Japan Energy Update Kae Takase Senior Economist Governance Design Laboratory

Energy and Economy to 2030 (reference) Million kl of crude oil equivalent Billion yen (1995 prices) Economy is assumed to grow by 2% to 2010, 1.7% to 2020, 1.2% to But energy demand is not supposed to grow, but to decrease since Gov. Reference

Reference assumption (2) Economic growth  TFP (total factor productivity) is assumed to increase 1%/year.  Labor force will continue to decrease since  Unemployment rate will be around 4%. F.Y.2010/ / /2020 GDP growth2.0 %/y 1.7 %/y 1.2 %/y

ΔCO2 =ΔCO2/E ＋ ΔE/GDP ＋ ΔGDP Japanese government expects very high E/GDP reduction for the future. Renewable scenario for 2030 does not show much CO2/E reduction.

ΔCO2=ΔCO2/E ＋ ΔE/GDP ＋ ΔGDP/POP+ΔPOP

Energy intensity of GDP (reference + higher efficiency) Energy intensity of GDP is assumed to decrease very fast.

CO2 Emission Kyoto target is set to +-0% of 1990 level for CO2 emission from energy, and it is expected to be accomplished by ‘additional’ policies.

CO2 Emission in 2003

Final Demand by sector (reference) Energy demand decrease in industrial sector, but increase in other sector (except for cargo after 2010).

Final Demand by sector (reference + energy saving tech.) Kyoto target

Policy Measures for Kyoto target 1) Industry ReferenceCurrentAdditional Voluntary reduction by JFE* -192 High performance furnace High performance boiler High performance laser - Cascading in complex -100 *Japan Federation of Economic Organizations (Nippon Keidanren) Unit: 0000 kl (Crude oil equivalent)

Policy Measures for Kyoto target 2) Residential & Commercial ReferenceCurrentAdditional Best efficient standard (current)-570 Best efficient standard (current)-10 Reduction of stand-by elec.-40 Higher efficient house Higher efficient building Efficient boiler Efficient lighting0-50 Efficient air conditioner for building--30 HEMS BEMS Strict implementation of energy efficiency law-70 Unit: 0000 kl (Crude oil equivalent)

Policy Measures for Kyoto target 3) Transportation ReferenceCurrentAdditional Best efficient standard (current)-870 Best efficient standard (current)-10 More clean energy car Introduction of sulfur-free fuel-40 Introduction of no-idling car-20 Comprehensive policies in transportation system to Unit: 0000 kl (Crude oil equivalent)

Policy Measures for Kyoto target 4) Trans-sectoral ReferenceCurrentAdditional More information of efficient appliances R&D in energy efficiency--110 Unit: 0000 kl (Crude oil equivalent)

Policy Measures for Kyoto target 5) Transformation ReferenceCurrentAdditional NuclearCapacity factor 83-77%87-88% Renewables9 G liter15 G liter19 G liter NG cogeneration3030 MW4620 MW4910 MW Fuel cell40 MW2200 MW

Summary of Government Outlook (1) Energy demand is expected to increase gradually to  Structural change in economic activity  Demand grows for residential, commercial, and passenger transportation. Nuclear generation plan has became smaller since last outlook. (+13  +4 plants until 2010)  Policy to raise capacity factor for Kyoto target.  From 2010 to 2030 High nuclear case: 4+13 (capacity factor 90%) reference: 4+6 (85%) Low nuclear case: 4+4 (85%)

Summary of Government Outlook (1) Kyoto target is set to +-0% of 1990 level, but it is a challenging target. -6% is planned to meet by flexibility measures (emission trading, CDM, etc) and carbon tax.

Japan LEAP model for AES04

Scenarios 1. Reference  Follows IEEJ (Institute of Energy Economics, Japan) forecast in National Alternative  Additional policies for less nuclear and more renewables and energy efficient technologies. 3. Regional Alternative  Additional policies with North East Asian regional cooperation. All scenarios are calculated from 2000 to 2030.

Regional Alternative (1) Pipeline Oil Import from Siberia  1 million bbl/day, from 2010, $1.5/bbl higher price Pipeline Gas Import from Sakhalin  6 million ton from 2015, price is set $3/GJ in 2005 (rise at the rate of crude oil price) Electricity import from Sakhalin  2GW from 2012, 4GW from 2014, 5 USC/kWh (fueled by natural gas)

Regional Alternative (2) Oil Refining on Commission with China  10,000 bbl/day in 2004, increase to 60,000 bbl/day in 2010, remain same until 2015, finish in 2016  Commission fee is set $3/bbl Regional Cooperation in Nuclear  Funds Nuclear Research: 8 million USD from 2007 to 2015, raise to 100 million USD until 2025, raise to 300 million USD by 2030 Waste Agreement: 8 million USD from 2006 to 2015, 25 million USD from 2016 to 2030 Cooperation in Energy Efficiency and Renewables  Funds Energy Efficiency: cost $1/HH since 2006 (approx. 50 million USD/year), Renewables: cost 50 million USD/year to Elec. Gen.  Effect 2 years earlier implementation of technologies in energy efficiency and renewables Cost reduction by 10%

Total Cost of scenarios Billion Japanese yen (2002 Price) *These costs are annual (not cumulative) costs, and are relative to the reference case. NA=National Alternative, RA=Regional Alternative

Difference with reference (Primary) Unit: 10^10kcal

Comparison with other outlook Final Energy Demand Unit: 10^15J

Self-sufficiency EJ, % BAUNARA Rate of self- sufficiency (%) 20%23%22% Rate of NEA sufficiency (%) 33% Definition of self-sufficiency : production of fossil fuel, renewable energy (including geothermal, hydropower, and waste), and nuclear energy.

CO2 Emission Index: 2000=1 reference

Summary Regional cooperation needs higher cost in early years, but results in lower cost in a long run (comparing with national alternative).  More energy efficiency measure and renewables are installed in RA, but the cost of them decline, and the total cost becomes lower even more are installed. Regional cooperation policy would result in higher regional-self-sufficiency. (BAU 23%, NA 22%, RA 33%) CO2 emission: slightly lower emission in regional alternative than national alternative