The Sterility of "3% GDP" Decarbonization Investment
2023/1/24
Lately, for some reason, there are days when I don't feel like reading the newspaper.
Today was such a day.
So I did not know until now that Mr. Taishi Sugiyama had published an article in Sankei Shimbun's "Sound Arguments."
Japan is in danger if the people do not recognize that he is one of the national treasures defined by Saicho and is now a supreme national treasure.
It is no exaggeration to say that this is the biggest postwar crisis in Japan's political history.
It is a must-read not only for the people of Japan but for people all over the world.
The following notes are mine.
The Sterility of "3% GDP" Decarbonization Investment
Taishi Sugiyama, Senior Research Fellow, Canon Institute for Global Studies
Amid the debate over increasing defense spending to "2% of GDP," a decarbonization scheme that would cost an even more massive 3% of GDP is about to become law with little public debate.
What public interests should be protected in the ordinary session of the Diet that began this month?
A decarbonization scheme with a more massive 3% cost is about to become law with little debate in the open.
I first learned on Twitter that 9 trillion yen is spent annually on the Gender Equality Act.
I have a terrible feeling that this law will bring disaster to Japan, undermine Japan, and diminish Japan's national strength, on par with the Gender Equality Law, the new Ainu law, and others.
I feel wrong about this, but readers know I have almost hit the nail.
"Planned Economy" Does Not Generate Growth
The government's "Green Transformation (GX) Council," under the leadership of Prime Minister Fumio Kishida, has compiled a basic policy proposal.
GX means decarbonization.
The government intends to submit related bills to the Diet.
The government compiled this draft in a short period of only about five months last year at the same expert panel led by the Prime Minister's Office.
Therefore, it must now be scrutinized strictly from the public's point of view.
The draft states that "stable and affordable energy supply is the top priority," and it calls for "maximum use of nuclear power.
So far, so good.
However, at the same time, the government claims to realize "more than 150 trillion yen in GX investments over ten years" to achieve decarbonization and economic growth.
This investment will be achieved through "regulatory and institutional measures" and the government's "investment promotion measures.
It is 15 trillion yen per year or 3% of GDP.
The plan's contents include the massive introduction of renewable energy (over 31 trillion yen), hydrogen and ammonia (over 7 trillion yen), and so on.
It is significantly more expensive than existing technologies.
The government is poised to move forward with the entire process.
While promoting the introduction of this technology through regulations, the government will also subsidize research and development, social implementation, and even compensate for the price difference with existing technologies.
The government will likely be involved in every aspect of energy production and consumption investments.
However, the government decides what to invest in, a planned economy.
There is no hope for economic growth.
The government says GX investment will achieve economic growth while decarbonizing the economy.
However, the Research Institute of Innovative Technology for the Earth (RITE), a research institute affiliated with METI, estimates that a 46% reduction in CO2 emissions by 2030 would result in a GDP loss of 30 trillion yen.
No matter how much "GX investment" is increased, the overall economy will suffer significant losses because the cost burden will reduce people's consumption expenditure, stagnate corporate investment, and reduce exports.
For more information on the problems with GX investment, please refer to my book, "The Ecology of Exile" (Wani Books).
Actual Tax Increase of ¥20 Trillion
The government will also issue ¥20 trillion in "GX Economic Transition Bonds" to fund the investment.
These bonds will be redeemed through a "carbon pricing" program operated by the newly established "GX Economic Transition Promotion Organization.
Carbon pricing is an energy levy and CO2 emissions trading system, in effect, a cumulative 20 trillion yen tax increase on energy.
The problem is that this will increase special accounts and establish an external organization, the "Organization," to manage these accounts.
There is a fear that the government's instinct will be to maintain and expand this mechanism.
If carbon pricing is strengthened to achieve this, it will completely reverse the original plan and drag the economy.
Europe was the first to implement an emissions trading system, but it failed.
The system of emissions quotas was subject to ongoing changes; prices repeatedly soared and fell, and the economy was in turmoil.
Why is Japan following this failed example?
As described above, it must revise the current government proposal with severe problems.
Japan has been forced to increase defense spending to counter China's military buildup.
At the same time, it will spend a massive 3% of GDP on decarbonization.
Moreover, much of this money will be used to purchase Chinese products such as solar panels and electric vehicles, as well as their components and raw materials.
What is this doing?
The Diet must stop the legislation.
The future global political and economic outlook is highly uncertain.
Countries have declared their goal of zero CO2 emissions, but implementing this goal is ludicrous for any country.
China emits ten times more CO2 than Japan.
Japan should focus on its security and economy and take a pragmatic approach to decarbonization, such as promoting nuclear power while at the same time conserving energy and electrifying the country to the extent that we can do it at a low cost.
It is dangerous to legislate the current GX Basic Policy, which aims for extreme decarbonization with a considerable cost burden, and to lock Japan's energy policy in this direction.
Based on the government's basic policy, many businesses are receiving subsidies, and government officials are trying to increase their budgets.
As a result, there is little outward objection to the system's design, even if one disagrees.
However, everyone needs to think more about immediate profit.
The future of Japan's energy and economy should be discussed publicly, starting with the ordinary Diet session.
The GX Economic Transition Promotion Organization, carbon pricing, GX Economic Transition Bonds, and other systems that could make future decarbonization and energy policies rigid should be stopped from being enacted in the current Diet session.