Environmental policies in Japan

[From the U.S. Government Printing Office, www.gpo.gov]

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Publi6 en fran gais anus le tflre
POLITIQUES DE LENVIRONNEMENT
AU JAPON
I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

p~~ ~~U S. DEPARTMENT OF COMMERCE NOAA
P~ ~COASTAL SERVICES CENTER
2234 SOUTH HOBSON AVENUE
CHARLESTON, SC 29405-2413

ax do X ~~~~~~ORGANISATION
FOR ECONOMIC
- S C O-OPER ATION
4 ST A ND DEVELOPMENT
PARIS 1977

Property of CSC Librazy

The Organisation for Economic Co-operation and Devel-
opment (OECD) was set up under a Convention signed in Paris on
i4th December, 1960, which provides that the OECD shall pro-
mote policies designed:
- to achieve the highest sustainable economic growth and
employment and a rising standard of living in Member I
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- to contribute to sound economic expansion in Member as
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The Members of OECD are Australia, Austria, Belgium, Cana-
da, Denmark, Finland, France, the Federal Republic of Germany,
Greece, Iceland, Ireland, Italy, Japan, Luxembourg, the Nether-
lands, New Zealand, Norway, Portugal, Spain, Sweden, Switzer-
land, Turkey, the United Kingdom and the United States.

� OECD, 1977
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addressed to:
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CONTENTS

Preface............................. 5

Chapter I

INTRODUCTION........................ 7

1. Causes of Environmental Degradation........... 8
2. Indicators of Environmental Degradation .........11

Chapter II

APPROACHES ...........................16

1. Development of Environmental Policies...........16
2. Characteristics of Environmental Policies. . .......19

Chapter III

STAN~DARDS...........................24

1. Quality Standards.....................24
2. Emission Standards....................26

Chapter IV

COMPENSATION.........................37

1. Private Compensation...................38
2. Judiciary Compensation..................39
3. Administrative Compensation ...............42

Chapter V

LOCATION ...........................50

1. Resident's Control ....................51
2. Administrative Control..................54

Chapter VI

ACHIEVEMENTS ............................59

1. Evolution of Environmental Quality ............59
2. Efficiency of Environmental Policies ........... 65

Chapter VII
ECONOMICS .........................68
1. Estimates of Pollution Control Costs..........68
2. Financing of Pollution Control Costs..........73
3. Consequences of Pollution Control Costs ........76

Chapter VIII
CONCLUSIONS ...........................83
1. Pollution abatement ..................83
2. Environmental quality .................87

Appendices
I. Estimates of anti-pollution investments in the private
sector, 1970-75 ......................89
1I. Estimates of the economic cost of pollution abatement
in 1975 ..........................94

List of Tables
1. Selected Economic Indicators per capita, Japan and
Selected OECD Countries 1974 or 1975........... 8
2. Growth Rates, Japan and Selected OECD Countries, 1960-70. 9
3. Selected Economic Indicators per km 2 of Inhabitable Area,
Japan and Selected OECD Countries, 1974 or 1975 ......10
4. Urban Population, Importance (1970) and Growth (1960-70),
Japan and Selected OECD Countries .............10
5. Water Quality in Selected Rivers, late Sixties.......12
6. Air Quality in Selected Cities, late Sixties........13
7. Press Coverage of Environmental Issues, 1960-71 ......17
8. Officials in Charge of Pollution Abatement, Various
Levels of Government, 1974.................23 I
9. Air Quality Objectives, Japan and Selected OECD Countries,
1975............................25N
10. Selected Water Emission Standards set by Central Government
and by. Kanagawa Prefecture, 1975..............29

II. Automobile Emission Standards, Japan and SelectedI
12. Fluoride Emission Standards in Alumi-nium Industry,4
Various Processes, Japan and Selected Countries ......31
13. Some Lawsuits for Pollution-related Damage.........41
14. Number of Certified Victims for the Purpose of the
Compensation Law Scheme ..................43

15. Rates of the Pollution Load Levy..............47

16. Spatial Distribution of Activities and Population, 1960,
1974............................57

17. S0 Pollution, 1965-1974................. 60

18. CO Pollution in Tokyo, 1965-1974............. 60

19. NO2 and Oxidants Pollution, 1970-1975 ...........61

20. Water Pollution, 1971-1974.................62

21. Pollution by Harmful Substances, 1970-1974.........63

22. Air Quality in Selected Cities, Early or Mid-Seventies ..64

23. Water Quality in Selected Rivers, Mid-Seventies ......64

24. Fossil Fuel Consumption and S0 Ground Concentration,
1968-1974 .........................65

25. Automobiles, Traffic, and CO Concentrations, Tokyo,
* 1~~968-1973 .........................66

* 26. Selected Economic Indicators, Japan and Selected OECD
Countries, 1970-1975 (increases in %) ...........66

27. Anti-pollution Investment and GNP, 1975 ..........69

28. Relative Importance of Anti-pollution Investments by
Private Enterprises, Japan and Selected OECD Countries,
1974............................70

29. Anti-pollution Investment Costs as a Percentage of GNP,
1970-1975 .........................71

30. Anti-pollution Investment by Industry, 1974 ........71

31. Anti-pollution Investments in Aluminium Industry, Various
Processes, Japan and Selected Countries, 1975.......72
32. Estimates of Annualised Costs of Pollution Abatement
Programmes Envisaged, Selected Countries as a Percentage
V, ~~of GNP, 1975 and 1980 ...................73

33. Favourable Interest Loans Programmes for Anti-pollution
Investment in Japan, 1975 .................75

34. Subsidy-equivalent of Assistance Schemes as a Percentage
of Private Anti-pollution Investments, Japan and Selected
* ~~Countries, 1975 ......................76

* 35. Changes in Macro-Economic Variables Generated Over Time
by a Soft Environmental Policy, as estimated by Murakami
and Tsukui.........................80

36. Changes in Macro-Economic Variables Generated Over Time by
Stricter Environmental Policy, as estimated by Economic
Planning Agency ......................80

37. Anti-pollution Equipment Market, 1974 ...........81

38. Growth of Anti-pollution Equipment Sales, 1969-74 .....81

List of Figures

1. Money Flows in the Compensation Law Scheme.........46
2. S02 Pollution, Japan 1965-1974 and Selected Japanese
Cities, 1970-1974 .....................62
3. BOD Levels in Major Rivers, 1966-74 ............63

PREFACE

In 1976-1977, the OECD Environment Committee conducted a Review
of Environmental Policies in Japan. This was the second national
review undertaken by the Committee, the first having been conducted
in Sweden in 1973.(1)
The Review was based on an extensive survey conducted in Japan
by the OECD Secretariat. The preliminary results of this survey
were examined during an Analysis Meeting held in Japan in November
1976 attended by high level government officials responsible for
national environmental policy formulation and implementation in
OECD countries.
This Analysis Meeting was chaired'by Mr. G. Eldin, Deputy
Secretary-General of the OECD, with the assistance of four group
leaders responsible for investigating the four main themes of the
Review, namely:

i) Setting of Standards: Mr. A.J. Fairclough, Director,
Central Unit on Environmental Pollution, Department of
the Environment, United Kingdom, Chairman of the Environ-
ment Committee;
ii) Compensation Schemes: Mr. J.F. Saglio, Directeur de la
Pr4vention des Pollutions et Nuisances, Minist~re de la
Culture et de ltEnvironnement, France;
iii) Siting of Development Projects: Mr. 0.S. Saetersdal,
Secretary-General, Ministry of the Environment, Norway;
iv) Economic Consequences: Mr. P.C. Endsj$, Head of Division,
Ministry of the Environment, Norway.

These themes were chosen because they covered the most important or
unique features of pollution control in Japan's environmental
policies.
The members of the Analysis Meeting were given the opportunity
of meeting with various interest groups not only in Tokyo, but also
in Chiba, Yokkaichi, Kashima, Yokohama and Kawasaki. This permitted
a full and thorough debate on the selected issues and account to be
taken of different points of view as expressed by the Minister of
Environment, Members of the Environment Agency, the Ministry for

1) See Environmental Policy in Sweden, Revised Edition, OECD, 1977.

N ~~~~~~~~~~~~~5

International Trade and Industry, the Land Use Planning Agency,
Representatives of Prefectures and Municipalities, Industry and the
general public.
The preliminary conclusions of the Analysis Meeting were repor-
ted to the Environment Committee in May 1977 and were reviewed in
detail. This Review identified a number of policy options for fur-
the consideration by the Environment Committee and OECD countries.
The background report for the Analysis Meeting and the subse-
quent concluding Review in the Environment Committee was prepared
by Professor Remy Prud'homme, formerly Deputy Director for Environ-
ment in OCED, now professor at the Paris Urban Institute, University
of Paris-Val-de-Marne. Professors S. Tsuru, A. Morishima (University
of Nagoya), H. Uzawa (University of Tokyo), E. Reishauer (Harvard
University), H. Patrick (Yale University), E. Mills (Princeton
University) read earlier drafts of the report and offered valuable
comments, which are gratefully acknowledged. This report, revised
in the light of the Analysis Meeting and the Review, is contained in
the publication which follows.
The OECD is greatly indebted to the Japanese Government for
having made this Review possible and for having provided extensive
information and statistics. The report which follows is published
under the responsibility of the Secretary-General.

