Japan’s Green Innovation Policy

Industrial Science & Technology and Environment Bureau, Ministry of Economy, Trade and Industry (METI)

Director, International Affairs Office Yoji UEDA

CSTP Workshop on Green Technology and Innovation Policy Paris, France (Oct. 25, 2010)

Contents

1. Global Challenges

2. R&D Trend and Future Innovation

Policy in Japan

3. Japan’s Green Innovation Policy

1

１．Global Challenges

2

・ Global CO2 emissions increased by almost 40% from 1990 to 2007, and are forecasted to reach about 2 times as much as 2007 by 2050, mainly due to the increase in developing countries.

・ 43% of global CO2 emissions are covered by OECD.

AnnexⅠstates excluding U.S.

U.S.

China

India

Brazil

Other states

0

30,000

40,000

50,000

60,000

1990 2000 2010 2020 2030 2040 2050

（mill

ion t

CO

2）

25%

23%

52%

23%

52%

20%

28%

62%

18%

21% 42%

35%

Source: RITE

10,000

20,000

Prospect of Global CO2 Emissions

1990

20,988

2007

28,962

“Global Warming” should be solved through world-wide cooperation

OECD 43.0%

Africa 3.0%

Latin America

3.6%

Asia 10.3%

China 22.3%

Former Soviet Union 8.3%

Non-OECD Europe

0.9%

Middle East 5.1%

Bunkers 3.5%

（Source） ＩＥＡ; Key World Energy Statistics 2010

29,381 Mt of CO2

Regional Shares of CO2 Emissions (2008)

3

45.7

62.8

119

13.5 14.4

174

0

20

40

60

80

100

120

140

160

180

200

Oil Natural gas Coal

Total World

OECD

Total World: 187.49 trillion cubic meters

OECD: 352,095 million tons

Source : BP Statistical Review of World Energy June 2010

Years

“Natural Resource Constraints” should be solved through world-wide cooperation

Confirmed reserves and reserves to production ratios of fossil fuel

Total World: 1333.1 thousand million barrels

OECD: 90.8 thousand million barrels

OECD: 16.18 trillion cubic meters

Total World: 826,001 million tons

4

“Aging” has been accelerating globally

・Working Population in Asia will peak out in 2015.

Source: United Nations; World Population Prospects: The 2008 Revision

Korea China

Japan

Singapore Indonesia India

Philippines

Malaysia

Vietnam Korea

China

Thailand

(year)

5

Working Population (population between 15 and 64 years old) in Asia

Innovation is the Key for the Solution

Global Challenges

Global Warming

Natural Resource

Constraints Aging ・・・・・・

“Innovation” is the Key for the solution

6

New Growth Strategy (Cabinet Approval in June, 2010)

7

Aims:

－GDP growth rate: Increase nominal growth to over 3% and real growth to over 2% (average by FY2020)

－Unemployment: Reduce the unemployment rate to the 3.0% - 4.0%range (medium term)

“Green Innovation” to address “Global Warming”

・ Innovative technologies are essential to halve global greenhouse gas emissions by 2050.

CO2 emissions in 2050: 62 G t

CO2 emission goal in 2050: 14 G t

[ Contribution of emissions reductions options in the BLUE Map Scenario

of ETP 2008, between 2005 and 2050]

Required CO2

reduction: 48 G t

Energ

y Savin

g

Technolo

gy

Cle

an E

nerg

y

Intro

ductio

n

CC

S

9% (4.3 G t)

10% (4.8 G t)

6% (2.8 G t)

21% (10.1 G t)

11% (5.5 G t)

7% (3.6 G t)

12% (5.9 G t)

24% (11.4 G t)

Industry and Transformation

Power Generation

Nuclear

Renewables

Power Generation Efficiency and Fuel Switching

End Use Fuel Switching

End Use Electricity Efficiency

End Use Fuel Efficiency

Source: IEA Energy Technology Perspective 2008

CO2 emissions

in 2005: 28 G t

8

“Life Innovation” to address “Aging Society”

・ Innovative technologies are needed to construct a sustainable society against the decrease in working population.

