A Comprehensive Review of

Japan’s Energy Policy－ Towards Simultaneous Achievement of 3Es－

OCT 2001ANRE/METI

Kyoto Commitment -▲ 6% of GHG emissions below 1990 level

- Stabilization of CO2 emissions at 1990 level

▲ 2.5%

▲ 3.7%

+ 2.0%

▲ 1.8%

▲ 6.0%

Emission Reduction of CO2, CH4 and N2O　 0% : CO2 from Energy Origin▲ 0.5% : Emission Reduction of CH4, N2O etc▲ 2.0% : Innovative Technologies etc

Sinks(Land Use Change and Forestry)

HFC, PFC, SF6

Kyoto Mechanism ( Emission Trading, J I, CDM )

Total

Page 1

Page 2

230

280

330

380

430

480

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Mill

ion t

on in c

arbo

n

200

250

300

350

400

450

Mill

ion t

on o

il equ

ival

ent

422

370

347

287

60

52

314

287

323

364

CO2 emissions

Final energy consumption

Note 1: 1996Fy: Nuclear power - 302 TWh; new energy sources - 1.1% of TPESNote 2: 2010Fy target: Nuclear power - 480 TWh (16-20 additional units); new energy sources - 3.1% of TPESNote 3: Caluculation assumes average economic growth from 2001 to 2010 at 2%/ year.

(1990 level)

Fiscal Year

Long-Term Outlook ‘ ９８ for Final Energy Consumption and CO2 Emissions

Substantial Changes since 98 Outlook

Page 3

★Change of Lifestyle - Rapid Increase of Energy Consumption in Residential and Passenger Transport Sector

★Deregulation of Energy Industry ・ Increased Cost Sensitivity and Conflict among 3Es・ Rapid Growth of Coal Power

★Delay of Nuclear Power Development Program・ JCO Accident in Tokai village (Sept 1999)

★Stagnant Growth of New and Renewable Energy

Indices on Final Energy Consumption by Sector

Page 4

0

50

100

150

200

250

300

FY

（Index FY1973＝１００）

104.8

152.3

187.5

217.2

274.5

(Source) Energy Balance Tables in Japan (METI/EDMC)

Passenger TransportSector

Residential Sector

Commercial Sector

Freight transportSector

Industry Sector

Comprehensive Review of Long-Term Supply and Demand Outlook (1)

Page 5

★Policy Target - - - Simultaneous Achievement of 3Es

◇ Energy Security– Reduction of dependency on imported oil

◇ Environmental Protection– Stabilization of CO2 emissions from energy

origin at 1990 level◇ Economic Efficiency– Stable economic growth and promotion of

deregulation to improve economic efficiency

Comprehensive Review of Long-Term Supply and Demand Outlook (2)

Page 6

★ “BAU” (Business As Usual) Case: ◇ Without any policies to achieve Kyoto Target

★ “Base” Case: ◇ With energy conservation policies introduced after COP3

-Industry Sector • Keidanren Voluntary Action Program

-Residential Commercial Sector• Top Runner Program for 11 types of household electric appliances• Energy efficiency standard for house and buildings

-Transport Sector• Top Runner Program for automobiles and light and medium trucks• Enhancing freight efficiency, modal changes from truck to railways• Intelligent Transport Systems

Voluntary Action Program of Keidanren

☆ Steel Industry▲ 10% Energy Consumption below 1990 by 2010

☆ Chemical Industry▲ 10% Energy Intensity below 1990 by 2010

☆ Paper and Pulp Industry

▲ 10% Energy Intensity below 1990 by 2010

Page 7

Top Runner Program

Page 8

16km/l

14km/l

12km/l

10km/l

Fuel Efficiency( km/l )

New energy efficiency standardOld energy

efficiency standard

16km/l

14km/l

12km/l

10km/l

Fuel Efficiency( km/l )

Targets for Energy Efficiency

Air conditioner(heating & cooling) Air conditioner(cooling only) Television receivers Video cassette recorders Fluorescent lamp luminaries Copying machines Computers Magnetic disc units Gasoline-fueled passenger vehiclesGasoline-fueled freight vehicles (2.5 tons or below)Diesel powered passenger vehicles Diesel powered freight vehicles (2.5 tons or below)Refrigerators

