The Generation of Business and International Competitiveness Through Innovations in Countering Global Warming

ABSTRACT

For Japan, meeting the reduction standards set by the Kyoto Protocol is by no means an easy task. In order to promote private sector-led global warming countermeasures and innovation, create new business opportunities, and strengthen international competition, it is necessary to minimize the relative costs of greenhouse gas (GHG) mitigation.

nnovation offsets the burden of GHG reduction, and has the converse potential of increasing international competitiveness. Simulation results of GTAP-E, the Computational General Equilibrium (CGE) model, reveal that, without innovation, production by countries with substantial GHG reduction goals-such as Japan and the EU-will decrease in high energy-consumption industries. Instead, production sites will shift to countries and regions without reduction targets. However, if innovation can be developed, production levels in Japan and the EU will actually rise, while production in other countries and regions will decrease.

To strike a balance between promoting innovation and solving the issue of global warming, it is necessary for reduction policies to be left up to the machinations of the business world's market mechanism, while ensuring at the same time that strict measures to prevent free-riding are also in place. Compared to other countries, the peculiarities of Japan's global warming countermeasures stand out as a gentleman's agreement, and these policies have now become fetters to the promotion of innovation.

When we compare the international competitiveness of global warming-related businesses, Japan has strong products in the competitive manufacturing field of environmental technologies. Furthermore, with the aid of supportive policies, Japan is gaining ground in the creation of new businesses in fields such as renewable energy resources. On the other hand, the Japanese service sector is left in the shadows of European countries and the United States.

In Europe and the United States, market-maximizing business model structures and international alliances are occurring at a brisk pace. Emissions trading, financing, consulting, marketing support, and other business ideas are also being created. Hailing GHG reduction as "economically meritorious", European and American market development for regionally and privately led assistance for businesses related to global warming is advancing.

In order to promote a proactive approach by the private sector, accurate recognition of the business opportunities offered by global warming countermeasures is vital. Moreover, it is necessary to enact short-term approaches to promoting innovation, while at the same time construct short-term private sector networks and concrete market design aimed at market development. Furthermore, it is paramount that Japan participates proactively in the construction of international business rules relating to global warming prevention. In regard to policies for assisting private sector initiative, it is necessary to construct a strategy for global warming countermeasures from an internationally competitive standpoint, to provide incentives to businesses for reducing emissions, and to develop the proper infrastructure to support voluntary efforts and innovations by the private sector.

Introduction

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