9

Minimally-Invasive Therapy Life-Support Robotics

Telemedicine system Regenerative Medicine

ES cell iPS cell Muse cell (other cells)

Cell data IT Analysis Measurement

2. R&D Trends and Future Innovation Policy in Japan

10

R&D in the past three decades in Japan

-0.6%

0.8%0.3% 0.3%

-0.7%-1.1% -1.2%

0.9%

0.9%

0.7% 0.5%0.5% 0.5% 0.3%

1.3%

1.1%1.8% 2.0%

1.3%0.8%

0.8%

2.5% 1.8% 1.5%2.4%

-0.1%

0.6% 1.3%

4.1%

4.5%4.3%

5.2%

1.0%

0.8%

1.2%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

1970-75 1975-80 1980-85 1985-90 1990-95 1995-2000 2000-2005

TFP growth

Capital Increase

Improvement of Labor Quality

Increase of Labor Quantity

GDP growth

TFP Contribution to GDP Growth

Source：JIP database 2008

・Japan’s rapid development before 1990 had been led by technological improvement.

・Since 1990, technological improvement has slowed down and contributed less to

economic growth.

11

・ TFP growth in Japan has fallen behind other states since 1995.

・ Return on R&D investment in Japanese private sector has experienced more severe decline than that in others’.

Source：EU-KLEMS Database 2009/11

* Base year (1995) : 1

日本 1.0201

米国 1.0766

ドイツ 1.0781フランス 1.0779

イギリス 1.0433

0.80

0.85

0.90

0.95

1.00

1.05

1.10

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06

全要素生産性指数

（年）

日本

米国

ドイツ

フランス

イギリス

R&D Efficiency in the world

Efficiency of R&D (Return on R&D investment) in private sector

Total Factor Productivity (TFP)

Japan

U.S.

Germany

France

UK

(year)

Germany 1.0781

France 1.0779

U.S. 1.0766

UK 1.0433

Japan 1.0201

France

Japan

Germany

U.S.

Source：OECD statistics 2008-1

*Return on R&D: added value in the next 5 years

per R&D investment in the 5 years

(Multiplier)

12

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

80 84 88 92 96 00 04 08

Gross Domestic R&D Expenditure per GDP

（Source）Main Science and Technology Indicators （OECD）

（％）

（Year）

Japan (2008) 3.8

Korea (2007) 3.2

U.S. (2008) 2.8

Germany (2007)

2.5

China (2007) 1.4

EU27（2007） 1.8

R&D Investment in the world

・ Gross domestic expenditure on R&D in Japan is the second largest in the world. ・ Gross domestic R&D expenditure per GDP (3.8 % in 2008) has been maintained at the top-

level among major economies.

0

50

100

150

200

250

300

350

400

450

80 84 88 92 96 00 04 08

U.S.(2008) 398

Gross Domestic Expenditure on R&D （Nominal, PPP exchange rate）

（Source）Main Science and Technology Indicators（OECD）

（billion dollars）

（Year）

Japan(2008) 161

China(2008) 121

Germany(2008) 77

EU27(2008) 277

Korea(2008) 45

Gross Domestic R&D Expenditure per GDP

13

・ Higher specialization and complexity in R&D elements make it difficult for each private sector to achieve innovation by its own resources only.

Background of Low Efficiency in R&D Investment - Excessive “Not-Invented-Here” Syndrome -

14

Background of Low Efficiency in R&D Investment - Strategies for Emerging Markets -

・ Growth in emerging markets is more rapid than that in developed markets.

・ Private sector should break into emerging markets.

15

Market growth in the world

(billion dollars)

2009-2015 market expansion

Emerging

markets

Developed

Markets Japanese

Market

Source: World Economic Outlook Database, April 2010

2002-2008 market expansion

Japan’s governmental R&D expenditure has less contribution to its gross domestic expenditure on R&D.

