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Japan's Energy Conundrum YOSHIDA J APAN’S APAN’S ENERGY CONUNDRUM Sasakawa Peace Foundation USA 1819 L Street NW #300 Washington, DC 20036 [email protected] JAPAN’S ENERGY CONUNDRUM A Discussion of Japan’s Energy Circumstances and U.S.-Japan Energy Relations Edited by Phyllis Genther Yoshida SASAKAWA USA SASAKAWA Sasakawa Peace Foundation USA JAPAN’S ENERGY CONUNDRUM JAPAN’S ENERGY CONUNDRUM A Discussion of Japan’s Energy Circumstances and U.S.-Japan EnergyTHE U.S. Relations MILITARY LAYDOWN ON GUAM PROGRESS AMID CHALLENGES Edited by Phyllis Genther Yoshida Jeffrey W. Hornung Sasakawa Peace Foundation USA Washington, D.C. Sasakawa Peace Foundation USA is an independent, American non-profit and non-partisan Sasakawainstitution Peacedevoted Foundation to research, USA analysis, is a 501(c)(3) and better non-profit understanding located inof theWashington, U.S.–Japan D.C. involvedrelationship. in U.S.-Japan Sasakawa USArelations, accomplishes providing its conferencesmission through and programsseminars, thatthink benefit tank analboth- ysis,nations people-to-people and the broader exchanges Asia-Pacific and coordinationregion. Our researchof high-level programs dialogue focus between on security, the two countries through our in-house and collaborative programs. diplomacy, economics, trade, and technology, and our education programs facilitate people- to-people exchange and discussion among American and Japanese policymakers, influential ISBN 978-0-692-65270-1 citizens, and the broader public in both countries. PrintedISBN 978-0-9966567-8-8 in the United States of America ©Printed 2018 byin theSasakawa United PeaceStates ofFoundation America USA Sasakawa© 2017 by USA Sasakawa does Peacenot take Foundation institutional USA positions on public policy issues; the views expressedSasakawa USAherein does are notthe takeauthors’ institutional own and positions do not on necessarily public policy reflect issues; the the views views of Sasakawa USA, its staff, or its board. expressed herein are the authors’ own and do not necessarily reflect the views of Sasakawa USA, its staff, or its board. No part of this publication may be reproduced or transmitted in any form or by any meansNo part without of this permissionpublication mayin writing be reproduced from Sasakawa or transmitted USA. Please in any directform orinquiries by any meansto: Sasakawawithout permission Peace Foundation in writing USAfrom Sasakawa USA. Please direct inquiries to: Research Department Sasakawa Peace Foundation USA 1819 L St NW #300 Research Department Washington, DC 20036 P:1819 +1 202-296-6694L St NW #300 E:Washington, [email protected] DC 20036 P: +1 202-296-6694 ThisE: [email protected] publication can be downloaded at no cost at https://spfusa.org/. This publication can be downloaded at no cost at https://spfusa.org/. Contents Preface .......................................................................................................................................................... vii Ambassador James Zumwalt Acknowledgments ..................................................................................................................................... ix List of Contributors .................................................................................................................................... xi PART 1: SETTING AND CONTEXT FOR JAPAN’S ENERGY CONUNDRUM Chapter One Japan’s Energy Conundrum ...................................................................................................................1 Phyllis Genther Yoshida Chapter Two The Geopolitics of Asian Energy ........................................................................................................ 11 Dennis Blair Chapter Three Japan’s Energy Miracles ....................................................................................................................... 25 Robert Alan Feldman PART 2: ROLE OF ENERGY SUPPLY AND MARKETS Chapter Four Reliance on Imported Fossil Fuels: Oil and Natural Gas .......................................................... 37 Ken Koyama Chapter Five The Return of Coal .................................................................................................................................. 47 Jane Nakano Chapter Six Japan’s Radical Incrementalism in Power Market Regulation and Renewable Energy ......................................................................................................................... 59 Llewelyn Hughes Chapter Seven Nuclear Energy: Light Water Reactors at a Crossroad ............................................................. 69 Nobuo Tanaka A Special Proposal for U.S.-Japan Nuclear Cooperation ......................................................... 