Create Incentives to Help The J-Credit system

The J-Credit system, issued by the Japanese government, certifies the reduction or absorption of CO2 emissions resulting from the installation of energy saving machine/equipment and environmentally friendly management. J-Credit is one of the attribute tracking systems that are officially accepted by RE100, so the purchase of the credit enables companies to join RE10 (RE 100 is a collaborative global business initiative committed to working towards 100% renewable energy.)

J-Credit assists companies in several ways. First, purchasing the credit will help companies gain reputation and attract investments. The credit system also provides incentives for companies to convert their sources of energy to more renewable ones and to save energy, which could lead them to the reduction of running costs. In addition, by exchanging the purchased credits through the market, they can gain profits.

The total amount of the J Credits that have been traded thus far is approximately 2.76 million t-CO2, so it can be said that the system has had significant impacts on energy saving and climate finance.

Nevertheless, this system is problematic in that it could trigger companies to have an attitude that just purchasing the credit is enough for their sustainability strategy. Consequently, it may not be effective to help decrease their dependency on fossil fuel.

Therefore, in addition to the current J-Credit system, the Japanese government should create a mechanism that forces companies to consider a) constructing on-site power generation or b) power purchase agreements (PPA) to be eligible for RE100.

Constructing on-site power generation: Small and medium-sized enterprises do not have the capacity to install such facilities, so it is major corporations who should take the initiative to promote renewable energy in Japan. Thus, the Japanese government should provide incentives such as tax breaks for large enterprises to construct on-site power generation facilities.
PPA: Although PPA is widely used abroad for the RE100 certification, most Japanese companies are unable to purchase renewable energy through PPA because Feed-in Tariff (FIT) has been put in place. Once the FIT policy is lifted in 2019, it will be crucial to design a system that allows Japanese companies to purchase renewable energy with low cost and to meet RE100 requirements.

The IPCC Report states that it is urgent to lower emissions from energy supplies, and the majority of institutional investors put emphasis on ESG (environment, social, and governance) investment and are willing to invest in companies that are active in creating environmental and social contributions. As shown in the Marubeni Corp’s initiative, divestment and ESG are becoming keywords for major Japanese companies.

Activity Rating: ** Standing Still

As mentioned above, J-Credit system contributes to climate finance; however, in order to accelerate the installation of renewable energy, the Japanese government needs to rebuild the system and provide incentives for large enterprise to achieve on-site power generation.

There are still many Japanese companies which have not engaged in environment friendly management. Therefore, it is necessary to persuade companies and financial institutions to promote RE100.

Take Action: Please send the following message to the policymaker below:

Dear Mr. Hiroaki Nakanishi, KEIDANREN (Japan Business Federation),

Actively participating in climate action through promoting RE100 will show to the world that Japanese companies are leading in the field of ESG. Also, by attracting ESG investment, it will stimulate the Japanese economy.

Therefore, we strongly suggest that Keidanren initiates active participation in RE100 and encourages Japanese companies to not only purchase J-Credit but also positively engage in on-site power generation or PPA.

Contact:

Mr. Hiroaki Nakanishi
KEIDANREN (Japan Business Federation)
Website: http://www.keidanren.or.jp/
E-mail: webmaster@keidanren.or.jp

For more information, please contact Climate Scorecard Japan Country Manager; Kenta Matsumoto: kmatsumoto@climatescorecard.org

Reference
Nikkei News Paper. (2018, September 27). “Ministry of Economy, Trade and Industry provides assistance to take in ESG money to Japanese companies: Appeal to global investors” Retrieved from https://www.nikkei.com/article/DGXMZO35791510W8A920C1EE8000/?n_cid=SPTMG053

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