Hongo: Climate change is a problem that will eventually occur as long as humans continue their activities, and I think it is inevitable that we have reached this point in our history. This is because human activities depend on the use of the Earth's resources, such as fossil fuels and food production. If we continue such activities beyond the Earth's resilience, the amount of carbon dioxide and other substances will inevitably exceed a certain level. It was the Fifth Assessment Report of the IPCC (2014) that scientifically analyzed this and recognized it as a carbon budget (carbon emission quota) for countries around the world.

Hongo: Yes. Although each country's policies and companies are in a different situation, the situation must be addressed by the world as a whole.

Hongo: Even if an agreement to address climate change is reached in the Paris Agreement, if health is harmed by energy shortages or if it is necessary to maintain the economy in order to make a living, then that can naturally take precedence. However, in the long term, we cannot avoid the need to decarbonize.

During the recovery from the Corona disaster, many countries adopted a "green recovery" policy, which means that if the same economic stimulus measures are to be implemented, they should be focused on climate change and environmental measures. In response to the current energy crisis, it is expected that an energy strategy will be developed that is based on security and also contributes to climate change measures.

Hongo: Yes, the G7 Leaders' Declaration for 2022 also states that the goal of a "decarbonized society" will remain unchanged, but that energy security will be secured. Of course, in the short term, there may be some regressions and delays. However, I think it is safe to assume that the realization of a decarbonized society is a goal that will not change.

Hongo: I hear that a lot, but I can't simply compare Japan and the EU because they are on different paths. Japan has been promoting energy conservation for a long time, and as a result, it has helped to decarbonize the country. In the EU, energy conservation is strongly promoted as a response to the energy crisis caused by Russia's invasion of Ukraine, and there are some similarities between Japan and the EU. The EU is also actively promoting investment in renewable energy generation. It is also proactive in investing in renewable energy generation and other projects.

From an economic point of view, CO2 regulation (decarbonization) is costly. Paying the cost means that there are people who receive it, and in the economy as a whole, it has the same effect as an economic stimulus package. The problem is that those who pay the costs are not the same as those who receive them, and actual economic and industrial policy must take into account those who bear the costs, viewing it as a redistribution of income. We believe that decarbonization efforts will be a driver of growth. Japan, on the other hand, seems to focus only on paying the costs and not on receiving the benefits, i.e., the economic benefits. Recently, however, there seems to be a growing belief in Japan that decarbonization efforts can be a driver of growth.

Hongo: Given the situation where money is not being invested, we need to set rules on CO2 and climate change issues so that investment can proceed. If we can create an investment environment where Japanese companies can take advantage of their past accumulation and strengths, a virtuous circle will be created: corporate activity will increase, salaries will rise, and households will become richer. Of course, since trade is a prerequisite, we must devise ways to combine overseas procurement with Japanese supply in a way that is both efficient and conducive to long-term growth.

Hongo: One is our energy conversion efforts. We are shifting from coal to LNG, which has low CO2 emissions, but since natural gas does not have zero CO2 emissions, hydrogen and ammonia are envisioned as energy options beyond that.

In Japan, we are working to develop technologies to realize such energy options. With regard to hydrogen, we are focusing on technologies to extract hydrogen through electrolysis of water using renewable energy, and technologies to fix the CO2 emitted when extracting hydrogen from methane (natural gas) underground using carbon dioxide sequestration (CCS). Both are low-carbon and decarbonized hydrogen that can reduce CO2 emissions from the hydrogen production process, and CCS can increase the energy options available. This CCS is an area in which Japan has advanced technology, and I think it is a major feature of Japan's efforts in decarbonization.

Hongo: But by doing so, we are trying to promote energy transition and technological innovation. During the Kan administration, the government launched the "carbon price for growth" initiative to ensure that economic growth is commensurate with the costs involved, and one of its policies is the "GX League," a mechanism to promote voluntary emissions trading. There is also a movement to improve the "Greenhouse Gas Emissions Accounting, Reporting, and Publication System" to enable proper information disclosure. These things are progressing gradually.

Various difficulties are expected in achieving the goal of virtually zero emissions by 2050. It may be possible to achieve it if costs are taken into account, but that is not likely to happen. On the other hand, since the entire world is aiming for virtually zero emissions, not just Japan, it will be important to create negative emissions (carbon negatives) on a global scale, even if this means incurring a certain amount of cost.

Hongo: This is an initiative to reduce the amount of CO2 in the atmosphere by directly separating, capturing, and fixing CO2 from the atmosphere, rather than reducing CO2 emitted from economic activities. While large-scale afforestation activities are one method, what Japan expects and is trying to do is an extension of CCS, which I mentioned earlier.

Hongo: Indeed, in terms of impact on CO2 emission reduction, it may not be significant. However, small efforts are born out of the positive mindset of each and every one of us. Therefore, rather than dismissing them as meaningless, we hope that they will serve as a catalyst for social change. There is a possibility that major innovations will emerge from these efforts. In addition, it is the consumer who ultimately bears the cost of decarbonization. In order to gain their approval, I think it is important to have a high level of interest in the movement around us.

Hongo: The circular economy is another important initiative. The reason for this is the same as the "reasons why we should aim for a decarbonized society" I mentioned at the beginning of this article: all human lives and economies are based on the use of natural capital, or what is found in nature. It is the same with agriculture. If we use too much natural capital, we will exceed the Earth's supply capacity. We are approaching that limit. Therefore, a circular economy that makes effective use of limited natural capital is also inevitable.

Key examples of the circular economy include the reuse of recycled paper and plastic bottles, and the recovery and reuse of precious metals. With regard to precious metals, the company became famous for recovering those found in discarded electronics to make medals for the Tokyo Olympics. Piles of discarded electronics are also known as urban mines, right?

What should not be overlooked here is that for the circular economy to circulate nicely, three conditions must be met: " technology to extract and recover resources," " established recovery routes," and " sufficient stocks. In terms of increasing stocks, we would like to focus on rare earths and rare metals, which are also strategic commodities, in the future.

Hongo: If we include the SDGs, we can say that there is a wide variety of differences. However, when it comes to climate change countermeasures, there are only two types of differences: high awareness and low awareness. There are countries with negligible CO2 emissions to begin with. There are also developing countries where the cost burden of decarbonization is very difficult to bear. The International Civil Aviation Organization (ICAO) is a good example of how to involve such countries. They have set a goal of no increase in CO2 emissions for international aviation after 2020. And they are starting with countries that have voluntarily joined the program, starting in 2021. But at that point, we have covered about 80% of CO2 emissions, and we will increase the phases every three years and eventually encourage all countries to participate. Thus, rather than waiting for all countries to align, I think it is important to start with what we can do.

In addition, the EU is currently considering a "border carbon tax. The idea is to charge imports that do not pay emission costs the same cost as products manufactured in the EU, in the form of a tariff, in order to make them equally competitive. Although there is opposition from other countries, this is one way to raise awareness of decarbonization in countries and entities that are less aware of the issue.

Hongo: I think what Japan is not good at is developing a market environment for technology, especially in the formulation of regulations and rules. The government is making efforts in this area in cooperation with ASEAN countries, so I have high expectations for the future.