※ Base year: 1997(automobiles: 1995)

2004/07 　 63%2007 14%2003 16%2003 59%2005 17%2006 30%2005 83%2005 78%2010 23%2010 13%

2005 15%2005 7%

2004 30%

Target Improvementyear of efficiency※

Page 9

Page 10

287

347

287

307321

422

323

378

393

1985 1990 1995 2000 2005 2010 2015 2020

250

300

350

400

Mtoe / 10^6 t-C

BASE - FEC

BAU - FEC

BASE - CO2

BAU - CO2

Policy target

Comparison of BAU and Base Case

Mtoe: Million tons of oil equivalent FEC: Final energy consumption

1990 1999 2010 (from '90) 2020 FEC; Mtoe BAU case 323 372 422 ( ＋ 31%) -- ↓44Mtoe BASE case 323 372 378 ( ＋ 17%) 393CO2; Mt-C BAU case 287 313 347 ( ＋ 21%) -- ↓40Mt-C BASE case 287 313 307 ( ＋ 7%) 321 ↓20Mt-C Policy target 287 287 (± 0%)

→Need more 20Mt-C reductions in addition to painful reduction of 40Mt-C!

Final Energy Consumption – Base Case

Page 11

1985 1990 1995 2000 2005 2010 2015 20200

100

200

300

400Mtoe

ResidentialPassengerCommercialFreightIndustry

Mtoe 1990 1999 2010(from'90) Residential 44 51 61 (+ 38%) Passenger 44 60 56 (+ 27%) Commercial 42 45 55 (+ 32%)* Freight 30 33 32 (+ 7%) Industry 168 175 173 (+ 3%)*

Total 328 365 378 (+ 15%)

* Including Non-energy use

Total Primary Energy Supply – Base Case 　

Page 12

1985 1990 1995 2000 2005 2010 2015 20200

100

200

300

400

500

600

Mtoe

RenewableNuclearHydro.Geot.

Nat.GasOilCoal

Mtoe 90 1999 2010(from'90) Renewables 7 7 9 (+ 40%) Nuclear 46 71 86 (+ 90%) Hydro & Geo. 21 20 19 (- 6%) Natural Gas 49 70 76 (+ 54%) Oil 284 285 258 (- 9%) Coal 81 95 126 (+ 56%)

Total 486 549 575 (+ 18%)

Additional Policies and Measures to achieve Policy Target

Page 13

Need to Reduce Another 20 Mt-C to achieve Kyoto Target

1- Further Promotion of Energy Conservation

2- Further Promotion of New and Renewable Energy

3- Fuel Switching ( mainly in Power Sector )

Further Promotion of Energy Conservation

Page 14

Further conservation of 6.46 Mtoe under Policy Case, in addition to 46.26 Mtoe under Base Case.

- Major energy conservation policy measures and effects -

Mtoe "Base case" "Policy case” Industry sector 18.59 Base+0.37 - Keidanren voluntary plan of action etc. 18.59 +0 - Promotion of efficient industrial furnace - +0.37 Residential & Commercial sector 12.96 Base+4.25 - Expansion of Top Runner Program ard for appliances 5.00 +1.11 - Efficiency standard for house & buildings. 7.96 +0 - Promotion of efficient appliances - +0.83 - Promotion of HEMS; Home energy manag. sys. - +0.83 - Promotion of BEMS; Business energy manag. - +1.48 Transportation sector 14.71 Base+0.92 - Expansion and Acceleration of Top Runner Program 5.00 +0.46 - Promotion of NGVs, Hybrid Vs, FCVs etc. 0.74 +0.46 - Promotion of ITS technology application 8.97 +0 Cross sector measures - Promotion of efficient boiler, laser, light - Base+0.92Total energy consumption reduction 46.26 Base+6.46

Further Introduction of New & Renewable Energy

Page 15

★ Further introduction of 9.53Mtoe under Policy Case, in addition to 8.14 Mtoe under Base Case.

