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ASIA PACIFIC Edition Regional Carbon Pricing & Markets Series Welcome & Opening Address

ASIA PACIFIC Edition Regional Carbon Pricing & Markets Series Part 1: Leaders Dialogue – Net Zero

Government of of Japa pan Updates from Japan Regional Carbon Pricing & Markets Virtual Series - Asia Pacific Edition - December 1, 2020 Office of Market Mechanisms Ministry of the Environment, Japan

Mid- and Long-term GHG Mitigation Targets of Japan Ministry of the Environment Government of Japan ・ NDC (Decided by the Global Warming Countermeasures Headquarter on July 17, 2015 ） ・ Global warming countermeasure plan FY2018(Confir med value): （ Cabinet decision on May 13, Base year emission 1.24 billion 2016 ） Emissions FY2013: 1.408 billion tCO2 (12% ・ Basic environmental plan （ 0.1 billion t-CO 2 ） tCO2 ※ Number at the reduction from （ Cabinet decision on April 17, time of target setting 16 FY2013) 2018 ） ・ Long-term energy supply Compared to /demand outlook (Energy FY2013 14 mix) 26% decrease in （ METI decision in July, 2015 ） Consistent FY2030 ・ Basic energy plan 12 （ 1.042 billion tCO2 ） （ Cabinet decision on July 3, 2018 ） Continuous ・ Long-term Strategy reduction for 5 （ Cabinet decision on June 10 years since Absorption 11, 2019 ） 2014 source 80% 8 decrease Innovative Environmental NDC of Japan (Decided Realize • Innovation Strategy by Global Warming by 2050 「 Decarbonized 6 countermeasures (Decided by the Headquarter on March Society 」 (Net-zero) Integrative Innovation 30, 2020) as early as possible in Strategy Promotion 4 Pursue further mitigation the 2 nd half of this Conference on January rather than stay at this century 21, 2020) level 2 In line with the energy Aiming to establish mix update, aiming for innovative technologies ambitious target by 2050 to make “Beyond reflecting further 0 Zero” possible mitigation efforts 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Mid-term target （ Source ） Developed based on 「Japan’s National Greenhouse Gas Long-term Emissions in Fiscal Year 2017 （ Final Figures) 」 and 「 Plan for Global （ Target ： Stacked ） 5 Warming Countermeasures 」 target （ Goal ）

The Long-term Strategy under the Paris Agreement (Cabinet Decision on June 11, 2019) Ministry of the Environment Government of Japan 6

Spread of Decarbonization in Corporate Management *As of October 19, 2020 Ministry of the Environment Government of Japan TCFD SBT RE100 1,471 financial institutions, companies Number of approved companies: Number of participating ◼ ◼ ◼ and governments around the world (311 488 (75 are Japanese companies.) companies: 263 companies are in Japan.) expressed their support. The 2nd largest in the world worldwide (40 are Japanese ◼ The largest number in the world companies.). ◼ Number of approved companies with SBT The 2nd largest in the world ◼ Number of companies that support by country (Top 10 countries) Number of companies participating TCFD(Top 10 countries & regions) in RE 100 by country (Top 10 countries) [source] TCFD website TCFD Supporters ( https://www.fsb-tcfd.org/tcfd- [source] Science Based Targets homepage Compiled from Companies Take Action Compiled from the [source] RE 100 home page (http://there100.org/). Industr supporters/) (http://sciencebasedtargets.org/companies-taking-action/). Industry classification is prepared y classification is prepared by the secretariat by applying the Japan Standard Industrial Classification, etc. by the secretariat by applying the Japan Standard Industrial Classification, etc. List of companies working on TCFD, SBT and RE100 Construction ： Sekisui House, Ltd. / Daito Trust Construction Co., Ltd. / Daiwa House Industry Company, Limited /TODA CORPORATION / LIXIL Group Corporation / Sumitomo Forestry Grocery : Ajinomoto Co., Inc. Electric Appliances ： KONICA MINOLTA, INC. / Sony Corporation / Panasonic Corporation / Fujitsu Limited / FUJIFILM Holdings Corporation / RICOH Company, Ltd. Chemical : SEKISUI CHEMICAL CO., LTD. Pharmacy ： ONO PHARMACEUTICAL CO., LTD. Other products ： ASICS Corporation Information & Communication ： Nomura Research Institute, Ltd. 7 Retail Trade ： ASKUL Corporation / AEON CO., LTD. / J. FRONT RETAILING Co., Ltd. / MARUI GROUP CO., LTD. Real estate ： MITSUBISHI ESTATE CO., LTD.

