By Matsumoto Yuko, ESG editor
Dealing with climate change is becoming an urgent task for businesses, and they are also facing intense global competition. Japan Bank for International Cooperation (JBIC) Governor Maeda Tadashi noted in a recent interview with Nikkei that Japanese companies “must have a ‘geopolitical vision,’ which is aimed at solving geopolitical issues by using the economy as a weapon, to remain competitive in the international market.” He proposed “including in European Union (EU) rules ways for Japanese technology to survive through such means as aid to the Central and Eastern Europe region” and stressed the need for hard-nosed strategies.
According to a survey JBIC conducted on 515 Japanese firms that have overseas operations, the surveyed entities forecast that their overseas production ratios will make a full recovery in fiscal 2024 or later due to growing uncertainties over the COVID-19 pandemic. He noted that “dealing with climate change is a different matter” and predicts that companies will implement climate measures regardless of their economic circumstances.
In June 2021, JBIC announced its mid-term business plan through fiscal 2023 and mapped out programs to help companies with decarbonization. These include the provision of assistance to facilitate an energy shift from coal to natural gas in emerging nations and financing of projects that will help manufacturers that cannot reduce carbon emissions without innovations, such as steelmakers and chemical companies, to secure funds for future investment.
On “co-combustion of ammonia” with coal-firing, a technology designed to reduce carbon emissions, Maeda called for the “need to clearly indicate a path toward decarbonization.” The reason is that to implement this technology, existing facilities need to be refurbished. And there are also concerns in the international community that the technology could help thermal power generation survive longer.
The EU, which wants to become a dominant player in the environmental field, is accelerating rule-making efforts. The JBIC survey shows that no European nation cracks the top 10 countries that Japanese firms consider promising. The EU is a huge global market for electric vehicles (EVs), and Chinese and South Korean firms are plowing more money into it. Maeda warned that “Japanese companies must pay more attention to the EU.”
Maeda particularly focuses on Central and Eastern European nations, such as Poland and Hungary, as in these countries wages are low and people speak English. Moreover, with regards to the EU’s rule-making, building a consensus is indispensable. He pointed out the need for Japanese firms to engage in EU rule-making through providing assistance to Central and Eastern Europe. For example, “Japanese firms should work toward the inclusion of waste power generation, over which Japan has an edge, into the ‘EU taxonomy,’ a classification system for environmentally friendly economic activities,” he said.
Renewable energy is also expected to become a main source of electricity in Japan down the road. To prevent electricity shortages, which have become a global concern, Maeda stressed that “we need to build an electricity adjustment market where all the electricity generated by the many renewable energy stations can be consolidated.” On offshore wind power generation, which has great potential for growth, he added that “we should consider creating a mechanism that can lead to industrialization, such as shipbuilders taking part in building structures for offshore wind plants.”