Chapter 1

INTRODUCTION

Japan like most countries, has a long history of environmental
pollution. The well-known case of a copper mine located at Ashio
which was seriously damaging the environment in the 1880s(1) is but
one example of environmental disruption associated with industriali-
sation. What is interesting to note is that Japan, unlike many
other countries, quickly developed anti-pollution policies. As
early as 1877, Osaka Prefecture issued an ordinance entitled
"Reglatonson Control of Manufacturing Plants", which even today
could be regarded as quite progressive. Attention was paid to the
selection of industrial sites that would minimise environmental
disruption; in 1895, for example, the Beshi copper refining plant
was transferred, for environmental reasons, to Shizata Island in
r the Inland Sea. Anti-pollution measures such as production cut-
backs in case of emergency, or erection of high smokestacks (a
156 meters high smokestack was constructed at Hitachi mine in 1914)

were taken. Compensation of pollution-related damages also took
p lace. Japan, therefore, has traditionally been active in the
field of environmental policies.
This tradition, however was somewhat forgotten in the pre-war
and post-war periods, and environmental pollution became more and
more important after World War II. It affected increasingly greater
geographical areas; it created not only property damage, but also
health injuries. By the late sixties, Japan was becoming one of
the most polluted countries in the world. This led the Japanese
Government (at national and local level) to take a number of measures
Laimed at preventing further deterioration and at fostering the
Simprovement of the environment. It is this policy that we shall
try to analyse here. Although pollution abatement is only one
aspect of environmental policies, it is a major one, particularly
in Japan, and the discussion will be focussed on this particular
aspect.

i) See Hurdle, Nonie and Reich, Michael, Island of Dreams, Autumn
Press, Tokyo, 1975, pp. 25-33 for an account of the unsuccessful
fight of Ashio area residents to halt copper pollution.

By way of introduction, it may be useful to examine the causes
of environmental degradation in Japan, and to try to assess the degree
of environmental pollution in the late sixties (i.e. before the
development of an environmental policy).

1. CAUSES OF ENVIRONMENTAL DEGRADATION

The pressure of economic growth on environmental quality has
been - and still is - greater in Japan than in most other countries.
First, Japan is a developed country. Economic indicators such
as output (particularly industrial output), energy consumption, or
car ownership, are - on a per capita basis - not low in Japan.

Table 1

SELECTED ECONOMIC INDICATORS per capita,
JAPAN AND SELECTED OECD COUNTRIES, 1974 OR 1975

GNPa) Industriala) Energya) Number of b)
(U.S.) Output Consumption Automobiles
1975) ($U. S. (TOE (1974)
(1974) (1974)

Japan 4,428 1,513 3.05 0.25
U.S.A. 7,044 2,067 8.09 0.62
U.K. 4,009 997 3.82 0.31
France 6,188 1,816 3.39 0.34
Italy 3,026 907 2.47 0.28
Sweden 8,419 2,226 5.45 0.35
Netherlands 5,921 1,600 4.55 0.28
OECD 5,291 n.a. 4.82 0.38

Sources:
a) OECD.
b) International Road Federation, World Road Statistics, 1975.

The rates at which outputs and associated discharges increase
matters as much as the volume of output in terms of environmental
degradation. Growth rates, as is well known, have been exceptionally
high in Japan. This was particularly true for industry, and espe-
cially for polluting industries such as steel, power, cement, pulp
and paper, foodstuffs, and chemicals, that played a key role in the
process of economic growth in Japan during the sixties. Plastics
production, which was only 100,000 tons in 1960, and which rose to
5,000,000 tons in 1970 - a fifty-fold increase - is an extreme case,
but can be taken as an exaggerated illustration of a significant
trend.

Table 2

GROWTH RATES, JAPAN AND SELECTED OECD COUNTRIES,
1960-1970 (Per cent per year)

GNP Industrial Energy Stock of
Production Consumption Automobiles
in use

Japan 10.8 14.8 11.6 25.3
U.S.A. 4.2 4.8 4.5 3.7
U.K. 2.7 2.8 2.3 6.6
France 5.6 5.9 5.3 8.2
Italy 5.5 7.0 8.9 24.1
Sweden 4.6 6.1 5.0 6.4
Netherlands 5.3 7.3 8.4 15.7
OECD 5.0 5.9 3.0 6.2

Source: OECD.

A third factor is that production and consumption activities
are spatially very concentrated in Japan. Japan is a small country
(about 370,000 kmi2) with more than 100 million inhabitants. Of
OECD Member countries only Belgium and the Netherlands have higher
densities. Moreover, Japan is a very mountainous country; only
about 25 per cent of the land has a slope less than 10 per cent.
The amount of activities - polluting activities - per square kilo-
meter of inhabitants area is therefore greater in Japan than else-
where, as shown in Table 3.
Activities are of course not distributed evenly over inhabitable
areas, but concentrated in cities. Japan is a highly urbanised
country, and also a country which has urbanised rapidly over recent
years, as shown in Table 4. Although it is difficult to produce
comparable data on urban densities (because such data depend on
definitions of "urban areas" which rest on administrative boundaries
and are not comparable between countries), it seems safe to suggest
that urban densities are high in Japan.(1) A final point about
concentration must be mentioned: a great many of the factories built
over the last twenty years have been clustered in industrial zones
developed (often on land reclaimed from the sea) for that purpose
by local and central governments. Such zones promoted industrial
growth, but increased the pressure on the environment that is
associated with physical concentration.

1) Urban densities in Japan are estimated to be about 1.5 times
that in the United States by Mills and Ohta; see Mills and Ohta
Urbanisation and Urban Problems in Patrick, H. and Rosovsky,
H, ed. Asia's New Giant - How the Japanese Economy Works,
Brookings, 1976, pp 673-751.

h ~~~~~~~~~~~~9

Table 3

SELECTED ECONOMIC INDICATORS PER km2 OF INHABITABLE AREAC)
JAPAN AND SELECTED OECD COUNTRIES, 1974 OR 1975

gNPa) Industriala) Energya) Number ofb)
(lO$U.S.) Output Consumption Automobiles
(1975) (106$U.S.) (o103 TOE) (1974)
(1974) (1974)

Japan 6.05 2.04 4.12 331
U.S.A. 0.32 0.09 0.36 27
U.K. 1.04 0.26 1.00 80
France 0.87 0.25 0.47 47
Italy 0.81 0.24 0.66 74
Sweden 1.67 0.44 1.09 69
Netherlands 3.10 0.83 2.38 146
OECD 0.31 n.a. 0.27 21

Sources and Note:
a) OECD.
b) International Road Federation, World Road Statistics, 1975.
c) Inhabitable areas are defined here as utilised agricultural
area + urban area + non-utilised agricultural area.

Table 4

URBAN POPULATION, IMPORTANCE (1970) AND GROWTH
(1960-70), JAPAN AND SELECTED OECD COUNTRIES

Urban Population in 1970 Yearly Growth
as % of Total Population Rate 1960-70 %
in 1970
Japan 56.3 4.0
U.S.A. 58.3 2.8
U.K. 71.7 0.5
France 42.6 3.5
Italy 29.4 2.8
Sweden 32.7 3.5
Netherlands 45.2 3.1
OECD 49.3 2.7

Source: K. Davis, World Urbqnisation 1Q50-70, University of
California, Berkeley, 1969 (Population Monograph Series,
No. 4).
Note: Urban population is defined here as population living
in cities of more than 100,000.

A fourth cause of environmental degradation is that public
investments in social overheads, which in many cases reduce the

burden of pollution, had traditionally been small in Japan.(1)
They remained smaller in Japan than in most other countries.
A last factor of environmental degradation is to be found in
societal attitudes and values. In the post-war period, Japan gave
priority to industrial development. Ambitious targets were set
(income-doubling 10-year plan), and no effort was spared to reach
them. As a matter of fact, Japan tried so hard that actual growth
rates were higher than planned growth rates, but this meant that
alternative or competing goals - such as environmental protection -
were to a large extent sacrificed. In the fifties and in the early
sixties, this strong commitment to industrial growth, and its
corollary, a relative neglect of environmental quality, were shared
by most segments of the Japanese society. This attitude, which was
to change drastically at the end of the sixties, explains why there
were practically no implicit or explicit environmental policies in
the two post-war decades.

2. INDICATORS OF ENVIRONMENTAL DEGRADATION

Comparative measures of environmental quality are extremely
difficult: there are so many pollutants to measure, so many places
to measure them, so many time-periods for which to measure them, and
so many ways of measuring them, that quantitative data can be pro-
vided to support any proposition. There are, however, some reasons
to believe that, in the late sixties, just before the development of
pollution abatement policies, the quality of the environment was
lower in Japan than in most other OECD countries.
Ambient concentrations as well as pollution-induced damage seem
to have been higher in Japan.
Dissolved oxygen (DO), for instance, is an indicator of water
pollution by organic wastes; when pollution increases, DO concentra-
tions decrease, causing fish, or rather certain kinds of fish, to
disappear. Average DO levels were low in the rivers and estuaries in
Japan's large cities. An investigation was conducted in 1969 at 21
sampling points in the Tokyo area;(2) DO levels were below 5.0 p.p.m.
in 17 cases, and below 2.0 p.p.m. in 8 cases. The figure for the
lower reaches of the Tama river, 2.5 p.p.m., is representative of
the quality of streams in the Tokyo area. Similar figures for rivers
in other countries are given in Table 5. Although they must be

i) See: Government of Japan, Environmental Policy of Japan,
Background Paper for the Review of Environmental Policy
of Japan, 1976 /ENV/JAP/76.17 (hereafter referred to as
Japanese Reportj, p. 18 for comparative data on the availa-
bility of sewage in Japan and in some other OECD countries.
2) See Tokyo Metropolitan'Government, Tokyo Fights Pollution, 1971
p.91

handled with great caution, they suggest that water quality, as
measured by DO, was lower in Japan than in most other countries.

