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Eco-business Industry Overview

11, 01. 2004

Current State

Market Size at Roughly 30 Trillion Yen in 2000

   Eco-businesses span many different business categories, and so there are many varieties of eco-businesses, and it also has a very broad base. Broadly classified, they include businesses in the clean energy field (e.g. solar power, wind power, fuel cells), the environmental technology field (e.g. water quality, emissions purification), the resource recycling field (e.g. waste treatment and waste separation), and the environmental support services field (e.g. providers of support for the acquisition of environmental management ISO certification).

   According to a study compiled by the Ministry of the Environment, the size of the Japanese eco-business market in 2000 was at 29.9 trillion yen, and the number of jobs created was at 769 thousand. Under present conditions, (1) waste treatment services and the manufacture/ construction of waste treatment facilities, and (2) Resource recovery and recycling are the two areas where there are large-scale sales.
   The Ministry of the Environment estimates that the size of the eco-business market will be at 47.2 trillion yen by 2010, with 1.119 million people employed in the industry, and at 58.4 trillion yen by 2020, with 1.236 million employed. In its "White Paper on the Environment" drawn up for FY2004, the Ministry of the Environment characterized such surges in numbers as representing the development of a new society and named this an "Environmental Revolution."

The amount of discharged carbon dioxide classified by country in 2000

Growth Also Expected in the Environmental Education and Information Services Field

   The Ministry of the Environment forecasts that eco-business fields in which turnover and the number employed will be growing in the future will include the manufacture of air pollution control equipment, such as photocatalysts; energy saving, including fuel cells and new energy; and education and information services, which includes consulting for the drafting of corporate environmental reports or for the acquisition of ISO certification.
   Meanwhile, the Ministry of Economy, Trade and Industry lists the environment, alongside information and communication technology and long-term care and support of the elderly, as being a growth area of the 21st century. Behind this is the concept, often heard in recent years, of an economy for sustainable development; the view that we should not achieve growth or profits today at the cost of leaving future generations with a negative legacy. In other words, this concept calls upon us to manufacture items or conduct services without causing adverse effect on the environment. It is expected that once this becomes something carried out thoroughly, environmental measures will become a business in themselves, and the eco-business market will thereby expand at a rapid pace.


Pollution Control Was the First Eco-business in Japan

Heavy traffic jam along Showa Avenue,Tokyo
Heavy traffic jam along Showa Avenue,Tokyo

   A variety of problems erupted in various parts of Japan from the 1950s to 1960s, towards the end of the country's period of high economic growth. They were distortions that resulted from the economic boom, public nuisances in the form of pollution. The so-called "four major pollution triggered diseases" in Japan - the Minamata disease (a neurological disorder caused by methylmercury poisoning; found in the Minamata Bay area, Kumamoto Prefecture), the second Minamata disease (found in Niigata Prefecture), itai-itai disease (chronic cadmium poisoning) and Yokkaichi asthma - surfaced, and environmental regulations began to be enforced toward business enterprises. It was at this time that the manufacture and sale of equipment to control water and air pollution appeared as the first eco-business in Japan.

   The second turning point was brought about by the two oil crises of the 1970s. Due to the sharp rise in oil prices, companies turned to thoroughgoing energy saving. This was reflected in products and resulted in strengthening Japan's international competitiveness. At the same time, "mass production and mass consumption," which had symbolized affluence, were renounced. The focus shifted from offering good products at a low price, and recyclable products that were "safe and environment-friendly" began to appear.
   In the 1990s, environmental efforts began to be sought of companies under the standpoint of good corporate citizenship. Under the logic that consumers will ultimately turn away from companies that do not give consideration to the environment and thereby lose its competitiveness, environmental efforts are starting to become one of the measures that become reflected in shareprices or in investment activities. This resulted in the appearance of the "support" field, such as consulting for the acquisition of environmental management ISO certification and the cultivation of human resources trained in Environmental Management Systems (EMS).

Major Trading Companies and Financial Institutions among Those Poised to Make Entry into the Emission Rights Trading Business

   The fourth turning point is the Kyoto Protocol, which sets down measures for the prevention of global warming. The Kyoto Protocol contains binding emission targets for developed countries for the reduction of the emission of greenhouse gasses such as carbon dioxide (CO2) and hydrofluorocarbons (HFCs) and will enter into force in February 2005. In the case of Japan, emissions of the period between 2008 and 2012 will need to be reduced by 6 percent, as measured against a base year of 1990. Realistically speaking, however, this target is difficult to achieve. For this reason, the Kyoto Protocol adopted an emission rights mechanism. Under this mechanism, if a company executes a project overseas to reduce emissions, such as through afforestation, that company acquires emission rights that can be resold to other companies as emissions credits.

Carbon-dioxide emissions of Japan in FY2002

   Many emissions brokers have been established, one after another, in the United States and Europe. Major trading companies and financial institutions in Japan are also making preparations to enter this market. One forecast is that once the commercialization of emission rights is realized in Japan, domestic transactions alone would be worth over 1 trillion yen a year. The Ministry of Economy, Trade and Industry is also planning to speed up the preparation of emissions transaction regulations.

Three Key Points towards the Future

Point 1
Will the Spread of New Energy Advance?

Present condition and prediction of the market and employment scale of environmental business in Japan

   While Japan has set a target for the reduction of the emission of greenhouse gasses, such as carbon dioxide, in the Kyoto Protocol, the country needs to expand its use of new energy in order to achieve this target since it is difficult to build new nuclear power stations. Wind power, solar power, and power generation utilizing biomass are some of the energy systems that will become the pillar of new energy. However, it is still unclear whether they will become viable as industries. According to the Ministry of Economy, Trade and Industry, while the cost to generate 1 kilowatt of electricity is about 10 yen using oil and roughly 6 yen for nuclear power, solar power is costly at about 70 yen per kilowatt. Costs are relatively low for wind power, but it is difficult to maintain a steady supply of power. For these and other reasons, the proportion of new energy in Japan is overwhelmingly low when compared with other major countries of the world.

Point 2
Can Japan Come out Ahead in the Race to Develop Fuel Cells?

   Fuel cells are said to be the future "star" of the eco-business. Fuel cells generate electricity through a chemical reaction between hydrogen and the oxygen in the air. It emits no carbon dioxide, which brings about global warming; only water is created. The practical application of the household use this mechanism is imminent, and a fuel cell device manufactured by Tokyo Gas Co., Ltd. will be installed at the Prime Minister's official residence in the spring of 2005. Manufacturers around the world are engaged in fierce competition to develop fuel cells for automobile use, but it looks like it will take a bit more time before it becomes commercially viable in terms of costs and infrastructure development.
   Fuel cells are like a miniature chemical plant. A wide variety of know-how, from materials and fine processing technology to engineering is required for development. In that sense, it becomes a matter of comprehensive strengths - something that Japan excels in - and some consider Japan to have a competitive edge over others.

Point 3
Can an Environment Tax Be Introduced?

   Within the Japanese government, the Ministry of the Environment and the Ministry of Agriculture, Forestry and Fisheries actively favor the adoption of an environment tax to be placed on fossil fuel, such as oil and coal, in order to put a curb on its use. They aim to make Japan a developed country in the field of environmental technology by applying the revenues from the tax to the development of new technologies in such areas as energy conservation. However, industrial circles, such as those in the basic materials industry - including the steel industry - which consumes much energy, as well as power utilities are strongly opposed. Their reasoning is that the tax would cause a rise in prices and weaken their international competitiveness.

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