Success and failure of the voluntary action plan: Disaggregated sector decomposition analysis of energy-related CO2 emissions in Japan

Abstract

To accomplish the goal of reducing greenhouse gas (GHG) emissions, the Japanese Business Federation (JBF) has implemented the voluntary action plan (VAP), which includes the unique feature of not penalizing industrial organizations for failing to meet the CO2 emissions or energy consumption reduction targets. This study evaluates the role of the VAP in emission reduction by analyzing highly disaggregated data of 197 sectors from 1980 to 2015 using the logarithmic mean Divisia index (LMDI) method. The results indicate that the increase in CO2 emissions among Japanese industries is mainly caused by the increase in indirect CO2 emissions. Moreover, the energy consumption structure has progressively shifted from fossil fuels to electricity. The decomposition analysis highlights two key points. (1) The VAP is ineffective in reducing emissions in sectors with low market concentration. (2) Energy intensity targets of the VAP does not lead to a significant reduction in CO2 emissions. Thus, this study concludes that the contribution of the VAP in reducing CO2 emissions is limited. Evidence from our research suggests four directions for future policy design and implications.