Japan needs more than a carbon tax and a green fund to reach net zero

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Japan needs more money to invest in innovative technologies to help it achieve its decarbonization goals – and one potential solution could be to consider a new form of sovereign debt to fund it.

That’s the view of the country’s environment minister, Tsuyoshi Yamaguchi, who was appointed to the post in November. While other officials don’t necessarily share his view of a different kind of bond, the minister said Japan’s 2 trillion yen ($17.5 billion) green innovation fund, established in 2020, and a possible carbon tax would not be enough to reach the net. zero.

“It’s important to share the urgency of carbon neutral goals with people,” he said in an interview. “We need investments for future prosperity, not just to fill the country’s deficits.”

The minister’s remarks come as Tokyo is still ironing out details on exactly how it will meet its climate change targets. Prime Minister Fumio Kishida has launched a debate on a new “clean energy strategy”, calling it a key part of his political agenda. On the other hand, his government has suspended plans to introduce a carbon tax this year, raising questions about the country’s commitment to tackling climate change.

Yamaguchi did not provide details on the type of debt he was considering. Japan and the United States are the only two countries in the Group of Seven that have not sold or planned to offer sovereign green bonds. Japanese companies have been frequent sellers, however, with the country’s business sales doubling to a record $17 billion in 2021, according to data compiled by Bloomberg.

Japan is aiming to reduce carbon emissions by 46% by 2030 from 2013 levels, and has a goal of full carbon neutrality by 2050.

Asked about the debate over whether nuclear power is needed to meet the 2050 target, Yamaguchi said it was “too soon” and the country needed to prioritize safety when restarting nuclear power. nuclear power plants and give priority to renewable energy sources.

“Europe and Japan think differently – and the situation is very different,” he said when asked about the European Union’s decision to include certain gas and nuclear projects in its taxonomy. green. “Fukushima didn’t happen in Europe. It did in Japan. We must prioritize safety. »

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