91 Nobuo Tanaka PART 3: INFLUENCE OF DEMAND AND PRODUCTIVITY Chapter Eight The Rise of Energy Efficiency ............................................................................................................. 97 Yukari Niwa Yamashita Chapter Nine Transforming Transportation .............................................................................................................113 Michael Smitka Chapter Ten Demand-Side Management in Japan: Moving Beyond Gaman and Pilot Programs ................................................................................................................123 Ken Haig PART 4: COOPERATION GOING FORWARD Chapter Eleven Japan’s Energy and Climate Quadlemma ...................................................................................139 Jun Arima Chapter Twelve U.S.-Japan Energy Trade and Investment ...................................................................................155 Tom Cutler Chapter Thirteen Considerations for the 2020s and Beyond ..................................................................................171 Phyllis Genther Yoshida Index ...........................................................................................................................................................185 PREFACE vii Preface Sasakawa USA is pleased to bring together an outstanding group of senior scholars, all with extensive knowledge and experience, to analyze and explain the many facets of Tokyo’s energy situation and its intersection with the U.S.-Japan relationship. This book provides insights into how Japan is seeking to resolve its current energy conundrum by balancing energy security, economic growth, environmental sustainability, and safety in the aftermath of the Great Eastern Japan Earthquake and Tsunami. It also recommends ways in which the U.S.-Japan energy security relationship can become stronger and collaboration deeper. Japan’s energy development, in particular, provides critical insights into how it has, so far, successfully managed to sustain economic growth even in the face of severe energy challenges. The contributors to this book and I all vividly remember and became involved in Japan’s most recent energy challenge as a result of the tragic events of March 11, 2011. We provided advice and support to the U.S. and Japanese governments, helped explain developments to American and other audiences around the globe, and, most importantly, supported those affected through our long-standing personal connections and friendships. Japan’s response to the 3-11 challenge continues, but it remains to be seen where that response will take the country. We hope this volume provides insights and useful suggestions as Japan shapes its energy future. At the same time, global energy markets continue to alternate between long-term oversupply and undersupply and among different potential energy mixes, all of which generate energy security concerns but also push advances in state-of-the art technolo- gies. While it is impossible to predict the future, we know energy will continue to be critical for the Japanese and American economies and for global security. Sasakawa USA remains committed to identifying and raising issues of importance that deserve greater attention, coordination, and cooperation in the U.S.-Japan relationship. In this regard, in an era when energy and environmental issues are increasingly complex and intertwined with technological capacity and economic strength, it behooves us to understand the changes underway. We hope that this book contributes to a greater rec- ognition by experts, policy makers, students, and the broader public of the critical role energy has played, and will continues to play, in economic growth, national security, and environmental sustainability. Ambassador James Zumwalt CEO, Sasakawa Peace Foundation USA ACKNOWLEDGMENTS ix Acknowledgments I greatly appreciate the contributors’ work and support in helping us explain the context and significance of the Great Eastern Japan Earthquake and Tsunami for Japan’s energy use and for U.S.-Japan cooperation. Energy security and energy resiliency are top concerns for both the United States and Japan. Indeed, both countries are undergoing profound changes in their energy sectors, driven in the United States by the uncon- ventional gas and oil revolution and in Japan by the March 11, 2011 events that led to the shutdown of Japan’s nuclear capacity. These changes have altered both countries’ economies and the U.S.-Japan bilateral relationship. The outsized role both countries play internationally also is deeply affecting many aspects of the global energy picture, be it nuclear energy, energy efficiency or fossil fuels. Therefore, cooperation on energy and related environmental issues offers an opportunity to strengthen our bilateral
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