Japan warns against allowing EU to set emission rules

Japan must lead the global push to cut carbon emissions or else live in a world where international standards are set by European regulators, a leading adviser to the prime minister has said in an interview with the Financial Times.

The comments by Takeshi Niinami, Suntory chief executive, highlight fears that Japan’s competitive strength in areas such as hybrid gasoline-electric cars will be destroyed if international standards discriminate against their technology and favour purely electric vehicles.

He made the remarks as Japan’s government races to elaborate its plans to achieve carbon neutrality by 2050.

“We are so afraid that [rules] stipulated, regulated and decided by the EU will become the global standard,” said Mr Niinami. “Then our competitive edge would be challenged so much.”

Mr Niinami is one of two private sector members of the government’s Council on Economic and Fiscal Policy, the main co-ordinating body for Japan’s economic policy.

He said that Japan might seek to promote alternative standards via the Trans-Pacific Partnership, a group of 11 Asia-Pacific nations including Canada, Australia, Mexico, Vietnam and Malaysia, of which Japan is a leading member.

“It’s not Japan’s rules,” said Mr Niinami. “It should be TPP rules or working with Asian countries where they still have issues such as CO2 emissions from coal-fired generators.”

In a press conference on Friday, Prime Minister Yoshihide Suga said the shift to carbon neutrality should be seen as a growth opportunity for Japanese industry, not just an environmental policy.

“We need to find a new frontier for corporate Japan to invest in,” said Mr Niinami. But while some Japanese companies regard carbon neutrality as an opportunity, the crucial automotive industry fears it will lose out to competitors in the shift away from internal combustion engines.

As part of its 2050 carbon neutral road map, the Ministry of Economy, Trade and Industry is considering banning the sale of new gasoline-only vehicles by the mid-2030s, according to people close to the government.

But Japan wants to keep hybrids on the road for the foreseeable future — starkly different to the UK’s plan for phasing out all new petrol or diesel vehicles after 2030, including hybrids after 2035.

Banning hybrids will be a blow to Toyota and other carmakers with the segment accounting for 30 per cent of Japan’s new car sales last year, while electric vehicles and plug-in hybrids made up only 1 per cent.

“Rulemaking in the EU has been progressing so rapidly. You’re left behind,” said Mr Niinami, using electric vehicles as an example. “We have to consider the fact that because of [electric vehicles] we will lose a lot of part manufacturers.”

Mr Niinami emphasised Japan’s goal should be net carbon neutrality, not zero domestic carbon emissions, suggesting he expected a role for offsets such as emissions reduction in less developed Asian countries. He said fuels such as hydrogen could play an important role.

Chief executives of Sony and other Japanese companies have also recently called on the government to outline its energy policy to achieve its 2050 target, warning that further delays could hurt their business.

Mr Niinami said the government needed to address the question of how the country would increase the use of nuclear and renewable energy and reduce its heavy reliance on fossil fuels.

“Having said that, it’s a good thing that we can discuss openly the resumption of nuclear reactors, which was a taboo,” he added.

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