GOJ TARGETS CLEAN ENERGY, RESOURCE SECURITY IN

UNCLAS SECTION 01 OF 03 TOKYO 000219

SENSITIVE
SIPDIS

STATE FOR EEB/ESC, EAP/J AND OES

E.O. 12958: N/A
TAGS: ENRG EFIN SENV KGHG PGOV JA
SUBJECT: GOJ TARGETS CLEAN ENERGY, RESOURCE SECURITY IN
FY2009 ENERGY BUDGET

REF: A. 08TOKYO1690

B. 08TOKYO1585

C. 08TOKYO1505

D. 08TOKYO1948

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1. (U) SUMMARY: The GOJ's FY09 energy budget proposal focuses
on securing stable access to conventional energy resources
while simultaneously pursuing energy efficiency and
low-carbon alternatives. It should enable the GOJ to launch
several policies developed in the run-up to the 2008 Toyako
G8 Summit. The GOJ proposes 768.3 billion yen ($8.17
billion) in 2009 energy-related outlays for the Ministry of
Economy, Trade and Industry (METI) to: (1) explore and secure
natural resources, both overseas and through development of
domestic under-sea gas and mineral resources; (2) develop
carbon reducing technologies; and (3) improve energy
efficiency. There are substantial increases in funding for
research and development of methane hydrates, rare metals
exploration, and research into carbon storage and
sequestration. The budget also introduces support for
residential solar power and enhanced incentives to develop
and commercialize clean vehicle technologies. END SUMMARY.

5.2 Percent Increase in 2009 Energy-Related Spending
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2. (U) The GOJ's 2009 energy-related budget proposal totals
768.3 billion yen ($8.17 billion),an increase of 5.2 percent
over 2008 (Note: figures assume $1=94 yen, and the budget
typically passes in March for the fiscal year beginning in
April). The GOJ proposes 265.5 billion yen in FY09 to
guarantee a stable supply of natural resources, an increase
of 0.9 percent. The Japan Oil, Gas and Metals Exploration
Corporation (JOGMEC),which funds resource surveys and
guarantees resource-related debt financing, is slated to
receive a 27% budget increase. The boost in funding will
enable JOGMEC to double its spending to secure supplies of
rare metals used in electronics manufacturing. JOGMEC's
Director General for Minerals Finance Tsuguyo Takahashi told
emboffs he hopes for speedy passage of the budget so his
organization can continue work on several projects, including
remote sensing of mineral resources in southern Africa,
programs to recycle rare metals from used electronic
equipment, and programs to take advantage of technological
innovations to extract remaining deposits of rare minerals
from shuttered mines.


3. (U) The FY09 proposal also increases funding for research
and development of methane hydrates off the coast of Japan by
eighty percent to 4.5 billion yen. Outlays for surveys of
ocean-bed hydrothermal deposits would also grow to support
Japan's ten-year strategy to identify petroleum, natural gas
and mineral resources within Japan's Exclusive Economic Zone.
The policy includes surveys of rare earth and manganese in
the cobalt-rich crust, hydrothermal deposits, and movement to
the second phase of the GOJ's methane hydrate research
program.

Global Warming Countermeasures
--------------


4. (U) To realize former PM Fukuda's goals for a "Low Carbon
Society", a highlight of the 2008 G8 Summit (refs A-C),
proposed FY09 outlays to counter global warming rise
fifty-six percent to 28.5 billion yen. The GOJ proposes
increased spending to realize its commitments under the Kyoto
Protocol (21.8 billion yen). Funding for research and
development of carbon sequestration and storage (CCS)
technologies more than doubles to 4.8 billion yen, including
3.3 billion yen ($33 million) in new funding for testing and
verification of subterranean carbon storage. METI's proposed
FY09 outlays for implementing innovative energy technologies
as part of the GOJ's "Cool Earth 2050" program total 88.6
billion yen, an increase of 41 percent.


5. (U) METI's funding for Clean Coal Technologies (CCT) rises

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21 percent and includes 12 billion yen in new funds to
promote technology transfer and expert exchanges in the
Asia-Pacific Region, with China and India as priority
countries.

Energy Conservation
--------------


6. (U) The GOJ proposes to spend 101.9 billion yen for energy
conservation. Targeted conservation measures include: 54.5
billion yen for energy-efficient buildings; 40.8 billion yen
for research and development of energy efficient
technologies; and six billion yen for "green IT projects" to
improve IT related energy efficiency.


7. (U) Separate from the budget proposal the Ministry of
Finance announced, at METI's request, tax measures to promote
energy-saving and new-energy facilities. The Finance
Ministry proposes allowing immediate depreciation over two
years on investments in energy-saving technologies or
facilities, such as solar power, natural gas vehicles and
highly-insulated windows, as well as for the purchase of
energy-saving home electric appliances.

New Technologies and Alternative Energy: Solar Wins Big
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8. (U) The FY09 budget proposes 137.9 billion yen to promote
new energy technologies. Solar power receives a substantial
increase and the budget includes 20.1 billion yen to support
residential solar power installation (ref D). The Director
of METI's Energy Conservation and Renewable Energy Department
told emboffs METI's installation target is 85,000 residences
by 2011. The current average purchase price for residential
solar units is 700,000 yen, and METI expects the subsidy to
cover around ten percent of the costs for a typical unit.
Three hundred local governments also have subsidy schemes
which provide up to 100,000 yen to defray the costs of
installation. METI does not expect the current economic
downturn to affect its target for residential installation.

Next-Generation Vehicles
--------------


9. (U) The FY09 proposal also includes 29.7 billion yen to
introduce and develop next-generation vehicles and fuel
cells. The GOJ's goal by 2020 is for half of new auto sales
to be next-generation vehicles. METI proposes 5.3 billion
yen in 2009 to subsidize the introduction of clean-energy
automobiles, including plug-in hybrids, Clean Natural Gas
vehicles, and accompanying infrastructure such as charging
stations. Officials in METI's New and Renewable Energy
Division told emboffs the agency estimates 2,000 electric
vehicles will be sold in 2009, primarily to corporate fleets.
The budget also proposes 6.1 billion yen in new funding to
support installation of residential fuel cells.


10. (U) The FY09 budget proposal also includes 800 million
yen in new funding for non-feedstock bio-ethanol production
and three billion yen for fundamental research on innovative
battery technologies, both of which will support Japan's
automobile manufacturers as they compete to produce greener
vehicles.

Nuclear Energy
--------------


11. (U) METI's portion of nuclear spending falls slightly to
21.6 billion yen, a decrease of 0.6 percent. Funding for
research and development of next generation light-water
reactors, fast reactors and small reactors; for research and
development of the light-water reactor fuel cycle; and for
regional assistance for siting nuclear facilities see modest
increases, consistent with METI's request. These were offset
by decreases for overseas uranium mining and disaster
planning.

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12. (SBU) Comment: METI Vice Minister Mochizuki, a former
head of the Agency for Natural Resources and Energy, singled
out energy security as a top priority in a recent press
conference on the budget and emphasized the need to balance
resource security, energy efficiency and environment issues
in Japan's energy strategy. The 2009 energy budget's
combination of funding to secure traditional fossil fuels and
support for alternative energy technologies clearly reflects
this strategy. Increases to fund the energy
security/low-carbon policies envisioned by then-PM Fukuda in
early 2008 suggests the GOJ continues to place a priority on
its energy policy despite falling commodity prices and the
current political paralysis. Energy issues have not been a
focus of political debate between the ruling party and the
opposition, and the energy budget will likely pass as
proposed. End Comment.
ZUMWALT