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The Lessons of the Great Tohoku Earthquake and Its Effects on Japan’s Economy (Part 3)

The Impact on Japan’s Energy Policy and Global Warming Countermeasures

Hiroshi Hamasaki
Research Fellow

April 26, 2011 (Tuesday)

The Great Tohoku Earthquake, which occurred on March 11, had a terrible effect on the nuclear reactors in the region, and the surrounding localities are even now exposed to the danger of radiation leakage. Such an incident will call for a substantial reevaluation of Japan’s efforts towards energy security and combating global warming. In this article, I examine the effects of the great earthquake on Japan’s energy security and global warming countermeasures and how to deal with them in the future.

1. Unavoidable, Drastic Decreases in Nuclear Power Generation

Figure 1 shows the rate of operation of nuclear power plants in Japan and other major countries. In 2009, Japan had a rate of operation of 64.7%, extremely low compared to other countries. Two causes for this are the large amounts of time necessary to restart normal operations after a stoppage caused by an accident and the short operation period compared to other countries. Regular inspections are performed, as required by article 54 of the Electricity Business Act, on nuclear reactors and their associated equipment, steam turbines, and other electricity operations equipment in order to prevent any accidents or breakdowns preemptively, to prevent escalation in case an accident does occur, and further to prevent any significant disruption in the supply of electricity. According to this law, a nuclear power plant must submit a regular inspection application form to the Minster of Economy, Trade, and Industry and receive an inspection of its steam turbines within 25 months of the last inspection (or the beginning of operations) and inspections of its nuclear reactor and associated equipment within 13 months of the last total load inspection.(1) In contrast, most nuclear power plants in the US have an operation cycle of 18-24 months,(2) and Japan has also been considering extending its operation period in order to increase its rate of operation. On October 15, 2010, the Tohoku Electric Power Company announced its plans to extend the period between regular inspections from the usual 13 months to 16 months at its Higashidori Nuclear Power Plant Reactor 1 (Higashidori, Aomori prefecture; 1.1 Gigawatts)(3) in an effort to raise Japan’s rate of operation to the same level as other countries.

 Figure 1: Rate of Operation of Nuclear Power Plants in Main Countries

Source: Japan Nuclear Energy Safety Organization,
Nuclear Energy Facility Operations Management Annual Report (2010 Edition)

The Central Environment Council Earth Environment Assembly Mid- and Long-Term Roadmap Subcommittee, a council within the Ministry of the Environment which creates Japan’s roadmap for reducing greenhouse gases (GHG), released a midterm adjustment(4) in December, 2010 which considers the raising of the rate of operation to 85% and the building of 9 more plants to be important parts of Japan’s efforts towards reducing global warming.

At present, Japan has 54 nuclear power plants, which produce a total of 48.85 Gigawatts (as of May, 2010) and supply 26.3%(5) of Japan’s power (as of 2007). Fukushima Reactors 1 and 2 and the Onagawa Reactor, which were damaged in the recent earthquake, put out a total of 11.27 GW, which comprises 23% of the entire country’s nuclear power. Quickly restarting those power plants which were stopped after the earthquake would be very difficult, and very careful consideration is necessary on whether or not to extend the operation period of plants.(6) A new 20.22 GW nuclear power plant was planned for construction,(7) but it will be very difficult to gain the understanding of the local citizens any time soon, and any building of new nuclear power plants will be extremely limited in the future. The midterm adjustment also touches on the risk of nuclear power not advancing as required, in which it estimates a rate of operation of 75% (the average from 1990 and on) and only two new power plants (considering only those already under construction). But even so, it is likely that after the earthquake, power production will drop significantly below even this lower estimate of the midterm adjustment. Immediate reevaluation of stable energy supply will be necessary, especially with regard to lack of power supply and more advanced energy saving.

2. Dealing with Global Warming and Economic Rebuilding

The decrease in produced nuclear power will affect not only energy security in the form of power supply shortage, but it will also greatly affect global warming countermeasures in terms of levels of GHG emission. Below, I look at the recent earthquake’s effects on and methods for dealing with global warming.

Under the hypothesis that Fukushima Reactors 1 and 2 and the Onagawa Reactor will stop power production and that there will be a freeze on the building of any new reactors, what effects will this have on future efforts towards stopping global warming? To answer this question, Fujitsu Research Institute’s Economic Research Center performed a quantitative analysis using a dynamic general equilibrium model.(8) The results are as follows: compared to the case in which the earthquake had not occurred, Japan will produce 4.6% more GHG(9) in 2020 (compared to 2004). Reasons for this increase are:

  1. The decrease in non-CO2-emitting nuclear power will require power to be supplied using other power generating methods. (Power configuration change).
  2. Power prices are expected to rise due to the earthquake, which will mean a shift to other energies.

Japan aims to reduce its GHG emissions by 25% of 1990 levels by 2020, which means that it will have to make even greater reductions in the future than it did before the earthquake. In the case where Japan achieves this 25% through domestic reduction alone, the reduction cost would be $239.3/ton CO2 (in 2020), which is incredibly expensive when compared with the current price of emissions rights in Europe (€16 = $20 per ton CO2). Paying such costs would result in Japan’s GDP dropping 1.9% (Table 1). In other words, it is possible that both nuclear power plant stoppages and greenhouse gas reductions will become obstacles to Japan’s post-earthquake reconstruction efforts.

3. Effectively Lightening the Load through Asia-wide Emissions Trading

If such is the case, then instead of achieving the entirety of its 25% reduction domestically, Japan should create a low-carbon marketplace with the goal of achieving reduced emissions across Asia, and thereby evaluate the feasibility of accomplishing both post-earthquake reconstruction and reducing GHG emissions.