Table 5

WATER QUALITY IN SELECTED RIVERS, LATE SIXTIES

Dissolved Oxygen (Yearly averages in p.p.m.)
Tama River, Tokyo (1969)a) 2.5
Seine River, Paris (1971)b) 3.5
Rhine River, Lobith (1969)c) 5.1
Delaware River, Philadelphia (1965)d) 3.5
Thames River, London (1969)e) 3.2
Rhine River, Braubach (Koblenz) (1970)f) 5.9

a) Tokyo Metropolitan Government, Tokyo Fights Pollution, 1971,
P. 91.
b) Agence de Bassin Seine-Normandie. The figure given is an
indicator of water quality at Acheres, just downstream from
Paris; see Ministere de la Qualitd de la Vie, Environnement
et Cadre de Vie, 1974, tome I, p. 243 for figures on the
quality of other French rivers, which are in most cases much
higher.
c) Netherlands Central Bureau of Statistics, Algemene Mitien
Statistiek 1973, p. 67; average figure for four seasons;
Lobith is on the Dutch-German border.
d) R. Porges, Water Quality Management in the Delaware River
Basin, in: International Conference on Water for Peace, 1967,
Vol. 8, p. 59.
e) Annual Abstract of Greater London Statistics, 1971, p. 260;
figures for low tides, at London Bridge, average for quarter
1st July to 30th September; the average figure for the year
would be significantly higher.
f) Commission Internationale pour la Protection du Rhin, Tableaux
Numeriques des Analyses Photochimioues des Eaux du Rhin. 1970
Table 2.

Similar comparisons can be attempted for air pollution. Levels
of sulphur dioxide (S02) and particulate pollution were high in
Japan in the late sixties. A map showing ground level SO2 concentra-
tions in Tokyo around 1967, for instance, suggests that all of the
city centre area recorded average yearly concentrations above
0.05 p.p.m., and that one had to go quite a way from the city centre
to find concentrations below 0.04.(1) Similar figures for other
cities, and for other pollutants are given in Table 6.

1) See Tokyo Fights Pollution, op.cit., p.61.

Table 6

AIR QUALITY IN SELECTED CITIES, LATE SIXTIESa)

so2C) coc) 03d)
S2 CO3

Tokyo 0.063e) 5.0f) 0.27b)g)
Osaka 0.082e) 4.8f) 0.26b),g)
Paris o.o44h) 24.4h) n.a.
London 0.088i) n.a. n.a.
New York 0.080b),j) 15.7b),j) n.a.
Chicago n.a. n.a. 0.07b),g)

Sources and Notes:
a) All figures are for 1968, except where otherwise specified.
b) 1969.
c) Yearly average concentrations, in p.p.m.
d) Yearly maximum concentration average, in p.p.m.
e) Environment Agency, Quality of the Environment, 1972.
f) Environment Agency, Quality of the Environment, 1975.
g) OECD, Environment Directorate, Report on the Problems of
Photochemical Oxidants and their Precursors, Paris, 19(4.
h) Ministere de la Qualit6 de la Vie, Environnement et Cadre De
Vie, 1974, Tome I; average of 15 stations for SO2.
i) Greater London Council, 1973 Annual Abstract of Statistics,
1974, p. 29; average over 7 stations; the figure is for
winter months only and should be lowered to be compared with
figures for other cities.
j) OECD.

An overall measure of environmental degradation would be the
cost of damages resulting from such degradation.(1)
Unfortunately, no reliable estimates of this social cost are
available for Japan.(2) International comparisons are therefore
impossible.

1) See G6ran-Maler, K. and Wyzga, R., Economic Measurement of
Environmental Damage, A Technical Handbook, Paris, 197b,
OECD, p. 151, for a description of the methods and of the
limitations of such measurements.
2) See: Environment Agency, Quality of the Environment, 1972
p. 12; Economic Council of Japan, Measuring Net National
Welfare of Japan, 1973, pp. 175 seq.; T. Miyamoto, Estimates
of Economic Losses caused by Environmental Pollution,
Annual Report of the Tokyo Metropolitan Research Institute
for Environmental Protection, 1975, pp. 75-85; for first
attempts.

It seems very likely, however, that people's health and pro-
perties did suffer from environmental degradation as much or more
than in most other countries.(1)
Figures relative to the number of "pollution victims" are
rarely meaningful because the concept of pollution-related disease
is rarely rigorously defined. One such definition has been promul-
gated in Japan for the purpose of the so-called "Compensation Law
Scheme".(2) According to this definition, which would be considered
as restrictive by many medical doctors, more than 35,000 people have
been officially designated as pollution victims. There is no com-
parable data for other countries.
In several cases, the health impact of pollution was parti-
cularly dramatic.
In 1959, a medical team announced that an illness from which
several residents of Minamata - a small city on the west coast of
Kyushu - suffered, was caused by ingestion of fish contaminated by
mercury discharged into the Minamata Bay from a local chemical
plant. The disease, which was called Minamata disease, is parti-
cularly painful, and incurable. Several hundred people were victims,
and more than 150 died. In 1965, Minamata disease was detected
amongst residents of the Agano river basin, on the Japan Sea side
of Honshu, again caused by the mercury discharges of a local chemical
plant; the number of victims also numbered several hundred.(3)
The term "Itai-Itai" means "ouch-ouch", and characterises the
extremely painful nature of the disease which struck residents of the
Jintsu River basin, also on the Japan Sea side of Honshu. The dis-
ease was identified as cadmium-poisoning in 1959, and the source was
identified at a local mining and smelting company. The government
officially identified 123 victims, of which 32 died.
In 1968, polychlorinated biphenyls (PCBs), used as a heating
medium in a factory producing rice bran oil, leaked from a hole in
a corroded pipe, and mixed with the rice bran; a large number of
people who ate this PCB-contaminated rice bran oil were seriously
poisoned and deaths were reported.
Here again, international comparisons are difficult. But it
would seem that lethal cases of environmental pollution, although
not unknown elsewhere (people died from air pollution in Donora,
Pennsylvania, in 1948, and in London in 1952) have been particularly
numerous in Japan.
1) J. Gresser, "The 1973 Japanese Law for the Compensation of
Pollution-Related Health Damage: an Introductory Assessment",
Law in Japan (1975), Vol. 8, p. 120, reports that at least
'1 per cen t of the Japanese population has developed related
health diseases with the percentage being as high as
16.7 per cent in the large cities.
2) See Chapter IV infra.
3) The number of officially designated victims of Minamata
disease was, in 1975, over 1,400.

Environmental degradation was therefore serious in terms of
pollution. But pollution is only one aspect of environmental
degradation. The situation may well have been - and m ay still be -
even more serious in terms of amenities. The growth of industry
and of cities did change drastically the physical and cultural
environment of many Japanese. Quietness and beauty are even more
difficult to measure than air or water quality; but many people
would argue that they suffered more. The people who used to culti-
vate small gardens carefully and pleasurably, who are now living in
suburban apartment buildings, or the people who used to walk at
leisure in de facto pedestrian streets, and who now have to share
the streets with automobiles /Ffiost streets do not have sidewalks in
Japan(1)7 did experience a very real environmental degradation that
We' should keep in mind even though we focus on pollution and pollu-

tion abatement policies.

5~ ~ ~ ~~~~~~~~1

Chapter II4

APPROACHESI

1. DEVELOPMENT OF ENVIRONMENTAL POLICIES

Changes in environmental quality led to changes in societal
attitudes, which were reflected in changes in political pressures,
which brought about changes in governmental policies. Similar1
changes took place in most developed countries, but were probably1
less dramatic than in Japan.
A rather rapid change in societal attitudes towards pollution
occurred in the late sixties. Japan had traditionally been (and to
a large extent still is) a consensus society, where goals and actions
decided by society and its leaders largely go unquestioned. In the
post-war period the Japanese people accepted to pay the price of
economic growth in terms of environmental degradation. In the
sixties, some people began to find that the price was too high. In
1963-64, a project for a petrochemical complex at Mishima. and
Numazu (Shizuoka Prefecture) was rejected by local residents and
local governments. In the following years, the Japanese became
particularly pollution-conscious. They began to complain to re-.
gional and public bodies: the number of such complaints and peti-
tions, which was virtually zero in 1960, increased to about 20,000
in 1966 and to more than 60,000 in 1970.(1 '
To a large extent, this change can be explained in simple '
economic terms. Economic growth brought not only pollution, but
pollution awareness. For each individual the disutility of a givenA
amount of pollution increases with income. It can even be said that
disutility increases more rapidly than income; the income elasti-
city of demand for clean air, clean water, quietness, etc. is
greater than one. The Japanese people were therefore more and more
sensitive to more and more pollution. A sort of a threshold was
thus reached, where what had been accepted became unacceptable. r
This awareness was precipitated by the horrible character of
Minamata and "Itai-Itail" diseases. Had not such episodes - which)
were in a sense accidental - occurred, environmental awareness

i) Environment Agency. Quality of the Environment, 1972, P. 7.]

would not have developed so strongly and so quickly. The tradition
of environmental consciousness that prevailed at the turn of the
century, in the early stages of industrialisation, made the change
easier. It was also greatly facilitated by the media. Pollution
made news. Press coverage of environmental issues increased greatly,
as shown in Table 7. Editorials calling for immediate action
appeared.

Table 7

PRESS COVERAGE OF ENVIRONMENTAL ISSUES, 1960-1971

Nume fa Share of News b)

1960 14 0.4
1961 31 0.7
1971 124 2.8

Source: Environmen Aecy, Quality of the Environment, 1972, p. 3.