2050 Zero Carbon Cities in Japan Ministry of the Environment Government of Japan ◼ 175 local governments announced their commitment to net zero carbon emissions by 2050. ◼ These local governments represent 82 million people (64.7% of Japan’s population) , and 3.6 trillion USD in GDP. Population of zero carbon cities (mil.) half of Japan’s popu pulati tion As of Nov 25, 2020 8 http://www.env.go.jp/en/earth/cc/2050_zero_carbon_cities_in_japan.html

Tax for Climate Change Mitigation Ministry of the Environment Government of Japan Tax rate corresponding to the amount of CO2 emissions for all fossil fuels (JPY 289/t-CO2) • Enforced from Oct. 2012 and increases in the tax rate gradually over 3 and a half years • All the tax revenue will be allocated for curbing energy-originated CO2 emissions • Tax rate per tCO2 Tax for Climate Change Additional tax rate Mitigation Petroleum and Coal Tax JPY779 Current tax rate JPY400 Crude oil/ Gaseous Oil products JPY301 hydrocarbon ※bracket means the Coal (LPG/LNG) energy tax rate Enforcement Taxable Objects Current Tax From Oct.1, From April 4, From April 4, Rate 2012 2014 2016 Stage ＋ JPY 250 ＋ JPY 250 ＋ JPY 260 Crude oil/Oil （ JPY 2,040 ） （ JPY 2,290 ） （ JPY 2,540 ） （ JPY 2,800 ） products [per 1kl] Gaseous ＋ JPY 260 ＋ JPY 260 ＋ JPY 260 hydrocarbon （ JPY 1,080 ） （ JPY 1,340 ） （ JPY 1600 ） （ JPY1,860 ） [per 1t] Coal ＋ JPY 220 ＋ JPY 220 ＋ JPY 230 （ JPY 700 ） Tax （ Note ） 0.76 JPY for gasoline per l by converting the added tax increase (760JPY) (After April 2016 (Normal year)) （ JPY 920 ） （ JPY 1,140 ） （ JPY 1,370 ） [per 1t] Revenue [FY2013] JPY 90 billion [FY2014 and FY2015] JPY 170 billion [After 2016 (normal year)] JPY 260 billion 9 Revenue is allocated to the introduction of renewable energy and drastic strengthen of energy conservation

J- Credits: Decarbonization through ‘Climate Change x Digital’ Ministry of the Environment Government of Japan J-credit trading market utilizing blockchain technology (“ ezzmo ” ) supply/selling purchase/utilizatio n Company B Company A （ company participating （ program manager ） in SBT, etc. ） Supporting AI ・ IoT efforts to Technolog decarboniz y e companies Enhancin g enterpris households SMEs e value STEP １ STEP2 Expansion of credit creation/transaction volume through Help creating a trading market utilizing computerization of application procedures and the blockchain led by the private sector simplification/automation of credit certification procedures 10 10

ASIA PACIFIC Edition Regional Carbon Pricing & Markets Series Part 1: Leaders Dialogue – Net Zero

ASIA PACIFIC Edition Regional Carbon Pricing & Markets Series Part 2: Scene Setter – Asia Pacific Markets Outlook

Regional Carbon Pricing & Markets Virtual Series - Asia Pacific Edition Jointly organized by IETA and the Carbon Pricing Leadership Coalition (CPLC) & World Bank Virender Kumar Duggal Principal Climate Change Specialist Asian Development Bank 1 December 2020

Climate Change and DRM Challenges 14

The Alarming Gap 15

The Alarming Gap Pre-COVID-19 global commitments were already insufficient to meet the Paris Agreement’s goals. Current commitment s in NDCs would lead to a temperature rise of 3.2 o C this century. Image Source: Climate Action Tracker, September 16 2020

Carbon Pricing ▪ Economists have for long recognized climate change as a market failure because of the externalities of anthropogenic GHG emissions as an undesired side-effect of economic activities. ▪ Carbon pricing internalizes external costs of GHG emissions by transferring the burden of environmental damage to those who are responsible for it in the first place. ▪ It can provide a clear signal to GHG emitters and provides them an option to either reduce or pay for their emissions should they choose to continue emitting. ▪ Carbon pricing can thus provide economic incentives for achieving the broader environmental objectives to the society cost effectively. 17