In accordance with the Copenhagen Accord,(10) developed countries submit reduction targets and developing countries submit Nationally Appropriate Mitigation Actions (NAMAs) to the United Nations’ Secretariat. The accord reached in Cancun in 2010 also touches on these reduction targets and NAMAs, and the discussions at COP17,(11) which is to be held at the end of 2011, will likely proceed based on them as well. The targets of developing countries are intensity targets (GHG emission per GDP unit: China aims for a 40-45% reduction in GHG emission per GDP unit by 2020 compared to 2005 levels) and relative Business-as-usual (BAU) reduction targets, which, while different from developed countries’ absolute reduction targets, do provide a specific number for their reduction targets.(12) By having countries set these reduction targets and NAMAs together, reductions can be made more effectively than if they were set individually.

If Japan were to reduce GHG emissions in concert with China, India, and South Korea instead of on its own,(13) the cost of reduction would drop drastically to $28.3/ton CO2 (Table 1). This means two things for Japan’s reconstruction. First, the burden that must be borne by households and companies in order to reduce emissions will be greatly lessened, which will allow Japan to concentrate much energy on reconstruction that otherwise would have been lost. Second, the advance of GHG reduction in China and India will lead to the wide utilization of, and therefore the creation of a large market for, Japanese companies’ energy-saving and low-carbon technologies, which are fundamental parts of Japan. As a result, the possibility that efforts against global warming may trigger an explosive revitalization of Japan’s economy is high. On top of this, Japan would also be contributing to GHG reduction on a global scale and carrying out its obligation to combat climate change as a developed country. The effects of the nuclear power plant stoppages due to the recent earthquake are indeed immense, but they can still be mitigated. Japan’s international institution-building ability is being put to the test. It must not be held captive by its past way of thinking, but rather begin making efforts to lead international opinion.

Table 1: Comparison of Economic Effects of Individual and Cooperative Reductions

Note: Shows deviation from the baseline.

Individual Cooperative
(Japan, S. Korea, China, India)
Limit Reduction Cost ($/ton CO2) 239.3 28.3
Change in GDP(%) -1.9 0.1

Notes

(1) http://www.rist.or.jp/atomica/data/dat_detail.php?Title_Key=10-07-01-08

(2) Nagatomi, Matsuo, Kamimura, (2010), “Efforts to raise nuclear power facility rate of operation in the US, Europe, South Korea – what should Japan learn?” IEEJ, June, 2010
http://eneken.ieej.or.jp/report_detail.php?article_info__id=3205

(3) Sankei Biz Web, October 16, 2010, 5:00, “Tohoku Electric Power Co. to extend regular inspection period for nuclear plant to 16 months—first in the country.”
http://www.sankeibiz.jp/business/news/101016/bsb1010160503000-n1.htm

(4) The Central Environment Council Earth Environment Assembly Mid- and Long-Term Roadmap Subcommittee, “Specific Measures to Realize GHG Reduction Targets in the Mid- and Long-Term.” (Mid- and Long-Term Roadmap) (Midterm Adjustment, December, 2010)

(5) Calculated by FRI based on electrical power suppliers’ amount of supplied power from The Institute of Energy Economics, Japan, “Energy Economic Statistics Handbook” (2010)

(6) On March 15, 2011, President Chiba of the Shikoku Electric Power Company said regarding the company’s consideration of extending the regular inspection period of its Ikata nuclear power plant (Ikata, Ehime prefecture), “considering the current situation, I cannot comment at this time.” He also expressed the view that such an extension would be difficult in the near future. He fielded questions from the press after consulting with Governor Nakamura of Ehime prefecture. (Nikkei Web edition, March 16, 2011, 5:58.)

(7) The Institute of Energy Economics, Japan, “ Energy Economic Statistics Handbook” (2010)

(8) Technology bundle model which splits power sectors by power technology. It is necessary to note that this simulation is a quick estimation based on currently available information. A more detailed simulation will be run as the situation changes.

(9) Applies only to CO2 at the energy source.

(10) A document considered at the 15th Conference of the Parties under the United Nations' Climate Change Convention (COP15) held in Copenhagen, Denmark in 2009.

(11) The 17th Conference of the Parties of the United Nations Framework Convention on Climate Change. (To be held in 2011 in Durban, South Africa.)

(12) The principle written into the Kyoto Protocol as “common but differentiated responsibilities” was realized as obligatory reductions for developed countries but not developing countries. However, main developing countries giving their NAMAs numerical values has effectively bridged the gap between developed and developing countries in terms of GHG reduction obligations.

(13) Based on the hypothesis that Japan, South Korea, China, and India all cooperate to meet each country’s reduction target or NAMA. I.e. each country does not achieve its goals individually, but the four countries achieve their goals collectively. A large part of reductions would be achieved in China and India, where reduction cost is low and reduction opportunities abundant, while Japan and South Korea would cover reduction costs and provide technological support.

Series

(1) The Effects of the Great Earthquake on Japan’s Macro Economy

(2) Making Use of Juki-net to Provide Safety Information Rapidly

(3) The Impact on Japan's Energy Policy and Global Warming Countermeasures

(4) The Effects of Power Shortages on Japan’s Economy

(5) Japanese Industry After the Great Tohoku Earthquake

(6) Thoughts on Planned Blackouts: Redesigning the Power System

(7) Disaster Prevention and Regional Development in an Aging Society

(8) Toward Rebuilding the Japan of Tomorrow