Notes:
a) Average monthly number of articles on pollution in a single
representative newspaper.
b) Ratio of space devoted to environmental issues to space devoted
to all news.

This change in attitudes was immediately reflected in the
political arena. Many groups and movements were created to protest
against pollution from private and, to a lesser extent, at least
in the sixties, public sources. By means of demonstrations, lobby-
ing, lawsuits, etc. they tried to stop or to reduce existing pollu-
tion, and to prevent future pollution by halting, scaling down, or
F modifying planned developments. At both local and national levels,
anti-pollution movements became an important political force.
F ~~One can probably go a little further, and note that consciously
or not, the environment was selected as a "battlefield" by anti-
establishment people, groups or parties. They certainly had a genu-
ine concern for environmental protection, but they also wanted to
find fault with the business leaders, bureaucrats and politicians
who had been ruling the country since the war. Pollution was an
ideal theme to that effect.
This in turn led to the development of an environmental policy,
or rather of environmental policies. Although some pollution pre-
vention mechanisms had been instituted in the post-war period at

both local(1) and central(2) levels, they were not very effective
and did not constitute a policy.
In the late sixties and in the early seventies, a number of
important decisions were taken by the Diet, the Administration,
and the Courts.
The legislative foundations of this policy were set in 1967
and 1970. The "Basic Law for Environmental Pollution Control",
enacted in 1967, is a seven-page document that spells out general '
principles regarding "the responsibilities of the enterprise, the
State and the local government bodies i?.-7 in order to promote
comprehensive policies to combat environmental pollution thereby
ensuring the protection of the people's health and the conservation
of their living environment" (Article 1). In 1970, a special
session of the Diet was devoted to environmental issues, at which
no less than fourteen pollution-related Laws were revised orI
enacted, thus providing a solid legal basis for environmental policy.
The executive created in 1971 a new institution to carry out
this policy: the Environment Agency. The Agency is not a Ministry,
and reports directly to the Prime Minister, but this does not mean
that its status is inferior to that of a Ministry; as a matter of
fact, the Director of the Agency ranks high in the Cabinet and has
the title of Minister of State. The Environment Agency is not theA
only Agency or Ministry interested in environmental policy. In
particular the powerful Ministry of International Trade and Industry
(MITI) which has created a specialised Directorate (called Industrial '
Location and Environmental Protection Bureau), plays an important
role in policy formulation and implementation.
The Judiciary also played an important role in the development
of environmental policies. In 1967-69, victims of Minamata disease,
of Ttai-Itai disease, and of pollution-related asthma sued the
companies which they held responsible for the diseases. In theseI
four lawsuits,(3) which were widely covered by the media, and became
known as the "four major lawsuits", the Courts decided in the early
seventies in favour of the plaintiffs, and found the polluters re-I
sponsible. The impact of these decisions on attitudes, laws, and
practices, was great.

1) Ordinances to control "factory hazards", noise, smoke and
soot were enacted by the Tokyo Metropolitan Government,
Ube City, Osaka City, Kanagawa Prefecture and Fukuoka
Prefecture in the early fifties.
2) Several Laws concerning Water (Industrial Water Law, Water
Quality Conservation Law, Sewage Law, Underground Building
Water Control Law) as well as a Smoke and Soot Regulation
Law were enacted in 1956, 1958 and 1962.
3) There were two suits filed by victims of Minamata disease
in different areas; for more details see Chapter IV infra.

What is striking in the development of environmental policies
in Japan is that practically everybody was in favour of them. All
political parties supported environmental laws. Established bureau-
cracies did not try to oppose the creation of a new Agency. Even
industry had to recognise the need to reduce pollution, and to
co-pertewith central and local governments to that effect. Such

unanimity aid not exist to the same extent in most other countries.
This unanimity, however, did not last. At present (1976),
environmental policy is no longer supported by everyone. On the
one hand, many people (victims, members of residents' groups, local
government officials, editorial staff writers of many newspapers,
Ketc.) criticise this policy as being too "soft".
On the other hand, some people complain that this policy is
too "hard"; thus, for instance, Keidanren, the Japanese Association
of Manufacturers has officially criticised in 1976 important and
specific aspects of this policy.(1) It would seem that the policy,
which succeeded in controlling environmental degradation did not
succeed in controlling societal disruption caused by environmental
degradation.

2. CHARACTERISTICS OF ENVIRONMENTAL POLICIES

First, the Japanese approach to pollution abatement appears
to be largely non-economic. Both because health damage has been
greater or more visible than elsewhere and because pollution abate-

mert has been an attack against industry as much as a defence of
the environment, it is based on feelings more than on economics.
The familiar proposition that a balance must be struck between
environmental costs and economic benefits has even been officially
rejected. The 1967 Basic Law stated that "efforts shall be made to
balance pollution control against the needs for economic development".
Although this provision referred only to environmental conservation
and not to health protection, it was violently attacked, and was
eventually deleted in 1970. More generally, the idea that a price
can be put on human life (in the sense that additional expenditures
on child care or on road safety would save additional lives) would
be rejected by most people as unbearable.
This is why a number of the measures taken were decided irres-
pective of their costs. It does not necessarily mean that the costs

1) See: Keidanren, Comments on the System for Environmental
Impact Statement, 16th February, 1976; Request Concerning
the System for Pollution-Related Health Damage Compensation.
4th March, 1976; Environmental Quality Standard on Nitrogen

were too high and the measures too stringent. It does not mean
either that all the measures taken have ignored cost considerations,
which certainly play an important role in the setting of specific
plant by plant standards. It only describes the approach followed,
which is basically uneconomic, or rather non-economic.
This lack of economic rationale also appears in the "anti-
business" attitude that prevailed, and which is particularly sur-
prising on the part of legislatures and governments which were not,
on other accounts, inamicable to the business community. Industry
did not appear as a source (of environmental degradation) that had
to be stopped, but as a villain that had to be castigated. Hence,
the success of the P.P.P. in Japan. The polluter-pays-principle
states that the costs of pollution abatement should be borne by
polluters, who will in most cases pass them on in the prices of
their goods, rather than by governments: it is a "consumer-pays-
principle", as opposed to a "tax-payers-pay principle"; it was
introduced in 1972 by the OECD as an economic principle, which
would

i) prevent distortions in international trade and
ii) improve the allocation of resources.

The P.P.P. immediately became very popular in Japan, and it is
often referred to. But the economic objectives of the principle,
and the mechanisms by which they are achieved, are not always well
understood. For many, the principle just means that polluters are
guilty, and must be punished. In short, it is understood as a
"Punish Polluters Principle".
A second characteristic of the Japanese approach is that it
was focussed on certain types of pollution, namely on pollution by
mercury, cadmium, polychlorinated biphenyls, sulphur dioxide, and
nitrogen oxides. These pollutants were responsible for the worst
cases of pollution experienced in Japan. Their discharge into the
environment has been very severely controlled. Thus, the factories
which were the major sources of mercury containing effluents (fac-
tories manufacturing acetylene-based vinyl polymer chloride and
acetylene-based acetaldehyde and caustic soda by means of mercury
process electrolysis) were forced either to discontinue their pro-
duction, to change their processes or to close off their effluents
to outside. The policy relative to PCBs was particularly rigorous,
and probably stricter than anywhere else in the world: manufacture
and imports of PCBs were banned (although exceptions can be granted);
measures were taken to recall, to store and to dispose of wastes
containing PCBs; and contaminated waterbed deposits were removed
and buried.
Strong policies have also been developed relative to air
pollution. As a matter of fact, reduction of S02 emissions has

been an essential ingredient -probably the most important element -
of environmental policies in Japan. The Japanese policy also
focussed - or focusses now - on control of NOx emissions; very
a mbitious ambient standards and very strict emission standards
(particularly for automobiles) have been established; in this
field also pollution abatement efforts are probably greater in
Japan than in any other country.
Other types of pollution appear to have been comparatively
neglected. Water pollution by organic matters has not been a
priority area in Japan. This can probably be explained by the
relatively minor importance of rivers in this small and mountainous
country. It would also seem that a great reliance has been placed
on the assimilative capacity of the sea, and that comparatively
little has been done to fight sea pollution.(1) Noise pollution
is particularly difficult to control (and to measure); although
exposure to high noise levels is widespread in Japan, policy in
this domain has not been exceedingly active; measures have been
taken to reduce the damage created around airports; standards have

been set for trains; but the difficult problem of highway noise
pollution has not been successfully tackled. The contrast between
developed policies in certain areas and relatively less developed
policies in other areas is therefore a characteristic feature of
the Japanese approach.
A third characteristic relates to the policy instruments
utilised: Japan has preferred direct administrative controls to
indirect economic incentives. There are only two instances of pollu-
tion charges: a tax based on S02 emissions in the framework of the
so-called Compensation Law Scheme,(2) and a special landing fee
that varies according to the noise emitted by the aircraft.(3) They
do not play a very important role. Japan - like most other countries-
does not rely upon market mechanisms to reduce pollution; price
sinasand incentives are considered not to be sufficient. Instead,
L Japan utilises emission standards, i.e. direct instructions given
by the Administration to polluters. As a matter of fact, with the
exception of the case of toxic substances such as mercury or PC~s,
emission standards are rarely general rules that apply bluntly to
everyone, they are often made-to-measure prescriptions tailored to
the needs and possibilities of each enterprise; in many cases they
are even negotiated between governments and enterprises; similarly,
enforcement is by persuasion rather than by coercion. In other

i) Several Laws were passed (Water Pollution Control Law, Marine
Pollution Prevention Law), but seem not to have been very
efficient.
2) See Chapter IV infra for a more detailed discussion.
3) See Japanese Report, p. 231 for additional details.

