (50,535) based on FY 2012 emissions data (10,000t-CO2) Voluntary Action Plan 42,307 (84%) Commitment to a Low Carbon Society 38,135 (75%) Business / commercial sector (27,237) as of June 30, 2014 Voluntary Action Plan 5,743 (21%) Commitment to a Low Carbon Society 2,981 (11%) Transportation sector (22,634) Voluntary Action Plan 13,723 (61%) Commitment to a Low Carbon Society 13,473 (60%) 7
9 Target indices set by participating sectors 8 Target indices set by participating industries CO2 emissions CO2 intensity Energy conversion Energy consumption 7 8 Industrial Business/ commercial Energy intensity Transportation Other Note: All targets counted for industries adopting more than one target Source: compiled from submissions for Voluntary Action Plan follow-up for FY2012 &FY2013 Targets are diversified, according to industry-specific circumstances. CO2 emissions and CO2 intensity are common in Industry sector Energy intensity is popular in Business/ commercial sector
10 Status of target achievement under the Voluntary Action Plan 9 Targets were achieved by 84 industries of the 114 industries that formulated action plans. One-third of participating industries (38 industries) enhanced their targets, responding to encouragement in follow-ups. Targets were slightly overachieved (achievement rate of %) in 52/114 industries, 26 industries of which had enhanced their targets in the follow-up process. 300%+ Status of target achievement by indicator (114 industries) 150%-300% 110%-150% 100%-110% 50%-100% 52 industries 84 industries -50% CO2 emissions CO2 emission intensity energy consumption energy intensity Source: compiled from submissions for Voluntary Action Plan follow-up for FY2013
11 Analysis of transparency in planning and review process 10 Method of analysis Compilation of data on whether planning phase involved third party consultation and whether review process involved follow-up assessments. Data coverage: Supervising ministries and agencies (11), trade organizations (118), companies (283) Results Supervising ministries and agencies Follow-up assessments conducted and announced by supervising ministry/agency, but diversified in content. Weight of discussions on follow-up assessments of Plan varied among different government committees. Follow-up assessment results announced individually by supervising ministry/agency or committee lack integrity. Trade organizations Companies Approximately 70% of participating organizations referred to participation or follow-up results, but most failed to provide information on planning or verification process. By sector, less information was available for industries in transportation sector compared to those in other sectors. Organizations with more employees / more staff members responsible for Plan tend to provide more information. 13.8% of participating companies referred to participation in Plan. Some companies have spontaneously formulated original voluntary action plans for the environment (39.9%) and/or have third-party assessment processes (32.3%). Announcement of participation in Plan tend not to be prioritized means of demonstrating environmental corporate responsibility (further studies, incl. interviews required for confirmation). With closer ties with consumers and society, companies expected to contribute to raising social acknowledgement of Plan, its gaining social status and inviting more companies to participate in it.
12 Conclusion: Implications and challenges for the future (1) 11 Participating industries increased by threefold from initial year of Voluntary Action Plan, proving effectiveness of flexible approach. Diversity of targets reflect industry-specific circumstances but not necessarily intentions to set easy targets, as implied by varied attainment levels due to exposure to varied impacts of changes in economic environment One-third of participating industries renewed target indices in response to demands from third parties and/or in order to appropriately reflect industrial reduction efforts. Proactive response to calls made in follow-up assessment process for renewed and enhanced targets in sectors which had already achieved / were about to achieve initial targets implies flexibility and efficiency of the Plan and its follow-up process.
13 Conclusion: Implications and challenges for the future (2) 12 Inter-industrial adjustments have been sometimes been made in order to avoid the double-counting of GHG emissions and industrial efforts. Some industries provide explicit guidelines to reporting companies on how to avoid double-counting. Reporting methods adopted to avoid double-counting include excluding companies, sections and processes overlapping with other sectors and division of emissions in proportion to energy consumption. Such approaches could be shared with other participating industries for consideration of measures to improve data reliability. Incentives for participant /compliance Review required on evaluation criteria considering unique domestic circumstances (e.g. introduction of global warming tax). Features and effects of Japanese scheme should be defined in context that European approach is centered on agreements.