Governmental Expenditure per Gross Domestic Expenditure on R&D

Source: OECD; Main Science and Technology Indicators 2009/2 * Germany: 2007, other countries: 2008

Governmental R&D Investment

17.8%

24.6% 24.8% 27.0% 27.7%

29.5%

39.4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Japan China Korea U.S. Germany UK France

16

Importance of Government R&D Investment

Expansion of government R&D investment in the middle- and long-term Intensification of R&D for cross-sectoral base technologies that are

indispensable for solving the world-wide problems

Improvement of R&D Platforms to Create Innovation and Promote its Practical Use

Practical collaboration between industries and universities Promotion of social demonstration of new technologies and systems Promotion of International Standardization Activities Systematic Assessment and/or Certification for new technologies Readjustment of regulations and systems for new technologies

Governmental R&D Investment for Economic Growth

17

・ Government should improve R&D platform to create innovation.

R&D for Value-creating

R&D for Common

fundamental Technology

Technology Demonstration

International Standardization

Industry-Academia

Collaboration

Advanced R&D

Product Develop

ment

Business Model

Patent Strategy

Government

Private Sector

Support

Innovative Platform building

Solution

for global

Problems

Commercialization

18

Focus on “Green Innovation” and “Life Innovation”

Expand government R&D investment onto the fundamental technology

Create Open-Innovation bases

Enhance collaboration between industries and academia

Promote International Standardization Activities

Improvement of R&D Platforms to Create Innovation

19

３. Japan’s Green Innovation Policy

20

Growth driven by Japan’s strengths

Principal measures

● Putting Japan’s world-leading technology to use

● Toward becoming the world’s top environment

and energy power through a comprehensive

policy package

● Growth from green innovation and securing

support resources

● Lifestyle reforms through improving the comfort

and quality of life, etc.

● Create over ¥50 trillion in new markets and 1.4

million new jobs

● Reduce worldwide greenhouse gas emissions by

1.3 billion tCO2e using Japanese technology

Environment & energy

Principal measures

● Turning medical, nursing care, and other health-

related industries into growth-driving industries

● Promoting R&D of innovative pharmaceuticals

and medical and nursing care technologies from

Japan

● Boosting expansion to Asian and other overseas

markets

● Promoting the availability of barrier-free housing

Foster industries that meet demand and create jobs:

● Roughly ¥50 trillion in new markets and 2.8

million new jobs

Health (medical & nursing care)

Targets to reach by 2020

Targets to reach by 2020

New Growth Strategy (Cabinet Approval in June, 2010)

21

22

○ Putting Japan‟s world-leading technology to use

○Toward becoming the world‟s top environment and energy power through

a comprehensive policy package

・new systems design and regulatory reform

・expansion of environmental technologies and products, etc.

○Growth from green innovation

・electric power feed-in tariff system

・low-carbon investment and financing

・development of innovative technologies

・efficient electric power supply and demand through smart grid, etc.

Strategy for becoming an environmental energy power through “green innovation” ① (From “New Growth Strategy”)

23

Strategy for becoming an environmental energy power through “green innovation” ② (From “New Growth Strategy”)

○Lifestyle reforms through improving the comfort and quality of life

・ zero-emission homes, offices, and other facilities

・spread of eco-housing

・expanded use of renewable energies, etc.

○Creating green cities by promoting the rebuilding and remodeling of

superannuated buildings

・approach toward medium- to long-term environmental standards

・redevelopment, rebuilding, and remodeling of superannuated office buildings, etc.

○Model to reform the socioeconomic structure from local areas

・to promote the use of public transportation

・low-carbon urban and regional structures, etc.

2010 FY -2011 FY - 2013 FY Goal for 2020

¥50 trillion in new environment-related markets 1.4 million new environment sector jobs

Po

licy

Establishment of domestic

emissions trading system

New tax system as a

measure against global

warming

Spread, expansion and industrialization of renewable

energies (electric power feed-in tariff system, regulatory

reform, etc.)