words, the Administration in Japan does not limit its role to the
setting of new rules of the game for private business; it inter-
venes directly into the detailed operation of enterprises, or at
least of major enterprises, on a plant-by-plant basis. One could
go as far as saying that many laws and even cabinet orders or local4
government ordinances are more instructions for administrators (to
help them carry out their task) than for polluters (to tell them '
by how much they should reduce their pollution). The Japanese
approach to pollution abatement therefore relies basically on
"administrative guidance" - in the spirit of a planned economy rather
than in the spirit of a market economy.
One should also note here that Japan makes an important use
of an instrument that is rarely, if ever, utilised elsewhere; the
payment of compensation to victims of pollution. The Compensation
Law Scheme, introduced in 1974, is a particularly interestingI
innovation, worth a special investigation.0()
Afourth characteristic of the Japanese approach is the role
played by local governments. Japan is a highly centralised country
with only recent experience of local autonomy. Laws and cabinet
orders provide for all cases and all places; when necessary, they
discriminate between places, introduce various standards, and
designate the areas where these standards will be applied. One
could therefore think that there is little room for local government
intervention. This would be a mistake.
Partly because they are closer to the needs and demands of the
people, partly for purely political (partisan) reasons local govern-
ments have often been more innovative and more severe than the
central government. Pollution control was actually initiated by
local governments at a time when the central government did not
think much about the problem; compensation schemes were also
pioneered by local governments; so was the idea of a ceiling to
the total of emissions allowed over a given area; and many local
governments have set emission standards stricter than the standards
set by the central government.
There is one other reason for local government intervention.
The detailed "administrative guidance" that is characteristic of
the Japanese approach cannot possibly be carried out entirely from
Tokyo offices. In practice, a number of standards are negotiated,
set and implemented at a local level.
Although it is true that local government officials are
officially given the task to implement central government decisions,
and that a number of laws have prescribed a role for local govern-

ments, it is not sure that all the initiatives taken by local4

i) See Chapter IV infra for a detailed discussion.

governments are legally founded. Some have been claimed to be
hardly constitutional. But none have been challenged in courts.
The relative importance of central and local government is
reflected (admittedly poorly) in the number of officials in charge
Kof pollution abatement at the various levels of government, as
shown in Table 8.

Table 8

OFFICIALS IN CHARGE OF POLLUTION ABATEMENT.

VARIOUS LEVELS OF GOVERNMENT, 1974

Number J
Prenetural Government 9 9 6 5 44
Preectural Government 599264

Municipal Government 6,465 49
Total I13,313 100

Notes and Sources: Japanese Report, op.cit., p. 24.

One of the most impressive achievements of local governments
is in the field of air pollution monitoring. About 70 networks
have been established. A network consists of 10-40 stations where
air is automatically and permanently analysed in terms of 5 or 6
* pollutants (502, particulates, CO, oxidants, NO, NO2), and of a
[centre where the results of these analyses are immediately trans-
ferred, processed, stored, and - contrary to what happens in some
other countries - publicly displayed. In addition, the most
sophisticated networks monitor S02 emission at source in the main
factories of the area. In some cases, computerised models can
predict ground concentration levels a few hours in advance. In all
cases, these networks are utilised as emergency systems. Whenever
ground concentrations exceed (or are predicted to exceed) certain
levels, the most important polluters are telephoned to reduce
emissions, by changing fuels or by reducing operations. These
monitoring systems, which are more numerous and more sophisticated
than anywhere else in the world, have benefited from central govern-
ment subsidies and technical assistance.

Chapter III

STANDARDS '

In Japan, as in many other countries, standards are an important
tool of environmental protection. The word "standards" is, however,
somewhat confusing because it is used to describe two very different
sets of prescriptions.
Some standards, usually called ambient or quality standards,
lay down the levels of pollution not to be exceeded in a receptor
medium; they do not, by themselves, impose constraints upon pollu-
ters who cannot be fined or punished because quality standards are
not met; they are in fact policy objectives.
Other standards, such as emission standards, which specify the
quantity of pollutants (or their concentration in effluents) which
may be discharged from a given source per unit of time, or product
standards, which prescribe the physical or chemical properties of
a product, or the maximum permissible polluting emissions from the
product during its use, are of a different nature; they are binding
and can be enforced; they are directly policy instruments.

1. QUALITY STANDARDS

Three points can be made about quality standards in Japan.
First, they are usually set at the national level. The role
played by the executive is often as important as the role played by
the legislative. In many cases, the laws passed by the Diet are
concerned with concepts, not with figures. Local governments are
in most cases not allowed to change quality standards. This does
not mean that all quality standards are identical all over the
country. In Japan, as in most other countries, quality standards
may vary over space. For some pollutants,(1) the quality required
for a particular stretch of river is not the quality required for
another stretch of the same river, and the quality required for one

i) Namely for pH-, DOD, suspended solids, dissolved oxygen and
coliforms; quality standards for cadmium, cyanides, organic
phosphorous, lead, chromium, arsenic, mercury and POE, on
the other hand, are identical for all water bodies.

river differs from the quality required for another river. In
other words, the principle of discrimination in quality standards
is applied in Japan, at least in the fields of water and noise.
Secondly, quality standards are generally strict in Japan.
Table 9, which gives daily average ground concentration values for
major air pollutants, suggests that policy objectives are more
ambitious in Japan than in many other countries.

Table 9

AIR QUALITY OBJECTIVES, a) JAPAN AND SELECTED
OECD COUNTRIES, 1975

S02 Particulates N02
(p.p.m.) (mg/m3) (p.p.m.)

Japan 0.04 0.10 0.02
Canada O.o6 0.12 0.10b)
Finland 0.10 0.15 0.10
Italy 0.15 0.30 n.a.
U.S.A. 0.14 0.26 0.13)
Germany 0.06 n.a. 0.15d)
France 0.38 0.35 n.a.
Sweden 0.25 n.a. n.a.

Sources: For SO2 and for particulates: Werner-Martin and Arthur C.
Stern, The Collection, Tabulation, Codification and
Analysis of the World's Air Quality Management Standards,
School of Public Health, University of North Carolina at
Chapel Hill, N.C., United States, October 1974; for NOx:
R. Kiyoura, International Comparison and Critical Analysis
of NO~ Air Quality Standards, paper presented at the
A-- nnual Meeting of the Air Pollution Control Associa-
tion, Portland, Oregon, 27th June - 1st July, 1976.
Notes: a) All figures are average daily values.
b) The figure is for Ontario; the figure for Saskatchewan
is much lower: 0.01.
c) For the United States, the N02 objective is set in terms
of average yearly value (O.05 p.p.m.); the figure given
is therefore an equivalent open to criticism.
d) The German standard is 0.05 p.p.m. for "long-term
exposure" and 0.15 p.p.m. for "short-term exposure".

The quality standard for NO2 is indeed much stricter in Japan
than in other countries. It is under attack from some quarters.
Its critics contend that it is not scientifically based, and that
the cost of meeting it will be enormous. It seems true that avail-
able epidemiological studies on which it is based are not very
convincing, and that it is not proven that concentrations somewhat
above the level chosen would constitute health hazards. But the
contrary (namely that such concentrations would not constitute
health hazards) is not rigorously proven either. More generally,

the notion of a "scientifically-based" standard must be viewed with
some scepticism. Epidemiological studies can only provide dose-
effect relationships. In the best of cases, such relationships will
exhibit thresholds that can suggest quality standards. In all cases
they only provide information to be taken into account in the selec-
tion of a standard. But the selection is made by men, not by
"science". It seems also true that costs have not been taken into
account in the standard setting process; but it is also true that
pollution abatement costs are often very difficult to estimate,
because they are the costs of new technologies, which are yet to be
developed, and which may well, in the end, turn out not to be as4
costly as was thought at first.
The third point to be made about quality standards is that
they are taken very seriously in Japan. Although they are merely
desirable administrative goals, with no binding force, they do play
an important role. Measurements are often related to ambient
standards, and environmental quality is defined, and compared over
time, in percentages of places where standards are met. More
generally, and move importantly, policy instruments are put to the
service of quality standards. This is true in every country, but
it is probably truer in Japan than in most countries. In Japan,
when a goal has been agreed upon, it is endorsed by everyone in
the administration and everyone does his best to ensure that it
will be achieved. In that sense, quality standards are probably
more important in Japan than elsewhere.

