INFO ON JAPANESE GREEN INVESTMENTS IN STIMULUS PACKAGES

UNCLAS SECTION 01 OF 02 TOKYO 000683 SENSITIVE SIPDIS STATE FOR S/SECC, IO, EEB, EAP/J STATE ALSO FOR OES/EGC - BDEROSA-JOYNT, EFENDLEY DEPT PASS CEQ NSC FOR CCONNORS, JLOI USDOC FOR NOAA CLIMATE CHANGE OFFICE - STHURSTON DOT FOR LLAWSON, CMITTELHOLTZ EPA FOR SFULTON USDOE FOR S-3, RMARLAY, SRUEN FAA FOR CBURLESON PASS TO USAID E.O. 12958: N/A TAGS: ETRD EAGR PGOV JA SUBJECT: INFO ON JAPANESE GREEN INVESTMENTS IN STIMULUS PACKAGES REF: STATE 26022 TOKYO 596 TOKYO 219 06 TOKYO 2690 TOKYO 00000683 001.2 OF 002 ¶1. (U) In response to the Department's request for information on green investments in Japan's stimulus packages (Ref A),Mission Tokyo provides the following information on the GOJ's budget and environmental legislation. -------------- -------------- FY 09 Budget: Kyoto Protocol Target Achievement Package -------------- -------------- ¶2. (U) Since FY 2006, the GOJ has allocated around 1 trillion yen ($10 billion) annually in its budgets to help meet Japan's Kyoto Protocol target of reducing greenhouse gas (GHG) emissions by 6 percent from 1990 levels by 2012 (Ref D). The package covers a wide range of green investments from low-carbon research and development to increasing energy efficiency. For FY 2009, a proposal totaling 1.2 trillion yen ($12 billion) is currently under consideration in the Diet and is widely expected to pass soon. The breakdown of the proposed FY 09 Kyoto package follows: -- Renewable energy (solar, wind, hydro, biofuel, geothermal, etc.) 114.5 billion yen ($1.1 billion); -- Energy efficiency (including conservation and demand-side management) 67.1 billion yen ($671 million); -- Research and development in low-carbon technologies 47.0 billion yen ($470 million); -- ImpQements to the power grid 3.1 billion yen ($31 million); -- Low-carbon transportation, including related incentives for industry and consumers 7.5 billion yen ($75 million); -- Mass transportation (general) 28.2 billion yen ($282 million); -- Oil, gas and coal, including price subsidies 10.0 billion yen ($100 million); -- Nuclear energy 162.2 billion yen ($1.6 billion); -- Forestry (increasing carbon sink capacity) 319.3 billion yen ($3.1 billion); -- Incentives to reduce the use of fossil fuels (i.e., incentives for green companies) 724.6 billion yen ($7.2 billion); -- Green job creation and green worker training 6.0 billion yen ($60 million); -- Miscellaneous greenhouse gas emissions projects 1.2 trillion yen ($12 billion). (Note: because some categories overlap, accumulating each item does not equal the total budget allocation. End Note) TOKYO 00000683 002.2 OF 002 -------------- FY 08 Supplementary Budget -------------- ¶3. (SBU) The Diet approved two supplementary budget packages for FY ¶2008. The first package, passed in October 2008, allocated a total of 147.5 billion yen ($1.4 billion) for environmental-related expenses, according to an informal internal Ministry of Finance (MOF) estimate provided to Post. Major expenditures include: -- Promotion of a "low carbon society" (43.0 billion yen ($430 million); -- Subsidies for residential solar power units 9 billion yen ($97.8 million); -- Financial support for farmers to offset fuel and food price hikes 78.9 billion yen ($789 million); -- Financial support for fishers to offset fuel and food price hikes (which included a requirement to increase the energy efficiency of fishing vessels) 60.0 million yen ($600 million); -- Energy efficiency measures 8.2 billion yen ($82 million). ¶4. (SBU) A second supplementary budget, passed in January 2009, allocated 113.6 billion yen ($1.1 billion) to environmental-related expenses, according to MOF sources. Major environmental/energy expenditures included: -- Subsidies to the Japan Self-Defense Forces and Coast Guard to offset fuel price hikes 25.5 billion yen ($250 million) and -- purchasing energy efficient equipment for GOJ buildings 7.4 billion yen ($74 million). -------------- Policy Reforms to Spur New Private Investment -------------- ¶5. (U) In addition to direct expenditures on environmental and energy projects, Japan has passed or is considering legislation aimed at spurring increased investment in, and increased consumer demand for, "green" technologies. Recent examples include: -- A recent bill provides tax exemptions for hybrid, plug-in hybrid, and electric vehicles, amounting to about $1,200 per car; -- The Japan Electric Power Exchange introduced a "Green Power" trading scheme in November 2008 to enable wholesale buyers and sellers to specify the type of electricity generation they desire to purchase or sell from non-CO2 emitting sources; -- METI introduced a bill to the current legislative session calling for a feed-in-tariff (FIT)-like scheme to compel electric power companies to buy surplus solar photovoltaic (PV) power from residential generators (Ref B).