Goal-setting of introducing renewable

energy, drawing up road maps

24

R&

D

Accelerating and prioritizing R&D of

innovative technologies (CCS, next-

generation vehicle, etc)

Road map of

innovative

energy

technology

From the timetable for the “ Growth Strategy implementation plan”

Implementation plan in environment and energy fields

Shift to “Green power”

<2>“Minimize electric

loss”

Low carbon revolution of

energy utilization

<3>“Reformative

introduction in green

material and process”

Green Innovation in society

and living environment

<4>“Thorough circulation,

substitution, and use

of resources”

<5>“From unit to optimum

system”

<1>“ Full-scale introduction

of Green power”

（example）

○ Higher effective and lower cost of

photovoltaic generation.

○ Practical use of electric vehicles and

fuel-cell cars.

etc

（example）

○ Practical use of SiC power

semiconductors

○ Practical use of superconducting

wire rod and equipment

etc

（example）

○ Practical use of electronic

devices using printing technologies

○ Practical use of nanomaterial

such as carbon nanotubes

○ Practical use of innovative

manufacturing processes

etc

（example）

○ Recycle technology of rare

metals and practical use of

alternative materials

○ Practical use of biofuel etc

（example）

○ Practical use, introduction and

dissemination of smart grid

etc

25

】 【 【 】 【 】

Key tasks for green innovation

R&D

Budget for S&T: \611 billion <\540 billion>

Green innovation \325 billion<\268billion＞

Life innovation \17 billion<\9 billion>

・Energy-saving IT

・Next generation lighting, etc.

Prioritize R&D in environment and energy fields

Promoting R&D in fundamental technologies for growing fields, such as EV and solar cells

Globalization of environment and energy industries

Promoting international demonstrations

Promotion of R&D

Promoting R&D in the fields of nursing care, diagnosis and treatment of cancer, and stem cells

Establishment of “Future City” Promoting demonstration of smart grid

・Fundamental technology

for drag discovery, etc

・CCS

・ solar cells, etc. ・ Guidelines related to

medical equipment, etc.

Supporting consumers to get eco-friendly equipments

Support system for getting eco-friendly cars

Promoting infrastructure industries and system exports Promoting international demonstrations in the fields of environment, medical

services and aerospace

Resource development, etc.

・Human resource

development, etc.

Others

\269 billion<\263billion>

Strengthening medical, nursing, and hearth care services

Promoting cross-sectoral cooperation and IT utilization

Strategic international standardization

Promoting international cooperation

26

Budget request for S&T in FY2011

Demonstration,

installation and

dissemination

・R&D support for regional energy management system under large-scale introduction of solar power facilities, electric cars, etc.

・International Standardization of Smart Grid is being discussed in the alliance.

•Real scale demonstration is planed at Los Alamos and Albuquerque in the State of New Mexico, US.

R&D International Standardization International Demonstration

Promoted by the Alliance

among industrial, academic,

and government entities

Integrated project from R&D to strategic actions for commercial use

Demonstration Project

at Los Alamos

Smart Grid

Period: FY2010～2013 (FS in FY2009) Estimated Total Budget: 300 million USD

27

Strengthen world-class R&D centers In “Tsukuba Innovation Arena (TIA)” based on collaboration among AIST, NIMS, Tsukuba

Univ. and Japan Business Federation, international standardization, evaluation and certification for the performance of new technologies are integrally promoted in addition to high-level advanced R&D.

AIST especially leads to build the collaborative center in the research fields of evaluation for performance and safety of storage batteries, solar cells, medical robots.