2. EMISSION STANDARDS

Nevertheless, in Japan as elsewhere, the policy instruments,
i.e. the constraints placed on polluters, consist of emission
standards. They raise four major issues:

a) who sets the standards?;
b) what are the standards?;
c) what relations do they bear to quality standards?;
d) how are they implemented and enforced?

a) The first question relates to the standard setting process.
Emission standards are set by both the central government and local
governments. At the central government level, just as in the case
of quality standards, an important role is played by the executive.
The 1970 Water Pollution Control Law for instance only deals with
broad principles, and explicitly states that "the standards of an
effluent shall be provided for in the Prime Minister's Office Order"
(Article 3); emission standards were in fact issued in the 1971 and
1974 Ordinances of the Prime Minister's Office. Similarly, the

1968 Air Pollution Control Law prescribes that "emission standards
with respect to soot and smoke generated from soot and smoke emitting
facilities shall be established by Order of the Prime Minister's
Office" (Article 3). The central government has therefore estab-
lished many emission standards for air, water, noise, as well as
products standards such as automobile exhaust gas standards.
However, these standards are often complemented by standards
set by local governments (prefectures and cities). Article 4 of
the Air Pollution Control Law provides that national emission stan-
dards can if necessary be replaced by stiffer standards prescribed
by prefectural ordinance for the soot, dust, and toxic components
found in soot and dust; by the end of 1974, 20 Prefectures, includ-
ing Tokyo, had passed such ordinances.
U ~~ In fact, local governments often go further than the mere
setting of generic standards, that apply to all plants, or to all
plants of the same type. They enter into detailed negotiations with
each plant - or rather each major plant - and set for each plant
specific standards to be achieved, and even the manner in which
they will be achieved. Thus, for instance, the city of Nagoya - a
2,000,000 population city in the heart of the Tokyo-Osaka megalopolis
prepared in 1974 a pollution abatement plan based on 68 pollution
abatement contracts signed between the local authorities and the
managers of 68 polluting facilities. The Tokyo metropolitan govern-
ment has also taken things into its own hands. It is important to
note that those detailed written agreements are made public. It
would therefore appear that the role of local governments in the
Ksetting of emission standards is great, at least as great as that
of the central government.
b) The nature of emission standards varies with the problems
they are meant to solve. However, a few general points can be made.
Most standards are expressed in terms of concentrations, not
quantities, of pollutants. This makes it possible for a polluter
(particularly in the case of water pollution) to increase the amount
of pollutant discharged by increasing the quantity of air or water
discharged. The cases of SOX and NO5 emission standards, however,
are somewhat more complex.
Sulphur oxide emission standards for each sulphur oxide emit-
ting facility are given by a complex formula of the following type:
q = f (K,H,0,V,T)
in which:
q = hourly volume of sulphur oxide emitted
K = coefficient
H = actual height of stack
0 = volume of exhaust gas
V = speed of exhaust gas
T = absolute temperature of exhaust gas.

The standard is defined in terms of quantity of pollutant, but it
is (partly) a function of the volume of exhaust gas, which means
that even in the case of SO.~, it is possible to increase the
quantities of pollutants discharged by means of dilution; this possi-
bility, however, is limited by the fact that the speed and the
temperature of exhaust gas (which would be modified by an increase
in volume) are taken into account in the calculation of the standard.
Nitrogen oxide emission standards apply to a complex magnitudeA
called: "converted concentration of NOXII and are defined by the
following formula:
s = g (N,C,O) -
in which:
s = converted concentration of NOx
N = coefficient
C = actual concentration of nitrogen oxides
0 = oxygen content in the exhaust gas.

This definition of s is such that it is not possible to meet the
standard and to increase quantities of NO, dischbarged by adding fresh
air: this would increase the oxygen content, and therefore the
standard.
A second point is that most emission standards do not vary
with the location of the polluting facility. This is even true
for water effluents, although some water quality standards are
different for different types of rivers and lakes.
SOX emission standards are an important exception. The value
of the coefficient K, which plays an important role in the formula,
varies with the area in which the polluting facility is located.A
More than 100 areas, grouped into sixteen K categories have been
designated. The value of K is about six times higher in the less- '
polluted areas than in the most polluted areas. All things equal,
a given facility will therefore be allowed to pollute about six
times more in Northern Hokkaido than in Tokyo or in Osaka. This is
of course perfectly reasonable.
An important qualification must immediately be added: central
government standards are identical over space, but local government
standards are not. In many cases, Prefectures and municipalities
have issued stricter generic standards, not to mention the even
stricter specific standards negotiated between government and in-
dividual enterprises. The differences can be great, as suggested
by Table 10.
It should also be noted that some emission standards are a
function of the type, and in some cases of the size, of the polluting
facility, while others are not. Standards for NO, soot and dust,
cadmium, lead, and most air pollutants are defined by type of

facility.(1) For instance, concentrations (in grams per normal
cubic meter) of soot and dust are: 0.40 for a coal-fired boiler,
0.10 for a large-scale heavy boiler, etc. SO2 standards and water
effluent standards, on the other hand, are given irrespective of the
type of facility.

Table 10

SELECTED WATER EMISSION STANDARDS SET BY
CENTRAL GOVERNMENT AND BY KANAGAWA PREFECTURE, 1975
(mg/1)

Central Kanagawa Prefecture
Government
BOD 160 20
COD 160 20
Suspended solids 200 50
Phenols 5 0.005
Fluorine 15 0.8

Source: Japanese Report: op.cit. pp. 161 seq.

It is also important to note that prefecture governors are
empowered to set stricter standards for new plants. The reason is
that it is normally cheaper for new plants than for old plants to
achieve a given standard. It is reported that many governors and
even mayors do set stricter standards for new plants.
It will be clear at this point that it is difficult to say
whether emission standards are stricter in Japan than in other
countries. There is, however, one case in which a comparison is
possible, and, in addition, particularly important: the case of
automobile emission standards. Standards were introduced in 1966
and progressively strengthened.(2) In 1972 standards for passenger
cars to be met in 1976 were announced as follows (in g/km):

Carbon monoxide (CO) 2.10
Hydrocarbons (HC) 0.25
Nitrogen oxides (BOx) 0.25

Standards for CO and HC did not raise any particular difficulty.
But the standard for NOx (the standard that appeared in the 1970
amendment to the Clean Air Act in the United States, and which was
never implemented in the United States) was strongly criticised, as
being unnecessarily strict, and above all, as being technologically

1) See Japanese Report, op.cit. pp. 93-94 and 105-113.
2) Figures given here relate to passenger cars with equivalent
inertia weight of 1,000 kg or less, except when otherwise
specified.

unmeetable. A less strict standard (0.60) was therefore set for
1976. But it was decided that the original figure (0.25) should be
made the target for 1978. This latter decision was again criticised.
But in the meantime, Japanese automobile manufacturers were actively
engaged in research on ways and means of meeting this so-called 1978
standard. One after the other, they announced that they could pro-
duce cars meeting the 0.25 g/km of NOx standard. Estimates of
additional costs (relative to cars meeting the 1976 standards) in
terms of money, fuel consumption, and driveability are moderate,
and range from zero to 10 per cent. Japanese automobile manufacturers
have apparently succeeded where other automobile manufacturers have
(or say they have) failed.
Automobile exhaust standards in several countries are therefore
as shown in Table 11.

Table 11

AUTOMOBILE EMISSION STANDARDSa),
JAPAN AND SELECTED COUNTRIES
(g/km)

CO HC NO
a
Japan (for 1976) 2.10 0.25 0.60
Japan (flor 1978) 2.10 0.25 0.25
U.S.A. - Federal
Government (for 1975) 9.30 0.93 1.93
U.S.A. - California
(for 1975) 5.60 0.56 1.24
Canada (for 1975) 15.62 1.25 1.94
Canada (for future) 2.13 0.25 1.94
Sweden (for 1976) 24.20 2.10 1.90
Source: OECD.

Notes: a) Testing methods vary from country to country and
comparisons must be made with great care.
b) 0.85 for passenger cars with equivalent inertia weight
of more than 1,000 kg.

It is easy to see that automobiles manufactured to meet European
and American standards will not be admitted to Japan in a few years'
time.(1) Could these strict standards be considered to have been
intentionally set as a non-tariff barrier to trade? Several points
can be made that suggest a negative answer. First, very low NOx
emission standards for automobiles are part of the impressive

1) Japan has given periods of grace for foreign-made cars
which will be required to meet 1976 standards in 1978 only,
and 1978 standards in 1981 only.

Japanese effort to reduce NOx pollution. Second, imports by Japan
of foreign-made automobiles are not very important, and would hardly
justify barrier setting. Third, these standards have been strongly
opposed by Japanese automobile manufacturers. It would therefore
seem unfair to accuse the Japanese Government of having set strict
standards to prevent imports of foreign automobiles.
Comparative emission standards have also been compiled for a
less important case: fluoride emission in the aluminium industry.
They are given in Table 12. They tend to suggest that, in this
particular case, which may not be typical, Japanese emission standards
are not very strict.

Table 12

FLUORIDE EMISSION STANDARDS IN ALUMINIUM INDUSTRY,
VARIOUS PROCESSES, JAPAN AND SELECTED COUNTRIES

(kg/ton)

Horizontal Vertical Centre Side
stub stub worked worked
S6derberg Sbderberg Prebake Prebake

Japan 2.0 O.4 0.9 0.9
U.S.A. 2.0 1.5 1.5 1.0
Canada 2.5 2.5 2.5 2.5
Germany 1.7 1.3 2.0 2.0
Norway 1.3 1.3 1.3 1.3

Sources and Notes:
OECD; in some countries standards are expressed in terms of
gaseous fluoride emissions and in others in terms of gaseous
and particulate fluoride emissions; appropriate correcons
have been made and the figures given here are all in terms of
kg of gaseous and particulate fluoride emissions per ton of
aluminium produced.

c) The relationship between emission standards and ambient
standards, between the tool and the goal, must also be explored.
Emission standards are reputedly set and implemented in order to
achieve quality standards.
In the case of SO2, for instance, emissions per stack have
been computed with the aid of diffusion models, and reflect local
conditions: the more industrial the area, the stricter the standard.
The relationship, however, is not very rigorous. This is shown by
the fact that there is a limited number of K values, i.e. of emis-
sion standards. There is no reason to believe for instance that
in each of the 8 areas for which K = 8.76 the number of stacks and
their locations are such that provided they meet the same emission
standard, the resulting ground concentration levels will be
identical.