★ Introduction of market expansion measures in electricity sector such as Renewable Portfolio Standard - New and renewable energy policy targets at 2010 -

Mtoe 1999 "Base case" "Policy case” Solar energy 0.96 1.24 Base+3.91 (5.15) Photo-voltaic cell generation 0.05 0.57 (1.09) Solar heat use 0.91 0.67 (4.06)Wind power generation 0.03 0.30 Base+0.94 (1.24)Biomass energy 4.28 4.55 Base+0.95 (5.50) Biomass fired power generation 0.05 0.12 (0.31) Biomass fuel use 0.00 0.00 (0.62) Black liquer; Pulp & paper waste 4.23 4.43 (4.57)Waste materials energy 1.10 1.96 Base+3.27 (5.24) Waste fired power generation 1.06 1.92 (5.11) Waste & residue derived fuel use 0.04 0.04 (0.13)Wasted energy recovery 0.04 0.09 Base+0.45 (0.54)Total 6.41 8.14 Base+9.53(17.67)

Fuel Switching

Page 16

1. Further Promotion of Energy Conservation6.46 Mtoe = 6.0 Mt-C

2. Further Promotion of New and Renewable Energy9.53 Mtoe = 9.0 Mt-C

3. Required Fuel Switching20.0 - 6.0 – 9.0 = 5.0 Mt-C

★Fuel Switching: ◇ Mainly in Power Sector (From Coal to Natural Gas)◇ Need to address Cost Differential between Coal and Other Fuels◇ P&M for Fuel Switching:

- Economic Instrument (Tax, Emissions Trading, Subsidy)- Regulation- Voluntary Action etc.

Power Sector after Fuel Switching for 5.O Mt-C

Page 17

Fuel Mix of Power sector in 2010 assuming certain economic instruments to achieve 5.0 Mtoe reduction (e.g. making generation cost of coal power 0.3 yen/kwh=25$/t-C more expensive than that of natural gas power)

1990 1999 2010 Base 2010 Policy0

200

400

600

800

1000

1200

TWh

RenewableNuclearHydro. & Geo.Oil

Natural gasCoal

Electricity power generation

2010 TWh 1990 1999 Base Policy Renewable 0 2 3 12Nuclear 201 317 419 419Hydro.& Geo. 90 93 100 99Oil 211 113 38 53Natural gas 164 241 234 255Coal 72 153 235 160 Total 738 918 1029 997 ＊ 10-13 additional units (instead of 16-20)

Policy Case: Conclusions(1)

Page 18

1990 1999 2010 Base 2010 Policy0

100

200

300

400

500

600

Mtoe

RenewableNuclearHydro.Geot.Nat.GasOilCoal

Trends of Primary Energy Supply / Policy case

2010 Mtoe 1990 1999 Base Policy Renewable 7 7 9 18 Nuclear 46 71 86 86 Hydro.& Geo. 21 20 19 19 Natural gas 49 70 76 77 Oil 284 285 258 251 Coal 81 95 126 105 Total 486 549 575 557 CO2 emission 287 313 307 287

Policy Case: Conclusions(2)

Page 19

1990 1999 2010 Base 2010 Policy0

100

200

300

400

Mtoe

ResidentialPassengerCommercialFreightIndustry

Trends of FEC by sector / Policy case

2010 Mtoe 1990 1999 Base PolicyResidential 44 51 61 58Passenger 44 60 56 55Commercial 42 46 55 53Freight 30 33 32 32Industry 168 175 173 171Total 328 345 378 370

Nuclear Moratorium Option

Page 20

★ Policy Case: 10-13 Additional Nuclear Power Plants towards 2010

★ Moratorium Option: No Additional Nuclear Power plants towards 2010

- Coal power substituting nuclear- Under Base Case, 40 Mt-C CO2 emissions above 1990 level

(instead of 20 Mt-C)- Need of another 20 Mt-C of fuel switching- Very painful economic measures (e.g. Carbon tax of 250$/t-

C)- Severe economic impact

Gross Output of Industry Sector▲ 4.2% below Base Case

Household Consumption▲ 3.9% below Base Case

→ 0% GDP growth from 2008-2010 (instead of 2% under Base Case and Policy Case)

★ Nuclear Moratorium Option can not be chosen as a viable option