14 Conclusion: Implications and challenges for the future (3) 13 Evaluated in terms of comparison with BAU levels Objective analysis methods required to evaluate whether targets are stricter than BAU levels or studies of diverse approaches to target setting. Empirical analysis and communication of conclusions important for exposure to third-party review and evaluation. Verification of entire scheme Verification involves evaluation of validity of numbers, etc.; hence credibility can be enhanced by disclosing verification process and summary of conclusions for both second-party and third-party processes. Evaluation of targets and efforts serve to maintain continuity of PDCA cycle through regular Follow-Up processes which successfully derive individual challenges and potential improvements. Evaluations of entire scheme by third-party (e.g. research institutions in Germany) can contribute to identifying challenges of entire scheme and improving social credibility.
15 Reference materials 14
16 Comparison of international experiences (1) 15 The Netherlands Germany UK South Korea Japan Title Long-term agreements on energy efficiency (LTA) / benchmarking covenants Declaration by German Industry and Trade on Global Warming Prevention Climate Change Agreements (CCA) GHG and Energy Target Management Scheme (TMS) Voluntary Action Plan for the Environment Time of adoption LTA1 (1992) Benchmark Covenant (1999) / LTA2 (2001) LTA3 (2008) 1996/2000/ / (Targets, determined in 2010; goals, set in 2011; the system, implemented in 2012) 1997/2013 Targets LTA1: 20% reduction of energy intensity (by 2000 from 1989 levels) LTA2: no sector-wide targets Benchmarking covenants: world toplevel energy efficiency (within top 10%) 35% reduction of GHG emission intensity (by 2012 with reference to 1990 levels) Targets voluntarily set by industry. Mostly energy consumption intensity. Choice between CO2 emissions, energy consumption or energy intensity. Targets determined by negotiation. Most companies use energy consumption intensity targets. CO2 emissions, CO2 intensity for electricity sector Linked with 2020 national target; targets negotiated and renewed annually Reduce emissions in to 1990 levels Individual targets set by trade organizations
17 Comparison of international experiences (2) 16 The Netherlands Germany UK South Korea Japan Participants Industry groups and companies (With a coverage of about 8% of final energy consumption in 2010) (LTA3) Industry groups (With a coverage of about 75% of CO2 emissions in 1990) Industry groups and companies (With a coverage of about 10% of energyderived CO2 emissions in 2012) Companies (With a coverage of about 61% of greenhouse gas emissions in 2007) Industry groups (With a coverage of about 53% of energyderived CO2 emissions or about 84% of CO2 emissions from the industry and energy conversion sectors) Calculation and reporting of emissions Industry organizations conduct annual monitoring and submit reports. Industry organizations submit annual monitoring reports Facility operators report energy consumption to industry organization. Industry organizations report to government on biannual basis. Companies report emissions Industry organizations annually report and disclose emissions. Verification of emissions / follow-up on target achievement Supervised by government bodies and consulted with Consultative Committee Private research institution (RWI) checks report and makes available to public. Emissions data verified by government and third party verification institution for government judgment on target achievement Third party verification of emissions, achievement of targets judged by government Government committees verify probability of target achievement and relevant Incentives for compliance Simplification of environmental licensing procedures No additional regulations for CO2 emissions and energy saving are introduced. No direct regulations (command and control) are introduced by the government, with mandatory energy audits omitted. Companies that meet the targets are entitled to a 65% discount in the Climate Change Levy (CCL) or a 90% discount for power consumption to which CCL applies. (In the case of noncompliance) Improvement order, non-compliance with which results in penalties. None
18 Comparison of international experiences (3) 17 The Netherlands Germany UK South Korea Japan Current status / future plans LTAs for small and middle-sized enterprises (non-lta companies) : LTA3 ( ); aimed at 2% annual improvement in energy efficiency; 40 sectors and 1000 companies signed to agreement. Agreements for major companies (EUETS companies) => LEE ( Long-Term Agreement on Energy Efficiency for ETS enterprises): introduced in 2009 to replace Benchmarking Covenants; mandatory participation; ; aimed at 2% annual improvement in energy Phase 2 terminated in target achieved in 2010 (113.7%) 2010 emissions reduced by 28.4% with reference to 1990 levels Extended end of scheme from 2013 to participating sectors 285 Mt-CO2 reduced in from sector base year. CCL discount rate reduced from 80% =>65%(2011) =>90% for electricity and 65% for other sectors Emissions trading scheme to be launched in 2015 Program to cover non-ets companies after launch of emission trading scheme. Voluntary Action Plan terminated in 2012 Shifted to Commitment to a Low-Carbon Society program As of 2014, 68 industries have formulated plans and 22 industries scheduled to formulate plans Note: Information on the Netherlands, Germany and UK compiled based on Industrial Policy Data base (
19 Lessons -from international comparison 18 Quantitative targets and deadlines are specified for all cases. Level of agreement on target (all industries / industry /company) varied among participants and target indicators (absolute value or intensity) determined flexibly. => All approaches studied involved time-consuming trial and error process of developing and improving programs. In general, industry groups report on the amount of emissions and government agencies or third parties check and/or verify the amount of emissions. Incentive schemes are in place in most case e.g., simplification of environmental licensing procedures in the Netherlands, reduction of the climate change levy in the UK, exemption from energy examination in Germany, and administrative measures and information disclosure in South Korea.