In most other cases, the relationship is even less rigorous.
Emission standards are identical for all parts of Japan, but the
densities of polluting facilities are not. Unless one assumes that
emission standards have been calculated so as to ensure quality
standards in the worst geographical case - a very unrealistic
assumption - it is difficult to think of a formal relation between
the two sets of standards. The most puzzling case is that of water:I
how can diversified quality objectives be reached through identical

emission standards?
This is also shown by the recent introduction of the "total
mass emission" concept for S02- Several Prefectures (starting in
1971 with Kanagawa. Prefecture, followed by Yokkaichi City) issued

ordinances indicating the total emissions of SOX that would be
tolerated on their territory. The central government picked up

sions control of SOX for 24 areas (which were partly the areas
covered by Prefectural mass emissions figures). In those areas,
Prefectural governors can - and do - prescribe for each plant
emission standards that are stricter than the standards resulting
from the K-value system. The idea is attactive and important. It
emphasizes the fact that the mere dispersion of pollutants into the
environment is a strategy that has limits. Just as a quality
standard, a mass emission standard is an objective of environmental
policy, that is not per se binding for the polluters. It has to be
translated into a set of emission standards that will be the real
tools of environmental policy, because they will be binding for the
polluters. The difficulty is that many different sets of emission
standards can be associated with a given amount of mass emissions.
The real policy problem is that of choosing one of those many
sets. The total mass emission concept does not bring an answerI
to that problem.' It is nevertheless very valuable, because it
introduces a new kind of objective for environmental policies, and
because it serves an important pedagogical purpose.
The total mass emission system has one other advantage. Emis-
sions are ascribed on a plant-by-plant basis. Each plant is then
faced with the task of allocating its emission between the various
polluting facilities within the plant. There is every reason to
believe that it does it in the least cost manner. The system there-
fore encourages efficiency at the plant level.
This lack of automatic links between goals and instruments is
partly remedied, as we have seen, by the action of local governments.
When and where centrally-decided emission standards would not be
sufficient to ensure that centrally-decided quality standards will
be met, local governments can and do impose stricter standards.

d) The implementation and enforcement of emission standards is
the final question to be discussed. The main point here is that
K standards are handled with flexibility.
We have already seen that local governments can - and do -
apply standards stricter than those prescribed by the central
government. It must also be noted that in some cases the basic
standards set by law have been temporarily suspended, and replaced
by less strict standards. Thus, for instance, the 1971 Prime
Minister's Office Order that set the effluent standard values for
water, immediately introduced different values for a number of
pollutants(1) and industries. For BOD, standards were as follows
(mg/litre):
Ordinary manufactures 1 60
Beet sugar manufactures 520
Canned and frozen sea products manufactures 780
Soluble sulphite pulp manufactures 1,600
Potato starch manufactures 20,000
These looser standards were allowed for two or five years. By 1976
most of them were normalized or, at least, strengthened. It can
nevertheless be said that those plants for which it would have been
very difficult to achieve the regular standards have not been asked
to achieve them.
A second point is that most emission standards only apply to
large polluting facilities. In the case of water, for instance,
"the effluents standards apply to the effluents of factories or
places of work which discharge effluents in an amount of over 50 m
per day on an average"~ (Prime Minister's Office Order No. 35 of
1971, Table No. 2, Remark No. 2).(2) In 1975, there were about
26,000 such industrial establishments out of a total of approxi-
mately 230,000 polluting establishments. The small establishments
for which it would be difficult to enforce emission standards are
therefore excluded. One should note, however, that large estab-
lishments account for the bulk of pollution and that in a number
of cases, small establishments will be regulated by Local Government
Ordinances.
Emission standards are enforced by persuasion rather than by
coercion.
Administrative guidance begins before production. According
to the Water Pollution Control Law (and similar provisions can be
found in the Air Pollution Control Law), anybody operating (or
planning to operate or to modify) a facility that could pollute

1) Such as BOB, suspended solids, but not for mercury, cadmium
and other toxic substances.
2) This, again, does not apply to mercury, cadmium and other toxic
substances.

water is required to submit a report indicating the location, the
kind, structure, and method of operation of the proposed establish-
ment, as well as the proposed method of treatment of polluted water
or waste liquid to be discharged by the establishment; if the '
Prefectural governor, to whom this report is submitted "~deems that
the effluent at the place of discharge does not satisfy the estab- i
lished effluent standard" (Article 8), he may order "the person who
submitted the report to change the reported structure, the method of
utilisation or the programme for the treatment".
Administrative guidance also applies to polluting facilities
in operation. Again according to the Water Law, "when there is
threat that /5n7 effluent does not satisfy the effluent standard,
the Prefectural governor may order the person who discharges it to
improve, by fixing the period, the structure of the utilising method
of the facility, of the treating method of polluted water, or to
stop for the time being the use of the facility"'(Article 13).
Similar provisions are to be found in the Air Law.
It is only in the last recourse, when the polluter does not
want to comply, that penalties (penal servitude not exceeding one
year or a fine not exceeding 500,000 yen) are applied.
Enforcement activities are therefore more concerned with
guidance than with punishment. In fiscal year 1974, in the field
of water, about 60,000 inspections were carried out; a similar
figure is reported for 1975 for air pollution. They apparently
resulted in more than 1,000 orders to improve waste water treatment
in fiscal year 1974, and about 100 orders to improve smoke and soot
emissions in 1975. Penalties, by contrast, are rather negligible.
No case is reported in the field of air in fiscal year 1975; about
250 cases are reported in the field of water in 1974.
It is interesting to note here the direct involvement of
environmental authorities in the control of the equipment or of
the processes of polluters. This is clear from the quotations of
the Water Law given above. One other clear and important case of
such a control relates to the type of fuels used.
In many places local authorities regulate the sulphur content
of the fuels to be used. Thus, in the Sapporo area 1,400 facili-
ties located in a central area (of about 40 km2 ) are not allowed
to use fuel with more than 0.5 per cent of sulphur, and 1,100 other
facilities, located outside this area are forbidden to use fuel
with more than 1.2 per cent of sulphur. Similarly, the administra-
tive authorities of Tokyo have requested to use fuel whose sulphur
content is less than 0.'8 per cent in buildings and plants in the

city's centre, and at the same time fuel with a sulphur content of
less than 0.5 per cent began to be used in Metropolitan Government
facilities. In the plant-by-plant agreements signed between local
governments and plant managements, the sulphur content of fuels is
often prescribed; thus, most of the 68 plants that signed a pollu-
tion abatement contract with the Nagoya city are required to use
0.5 per cent sulphur fuel.
Many other instances of this close and constant co-operation
between industry and administration could be given. The following
one is particularly striking. In August 1975, an important manu-
facturer submitted projected production plans for less-polluting
p roducts; later in the year, it appeared (from material submitted
to the MITI by the manufacturer himself) that these plans were not
being followed: the Minister then severely and publicly reprimanded
the manufacturer; the manufacturer immediately apologised and re-
vised his production plans.

Compliance and co-operation by industry cannot be entirely
accounted for by good sentiments. It is also obtained by a delicate
handling of sticks and carrots by the administration, who can be
more or less responsive to industry's needs in terms of accelerated
depreciations, of funding, of procurements, of permits, and the like.
Pollution abatement efforts are part of a package negotiated between
I' industry and administration. It has even been suggested that some
segments of the Japanese administration welcomed pollution controls
Fbecause it increased their bargaining power at a time when other
types of controls, such as controls over imports, foreign exchange,
Flicencing, had been relaxed.
The essence of the control-by-standards tool is to set emission
standards, to let the polluters do what they want to meet them, and
to make sure that they are met by punishing those who do not meet
them. This is -not what is done in Japan. Not only are many stan-
dards "made to measure" rather than "ready-made", but they are
utilised as guidelines for the administration to provide guidance
to polluters, rather than as norms that must be met by polluters.
In fact, the Japanese practice appears to be somewhat similar to
the British practice of "best practicable mens enforced by
gentlemen's agreements between alkali inspectors and plant manage-
ment. It could also be compared to the French "sectors contracts"
(contrats de branches) in which detailed written agreements are
passed between the French Administration and the enterprises of a
sector, prescribing emission levels and pollution abatement efforts.
This is not very surprising, because Japan is a society in which
difficulties are settled by negotiations rather than by trials.
It seems, then, safe to conclude that in Japan the role of emission
standards as a tool of environmental policies is different from

what is often thought. Standards are utilised as a weapon in the
hands of the administration in the negotiations it engages in with
polluters rather than as prescriptions that automatically apply.
There is no reason to believe that it is a less efficient way of A
utilising standards.

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k ~~~~~~~~Chapter IV

COMPENSATION

A compensation is a sum of money handed out to a person, a
family, a group or an enterprise to "compensate" him (or it) for
damage caused. Here we will only consider environmental damage,

i.e. damage caused by various sorts of pollution.
Economists are usually very fond of compensations. Since the
19th century, they have accepted the idea that state of affairs B
is "better" than state A if moving from A to B improves the situa-
tion of at least one person and at the same time does not deteriorate
the situation of any person. But they did not know how to compare
A and B when moving from A to B improves the situation of some while
deteriorating that of others. It is only in the twenties that two
British economists, Hicks and Kaldor, provided an answer to this
problem. They noted that if the amount of satisfaction generated
by the change from A to B is greater than the amount of dissatis-

faction generated by this change, those who gain can "compensate"
those who lose, and still be net gainers; we are thus back to
the preceding case, and B can be said to be "better" than A. The
so-called "compensation principle", which has provided the founda-
ton of cost-benefit analysis, implies the payment of compensations.

