How Japan Saved the World

Globe & Mail, Business Section

By Emil Nicolov,

In the next ten years, as the World awakens at last to the most formidable challenge it has ever faced, it will pleasantly discover that a solution is already there. Throughout history, man has struggled with his external environment to ensure survival; the 21^st century will be a vastly different place because we will have to face a problem that is fundamentally man-made, this is the exhaustion of our natural endowments in clean air, clean water and readily available energy and materials. Fortunately, Japan has been working on a solution to this problem for a long time. In 1976, Donald R. Thurston remarked that “Japan, bordering on the brink of ecological catastrophe, has the unenviable distinction of being the most heavily polluted nation in the world.” The frenzied pace of industrial development in the post-WWII period, combined with a small geography and high population density made this result inevitable early on for Japan. In the three decades that followed, Japan had no choice but to clean up its act, and clean-up it did. Today Japan boasts the lowest level of energy consumption and carbon emissions per capita amongst the OECD countries.

In the land where the sun rises, the fight to preserve the environment is a matter of national concern, and solutions have been achieved by a mix of central policy and voluntary commitments to emissions and energy intensity targets (most notably through the Keidanren Voluntary Action Plan on the Environment, a non-binding framework adopted across all key industries). Most importantly, change was made possible in Japan because of a fundamental paradigm shift in the manner in which the economy should be run, and particularly by emphasizing the importance of tapping human ingenuity in order to reduce the impact on the environment. Today it is a rare sight indeed if a Japanese company does not have a line of environmentally-friendly products or services, regardless of the business it operates.

There is an entrenched belief amongst economists that Japan’s developmental model is ineffective and cannot be fixed; Nikkei-listed companies have delivered low profit margins and low returns for their investors for almost two decades now, and nobody believes this will change anytime soon. Little credit is given to Japan for its structural transformation to an eco- economy. Yet it seems that the rest of the world is now too headed towards a collision course, approaching the critical point where resource degradation will require, urgently, a new approach. This paradigm shift will perhaps put Japan back on the map as the country that will teach us, once again, about efficiency.

The all-powerful Ministry of Economy, Trade and Industry, or METI, unveiled in March of this year the “Cool Earth 50” initiative, an ambitious plan to cut down global carbon emissions in half by 2050. It is not the first time that the Japanese government is attempting to coordinate the economy towards a seemingly unattainable goal. In fact, Japan may just have the means to achieve this vision, and it has proved in the past its ability to redefine the world economy against seemingly impossible odds. Many Japanese companies are already involved with international projects to reduce carbon emissions as per the Joint Implementation (JI) mechanism of the Kyoto protocol. Domestically, various eco-technologies which are still at their infancy stage elsewhere in the World, are already widely adopted, including solar power, clean coal, low-emission vehicles and fuel-cell systems.

Two technologies that are less commonly discussed in the press but hold the promise for revolutionary change are Intelligent Transport Systems (ITS) and Building Energy Management Systems (BEMS). Let us look in a little more depth at how Japanese companies have adopted these innovations.

Intelligent Transport Systems (ITS)

ITS is the application of Information Technology to connect people, roads and vehicles in an integrated network in order to facilitate traffic flows, improve safety, reduce transportation times, and increase fuel efficiency. Current applications of ITS in Japan consist of a centralized navigational system named VICS which provides drivers with digital easy-to-understand, real-time information on congestion conditions, best itineraries, required travel time, as well as hazardous road conditions. VICS adoption now exceeds twenty million drivers in Japan, and it is expected that the system will generate over fifty billion dollars in net savings over the next ten years.

ITS technology is interesting partly because it increases fuel efficiency and reduces emissions, but more importantly because it saves time, a far more valuable commodity.

Asia is the most densely populated continent in the world (China and India are five and ten times more densely populated than the USA respectively), and yet the continent has only recently began its process of urbanization. The sheer scale of the transport infrastructure that will be required in a fully mechanized China & India is colossal, and the adoption of state-of-the-art ITS networks will be essential. The eventual goal of ITS is automated driving using an artificial intelligence that can effectively and safely interact with the external environment – although we are still years away from achieving that.

The company that designed the VICS system is Nippon Signal, which is also involved in nanotechnology and in particular with designing Micro Electro Mechanical Systems (MEMS).

Building Energy Management Systems (BEMS)

BEMS employs IT to optimize energy consumption inside buildings through intelligent control of air conditioning, lighting and natural ventilation, assisted by real-time monitoring of weather conditions and sensors that detect the presence and spatial position of individuals. Some particularly interesting innovations native to Japan include the personalized “floor-flow” air conditioning that blows localized air currents from underfoot, as well as adjustable blinds systems which optimize the use of external lighting. Buildings equipped with a BEMS system typically reduce energy consumption by 25%-40%, with proportional reductions of carbon emissions. And this is just the beginning. Future innovations may include the use of “amorphous silicon” on rooftops in order to capture solar energy for power generation. Considering that buildings produce over one third of global carbon gas emissions, the widespread adoption of this technology may have revolutionary consequences. Two of the most active Japanese companies on this front are Yamatake and Shimizu Corp.

BEMS and ITS technology are interesting case studies because they are both very likely to become in high demand across the World, in particular in East Asia. Yet Japan is years ahead in the level of implementation of these systems, and even inside Japan, the companies mentioned above are virtually the only providers. Yet the capital markets attach negligible value to these companies and their technology; the World is still thinking in terms of old paradigms. Old ideas die slowly, but things are changing fast, and a new age is at the horizon for Japan.