20 Status of information available from supervising ministries/agencies on follow-ups to Voluntary Action Plan 19 Status of information made available by supervising ministries/agencies on follow-ups to Voluntary Action Plan (overview) METI MLIT MAFF MHLW MEXT MoE MIC MOF NTA FSA NPA Summary of results / compilation of data Disclosure of individual submissions Full coverage of all participating industries Government committee mandated solely to follow-up on Plan Availability of material other than individual submissions Disclosure of committee proceedings and comments made on follow-up evaluations Records of discussion on Plan among committee members on Plan found in proceedings Presentations and responses made by representatives of trade organizations at committee meetings Past FU data available (FY2008-FY2011) Most recent committee meeting 13/3/29 13/9/5 13/3/12 13/3/4 10/2/18 13/3/29 13/5/17 13/2/5 13/2/26 09/3/12 11/11/25 Source: Compiled from information available on ministry / agency websites Follow-ups to Plan conducted in all supervising ministries/agencies (10 ministries/agencies + NPA) but no cross-ministerial information available due to system of announcement of follow-up results by sector. Available information varied among supervising ministries/agencies. All follow-ups conducted in committee meetings, but addressed differently depending on committee. 3 committees mandated solely to follow-up on Plan. Other committees address different agenda and aims. 8 committees have members commenting on Plan at meetings. Comments on Plan tend to be limited in presence of other agenda. 6 committees receive attendance of trade organizations.
21 Status of disclosure by trade organizations on participation in Voluntary Action Plan and third-party involvement 20 (1) Ratio of industries announcing participation in Voluntary Action Plan (2) Engagement of third parties in planning/review processes Total n = % Total n = % Energy conversion n = % Energy conversion n = 4 0.0% Industrial n = % Industrial n = % Commercial and others Transportation n = 41 n = % 80.5% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% Commercial and others Transportation n = 41 n = % 5.9% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% Compiled from information available on trade organization websites and responses from organizations to 2012 questionnaire survey on the Voluntary Action Plan 76.3% of total 118 organizations refer to participation in Plan Energy conversion: 75.0%; Industrial: 82.1%; Commercial and others: 80.5%; Transportation 47.1% (Figure (1)) 2.5% of total 118 organizations engaged third parties in planning and/or review processes (Figure (2)) Participation of academics in in-house committees on formulating plan; third party verification of emissions data
22 Status of disclosure of corporate participation in Voluntary Action Plan and other environmental efforts 21 (1) Ratio of companies announcing participation in Voluntary Action Plan (2) Ratio of companies engaged in third party assessment Total n = % Total n = % Energy conversion Industrial n = 9 n = % 13.6% Energy conversion Industrial n = 9 n = % 42.9% Commercial and others n = % Commercial and others n = % Transportation n = % Transportation n = % 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% Source: compiled from information available on corporate websites 13.8% of companies surveyed (283 companies) refer to participation in Voluntary Action Plan (283 companies) (Figure (1)) Energy conversion: 33%, Industrial: 13.6%; Commercial and others: 14.9%; Transportation: 6.1% 39.9% of companies surveyed disclosed original environmental action plans. 63.3% had pages dedicated to environmental issues on website. 32.2% of companies exposed to third party assessment on environmental performance (Figure (2)) Means of third-party assessment include environmental credit rating, carbon disclosure rating by CDP, and third party verification of environmental performance data and CSR reports