Tsukuba Innovation Arena

“Open Innovation” Based on Collaboration of Industrial-Academic-Government Complex

Collaborative R&D centers

28

➢Strengthening R&D by capitalizing on regional strengths For regional development not only R&D by capitalizing on regional strengths at

“Innovation hubs”, but also integrated promotion of infrastructure development including system reform are required

29

Example activities of innovation hubs

Organization Current Activities Activities for Commercialization

Kyoto University R&D of next-generation batteries

Establishing standards of safety and credibility at AIST Kansai

Kyushu University R&D for hydrogen-related products

Test and certification of hydrogen-related materials and equipment

Fukuoka IST R&D for advanced-system LSI Providing fields for demonstration and experiment of systems

Strengthening R&D for development of regions

30

International Standardization is getting more important under globalization, modularization, digitalization, and networking.

Japan promotes International Standardization of technology and regulation under global cooperation , especially with Asian-Pacific economies.

(1) Bilateral Cooperation with Asia-Pacific economies

- Concluded AIST*1 (Japan)-NIST*2 (US) MoU on R&D cooperation in the field of smart grid, etc. - Published Joint Statement on Standards Cooperation among China, Korea and Japan - Under discussion with Singapore, Malaysia, Thailand, Indonesia, etc.

(2) Multi-lateral Cooperation

<Potential Cooperation Platform> APEC, ERIA (Economic Research Institute for ASEAN and East Asia), PASC (Pacific Area Standards

Congress) etc. Ex) APEC wide cooperation

-To hold 8th conference on standard and conformance for green harmonization -To hold Supply Chain Visibility Workshop (RFID) etc.

Asia-Pacific Standardization Cooperation Program

31

(1) Oxyfuel combustion ：Callide Oxyfuel Combustion Project

Demonstration of reliability and operability of Callide-A unit No.4 power plant with

CCS using oxyfuel combustion technologies as the actual power plant. The world‟s

first demonstration test of an integrated CCS and underground storage system at an

existing power plant.

■ R&D：Japan (J-Power, IHI., etc.) /Australia

■ Site : Queensland

■ Scale：30MW ■ CO2 capture：30,000 t-CO2/year

■ Period：2011～2014

(2) ZeroGen Project

Demonstration of Air-blown Integrated Coal Gasification Combined Cycle (IGCC) with

CCS function, the world's first commercial sized plant.

■R&D: Japan(Mitsubishi Heavy Industries, Mitsubishi Corporation)

Australia(ZeroGen Corporation)

■Site: Queensland

■Scale:530MW

■CO2 capture : 200～300mill tons/ year

■Period： 2008～

CCS Demonstration Project with Australia

METI has been implementing 3R cooperation projects with China since 2007 and with Thailand since 2009. Transfer Japanese experience and know-how for developing “Eco-town” through

cooperation between local governments.

Start studying for future possibility of cooperation with other cities in Asia.

○Feasibility Study ○Training Program Dispatch of Experts

Asia Japan

METI’s support

32

Japan and China

1) Kitakyushu(J) and Dalian(C) (‟09-‟10)

2) Ibaraki(J) and Tianjin(C) (‟09-„10)

3) Kawasaki(J) and Shanghai(C) (‟08-‟09)

4) Kitakyushu(J) and Tianjin(C) (‟08-‟09)

5) Hyogo (J) and Guongdong (C) (‟07-‟09)

6) Kitakyushu(J) and Qingdao(C) (‟07-‟08)

Japan and Thailand

1) Yamaguchi,Kitakyusyu(J)

and Rayong(T) („09-‟10)

2) Akita(J) and Chonburi(T) („09-‟10)

3) Osaka(J) and Amata Nakorn(T) (‟09–‟10)

Experience and know-how relating to development of recycling systems, etc.

Japan-Asia 3R Cooperation Project

○ “Green Innovation” is the key to solve global challenges such as “global warming”

○Japan to promote green innovation through the new growth

strategy.

○Promote the creation of a low-carbon society through a

comprehensive policy package including new system design,

regulatory reform, R&D etc.

○Improve R&D platforms to create innovation

○Contribute to world economic growth through innovation with

international collaboration

33

Conclusion