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Phil Keys: Japan-California climate deal points to big business opportunities

On Sept. 5, Japan entered into a memorandum of cooperation to expand efforts in environment-related technologies with a government responsible for some 38.8 million people and a gross domestic product of $2.2 trillion. The other party was not a country, however -- it was the U.S. state of California.

     Cognizant of the danger posed by climate change, the two governments agreed to cooperate in fields including high-speed rail, electric vehicles and renewable energy. Included in the deal are energy storage, zero-emission vehicles, infrastructure for supplying electricity to vehicles and water conservation technology.

Japan and California will work together to test electric vehicle fast-charging as part of a strategy to develop new infrastructure to replace current technologies that have caused environmental crises.

     Surrounding the author are numerous businessmen observing the U.S.-Japan business environment, but very few people are aware of the agreement. About half a year has passed since the two governments signed the memorandum, so it is unfortunate that it is not mainstream knowledge.

Infrastructure for the new century

The significance of the memorandum is that Japan and California can cooperate in realizing technologies for creating infrastructure needed for the 21st century. Since the dawn of this century, the economies of developing countries such as China and India have been steadily improving. Such countries naturally aim to achieve a standard of living on the same level as industrialized nations. For their hopes to come to fruition, however, it is no longer possible for them to use the same 20th-century infrastructure technology that sparked numerous environmental crises.

     The development of 21st-century infrastructure technology that reduces the burden we place on the environment is an important and potentially lucrative business opportunity.

     It is natural for California and Japan to team up in this field. In Japan, with its scarcity of natural resources and large population, the culture of "setsuyaku" (conservation) has deep roots. The understanding of the importance of renewable energies has also increased as a result of the nuclear power plant accident in Fukushima. More than anything else, Japanese companies and universities possess a wealth of basic technologies and manufacturing expertise required for this 21st-century infrastructure.

     California, meanwhile, for some time has had a relatively large number of people interested in environmentalism compared to other U.S. states. While Congress in Washington is currently controlled by conservatives who tend to be critical of environmental regulations and investments in renewable energy, the government of California has proactively moved forward with policies such as mandating that 33% of power generation be switched to renewable energy by 2020.

     Moreover, in the case of Silicon Valley, information technology companies such as Apple and Google are aggressively making investments that will enable much of their electric power to be obtained from renewable energy, and many companies are very interested in helping to solve environmental problems. Above all, Silicon Valley has an abundance of marketing know-how for making new technologies succeed quickly in the market.

     Concrete results from the agreement are emerging. On Oct. 14, Japan's New Energy and Industrial Technology Development Organization, known as NEDO, and the California Governor's Office of Business and Economic Development agreed to conduct an EV charging field test using CHAdeMo, an electric vehicle fast-charging standard mainly backed by Japanese companies.

     Furthermore, a number of Japanese companies exhibited water-related products at a water-themed conference hosted by California. The current water shortage in California is at historic levels and water saving technologies are critical.

     California has inked similar memoranda with a number of countries besides Japan, such as Israel, but the results of those are also not drawing much attention. This is probably because many people think that policies without a large budget cannot wield significant influence. However, it seems the correct stance would be to recognize the business opportunities these two governments are pointing toward and for the private sector to proactively take the lead in making them a success.

Phil Keys is an analyst at Blue Field Strategies, a consultancy based in San Francisco. He came to Japan as an exchange student while studying at the University of California, Berkeley. Well-versed in Japan's IT industry, he has also been active as a journalist for technology journals and websites.

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