April 20, 2010


Let's Increase Public Literacy on the Costs and Benefits of Action (and Inaction) on Climate Change

Keywords: Newsletter 

JFS Newsletter No.91 (March 2010)

At the United Nations Summit on Climate Change in September 2009, Japanese Prime Minister Yukio Hatoyama announced Japan's medium-term target to reduce its greenhouse gas emissions (GHGs) by 25 percent from the 1990 levels by 2020.

The previous administration had refused to set a high target, insisting that each household would have to bear a cost of 360,000 yen (about U.S.$3,913) annually for the 25-percent reduction, and that it would be impossible for citizens to bear such a burden. A full-page ad saying, "Think. Even for a three-percent reduction, each household would have to pay 1.05 million yen (about $11,413)," was placed in major newspapers, sponsored by 59 industry organizations (Nippon Keidanren, Japan Chamber of Commerce and Industry, regional economic federations, including Kansai Economic Federation, etc.), industry groups (Federation of Electric Power Companies of Japan, Japan Iron and Steel Federation, etc.), and seven labor unions (Federation of Electric Power Related Industry Workers Unions of Japan, Japan Federation of Basic Industry Workers' Unions, etc.).

We should not be threatened by this kind of claim. All actions, one way or another, generate costs. We cannot curb global warming just by praying for it to stop. If we consider our impacts on and responsibilities to future generations, it is simply not acceptable to decide to take no action on global warming just because it is costly.

In the future, it is certain that we will see more and more arguments over the cost burden of reducing GHG emissions. I think it will be important for governments to make their calculations transparently and work to increase what I call society's "cost literacy" about climate change measures.

At my public lectures, I often tell people,
(1) If you are asked "What is the cost of action?"
(2) then you should also ask "What are the benefits of action?"
(3) and also "What is the cost of inaction?"
We can think about the benefits of inaction, but normally these three questions above are considered the most important points in any discussions of cost.

There is a tendency to talk only about the first question: the cost of action.

Meanwhile, we need to think about what the benefits of action are. If we switch to energy-saving equipment, for example, then energy use and cost will be reduced. If we install solar panels, our electric bills will go down. Also, the need for massive investment means a positive situation in which money flows into the economy and markets. These are part of the second question -- the benefits of action.

I have one personal example of this "benefit of taking action." Recently, I had all the windows at home switched to double-glazed, and I have realized many benefits that both can and cannot be converted into monetary value. For example, room heating has become almost unnecessary. I also enjoy the silence, because the double-glazed windows block outside noise. And as dew condensation is prevented, it saves a lot of the bother of cleaning. Plus, I feel more secure in terms of crime prevention.

Installing solar panels may have many benefits too, besides lower electricity prices. For instance, we get a sense of security knowing that we can generate our own power, even when it goes out in cases of disasters and blackouts. We can also stop wasting electricity, and therefore lead an energy-saving lifestyle without trying too hard, simply by checking power generation capacity and consumption meters. Finally, we can be more aware of and thankful for the blessings of the sun on a daily basis.

We also need to think about how much it will cost us in the future if we do not take action. While oil demands in emerging countries and other countries are rising, world oil production will soon reach (or already has reached) its peak, which will lead to soaring fossil fuel prices and fossil fuel-fired power generation costs. If we do not introduce energy-saving facilities and renewable energy sources, how much will it cost us in the future?

And we are not the only ones to pay the "future cost as a result of not taking action." If we cannot curb global warming, what costs will future generations face? Thus, the third cost, is (3) the cost of inaction.

When we discuss cost, it is important to present all these three points, think carefully, and then make a decision.

In Japan, we often see statements like this one from a poll conducted by the government's Cabinet Office on the economic burden that households are willing to accept to tackle global warming: "More than 60 percent of people would accept an economic burden only if it were 1,000 yen (about $10.90) or less a month. This means that people do not want to bear any burden."

The question posed by the poll went like this:
"To build a low-carbon society, the economic burden on households might be increased, on one hand, by buying expensive but highly efficient energy- saving home appliances and houses, as well as environment-friendly cars, installing photovoltaic panels at home, and coping with higher electricity bills to cover increased costs for reduction measures at power plants. On the other hand, the burden on households might be decreased because we can reduce consumption of electricity, natural gas, heating oil, and gasoline, by using energy-saving home appliances, houses, and cars. How much do you think you can accept if your household burden increases?"

Anyone, of course, would have answered no if the question had been, "Do you want to throw away 1,000 yen (about $10.90)?" The poll included some descriptions on possible benefits when people share the burden, but the formulation of this question was still almost the same as asking, "How much would you be willing to pay for nothing in return?" If posed this way, I think most people would answer, "The less the better."

It is not until we present a more complete picture, such as, "If we share the financial burdens now, we will all benefit," or "If we don't pay for it now, we will face costs and disadvantages in the future," that we can start to have a proper discussion of costs and burdens.

If the situation is explained well, I believe that people can figure things out for themselves (although it appears that many politicians and bureaucrats do not have this faith in people, I'm afraid to say).

In March 2009, I conducted a survey about a possible "feed-in tariff," a policy mechanism to promote renewable energy, by which large power utilities would be required to pay certain tariffs to independent power producers for electricity generated from wind and solar power. A total of 300 homemakers were surveyed. In the questionnaire, I explained the following:

"A study group of the Ministry of the Environment estimated that if Japan were to introduce a series of policies centering on the feed-in tariff system, the nation will be able to generate 55 times more solar power than today, create some 48 trillion yen (about $522 billion) of gross domestic product (GDP) and some 700,000 jobs, by reducing use of fossil fuels and increasing the export of solar panels, which would increase the energy self-sufficiency rate from the current 5 percent to about 16 percent, and significantly cut carbon dioxide emissions.

"On the other hand, because the system is to require consumers to share the burdens broadly in tiny amounts, the monthly electric bill of a standard household will go up by 260 yen (about $2.80) on average. (Consideration will be given for low-income families, such as not charging for daily necessities.)

"If your monthly electric bill were to go up by an average 260 yen, would you agree with the introduction of a feed-in tariff or not?"

As a result, 53 percent of respondents agreed with having their monthly bills go up by 260 yen. Only 5 percent were against a cost increase.

From now on, be ready when you encounter an argument such as, "If we take the necessary steps, it will cost a lot. People should bear large burdens. Do you agree with paying for these burdens?" Whether the survey is on global warming, biodiversity, or local environmental pollution, let us ask the following questions first, without hesitation: "Just a moment. Let's look at this more closely. What benefits will we get by introducing the measures, and what costs will we and our future generations have to pay if we take no action?"

This discussion on the costs and burdens of global warming measures will give each of us a good opportunity to build the capacity for sizing up the whole picture of the problem. I think this is a good exercise for Japan and the world to go through in order to be a truly democratic society.

Written by Junko Edahiro