Policy-makers, by contrast, do not like compensations. They
tend to take compensations to be both immoral and impracticable,
and they have, in most countries, been reluctant to pass bills
gr anting money to victims of pollution. This is why there are not,
inOECD Member countries, many examples of compensation.
;~Japan is an interesting exception. It offers three different
tpsof compensation:

i) private compensation, which consists of pre-damage and
after-damage compensation negotiated between polluters and
polluted;
ii) judiciary compensation, which is after-damage compensation
decided by the courts; and
iii) administrative compensation, which is after-damage compensa-
tion provided by a Law initiated by the Government.

1. PRIVATE COMPENSATION

Private compensation, i.e. compensation negotiated between
private parties - along the lines advocated by economic theorists-
is a significant feature by Japanese practices. A distinction can
be drawn between pre-damage and after-damage compensation.
Pre-damage compensation is negotiated between private or public
bodies planning to develop industrial or transportation facilities,
and local residents that will (or could) be harmed by these develop-
ments. The damage to be compensated is usually economic damage,
not health damage.
Local residents can only engage in this type of negotiation
when grouped in strong associations. Particularly important inI
this respect are the fishermen's co-operatives. There are many

well-organised and powerful fishermen's co-operatives in Japan,
which own fishing rights. A developer has to buy these fishing
rights in order to utilise the area. Strictly speaking, payments
to fishermen's co-operatives are purchases, not compensation. In
practice, however, they have many of the attributes of compensation.
Thus, in June 1974, two fishermen's co-operatives agreed to
let Tokyo Power Company build eight nuclear reactors (8000 MW) and
discharge hot water into the sea, against a 4,000 million yen com-
pensation. In November 1975, the 175 member Tomakomnai Fishermen's
Co-operative decided to give up the fishing rights in favour of
.building a giant industrial port for 5,356 million yen compensation.
There is no standard basis to figure out the amount of such com-
pensation. In one case (that of a steel plant), the figure was
reached by multiplying the surface of the fishing area by a fraction
(10-20 per cent) of the market price of on-shore cultivated land.
In another case of a steel plant, the amount of the compensation was
the sum of annualised yearly income losses associated with the
pollution. The amount of compensation seems to be the result of a
negotiation process. Although negotiations are not secret - they
take place under the eye, and indeed the control, of the general
public - no data are available relative to the overall importance
of such compensation.
It may be interesting to note, in this respect, that in the
above-mentioned cases the compensation amounted to about 0.5 per cent
of the construction costs of the nuclear power plant, and to about
6 per cent of the construction costs of the port; but it would be
dangerous to generalise from only two examples.
After-damage compensation is meant to compensate health damage,
as well as economic damage. This is also negotiated between pollu-
ters and polluted, without administrative influence, although local
or prefectural officials are often reported to have played a role as

p mediators in particular negotiations. The Mizushima case is parti-
cularly impressive. In 1974, in Mizushima (Okayama Prefecture), an
oil tank belonging to Mitsubishi Oil Company broke down, causing a
massive oil leakage into the Inland Sea; affected fishermen entered
into negotiations with Mitsubishi Oil Company; the Company eventu-
ally paid compensation of 15,000 million yen. An example of health
damage compensation is provided by the 124 million yen paid by
Sumitomo Metal Mining Company to 45 victims of its arsenic pollution.
In 1975, Nippon Chemical Industrial Company, which seems to
have caused hexavalent chromium pollution (before 1965), started
to negotiate with a group of'victims for compensation, and the
President of the Company said he "did not think there was negligence
in legal terms on the part of the firm, but it still felt social
and moral responsibility for chromium pollution".
Thus, in Japan, private enterprises enter into negotiations
that will lead them to pay compensation. This behaviour cannot be
entirely explained by economic or legal reasons. It is to be
accounted for by social reasons. In Japan, more than elsewhere,
the business community wants to be loved, and to be considered as a
praiseworthy part of the national community. A Japanese business-
man would rather lose money than be looked down upon as a black
sheep. He is willing to pay a compensation because the acceptance
of the compensation by the victim will restore the climate of
harmony that is vital to any Japanese, and help business maintain
an image acceptable to the community.

2. JUDICIARY COMPENSATION

Unlike private compensation, judiciary compensation, i.e.
compensation decided by courts at the end of a trial, are not typical
of Japan, and can be found in most countries.
In all organised societies, someone who is harmed by someone
else's actions has a right to be compensated for the harm he suf-
fered; in other words, people are responsible for the damage they
cause. Environmental harm, or damage, is no exception, but raises
a number of specific problems to which different legal systems give
different answers. The Japanese legal system is a written-law
system (as opposed to the common-law system to be found in Anglo-
Saxon countries), and the basic civil code has been patterned after
the German and French civil codes. It includes in its Article 709
a general provision for civil responsibility. But this article,
which was drafted in the 19th century, was not aiming at environmental
damage compensation. Jurisprudence has therefore had to play an
F important role in "applying" the code, and has in practice developed

the law of compensation. This is why a look at some of the pollution-
related lawsuits that took place in Japan is not without interest.
Table 13 provides information relative to several such cases. The
first four cases are particularly well-known, and often referred
to as the "four major pollution lawsuits".
Four points can be made about this jurisprudence.
The first is that governments, whether local or national, and
more generally public entities, can be sued and sentenced to pay
compensation, just as private individuals or enterprises. In Japan,
the first lawsuits, and particularly the "four major" ones, were
filed against private enterprises. But the Osaka International
Airport case, in which the defendant was the Government of Japan
clearly shows that public entities can successfully be sued.0()
The "public interest" of public entities' undertakings - here the
public utility of the airport - does not exonerate the public entity
from its duty not to harm anyone, or to compensate for harm done.
The second is that the causality between the action undertaken
by the defendant and the damage suffered by the plaintiff need not
be very rigorous. The results of epidemiological studies were
accepted, which means that a correlation was considered as a
causality. In other words, the burden of proof, which rests on
the plaintiff, is made relatively light.
A third is that a "fault" on the part of the defendant is
hardly required. Originally, civil responsibility implied a fault;
and a fault implies a norm; when norms do not exist - which isI
usually what happens in pollution-related damage lawsuits - they
are, so to say, set by the courts. Japanese courts have set them
rather strictly and have, in fact, created an obligation of cautious-
ness. A behaviour can be faulty by its results, and not only by
its nature. Another way to express the same idea is to say that,
in pollution cases, Japanese courts have extended so much the concept
of fault that they have extended the concept of responsibility from
the area of fault to the area of no fault.
The last point relates to "damages". The concept of damage
has also been extended by the courts so as to cover not only economic
and physical damage but also, and more generally, violations of
"personal right" (the right to physical integrity) of Japanese
citizens. As Judge Sawa! declared, in the Osaka Airport case, "the
residents whose life is disturbed under such circumstances are
entitled to demand that the Government do something in accordance
with their rights guaranteed under Articles 13 (individual's right
to life, liberty and the pursuit of happiness) and 25 (people's

1) The Japanese Government has appealed to the Supreme Court, where
the case is now pending.

Table 13

SOME LAWSUITS FOR POLLUTION-RELATED DAMAGE

Plaintiff Date suit Compensation
Defendant
Case No. Type of Damage Filed Ended Claimed Awarded
(million yen)
Niigata Minamata 77 Mercury poisoning Showa Denko Ltd. June 67 Sept. 71 530 270
Itai-Itai
1. First 31 Itai-Itai disease Mitsui Kinzoku Mar. 68 June 71 62 57
2. Appeal 34 id. id. June 71 Aug. 72 151 148
Yokkaichi 12 Yokkaichi asthma 6 petrochemical Sept. 67 July 72 200 88
companies
Minamata 138 Mercury poisoning Chisso Ltd. June 69 Mar. 73 1500 937
Toroku Mine 11 Arsenic poisoning Sumitomo Metal Dec. 75 Pending 191 -
Mining Co.
Yokota Air Base 300 Noise damage Jap. Government Jan. 76 Pending 300 -
Osaka Airport
1. District Court 264 Noise damage Jap. Government Dec. 69 Feb. 74 132 115
2. High Court 263 id. none Mar. 74 Nov. 75 180 295
3. Supreme Court 272 id. none Dec. 75 Pending - -

right to maintain the minimum standards of wholesome and cultured
living) of the Constitution". It should also be noted that the
amounts of compensation granted by courts are not insignificant.
Any judgement an this matter is bound to be subjective. But it]
seems fair to say that compensation, which amounted to several
million yen per plaintiff, was not mere token compensation. It is
also important to note that, in the Osaka Airport case, the defendant
was asked to pay compensations in the future so long as noise pollu-
tion is not reduced to a certain level.

3. ADMINISTRATIVE COMPENSATION

Private and judiciary compensation cannot be considered as an
element of environmental policies, in the sense that they developed
without governmental interference. The Japanese Government, however,
followed with great attention these developments, which prompted it

to create its own compensation scheme.
A law entitled "iPollution-Related Health Damage Compensation
Law" was passed in October 1973 and came into effect in
September 1974. Compensation granted under this law can be named
"administrative" because the scheme is operated by the
Administration. (i)
The 1975 Law was preceded by measures taken by local govern-
ments and by a 1969 Law. Thus, Kumamoto Prefecture decided to grant
financial support to victims of Minamata diseases as early as 1958;
and Yokkaichi city started aiding Yokkaichi asthma victims in 1965.
The 1969 Law, called Law Concerning Special Measures for the Relief
of Patients with a Pollution-Related Disease, provided a "first
version" of the 1973 Law.
The Law sets out in great detail:

i) who is compensated;
ii) what is compensated; and
iii) who is compensating.

Who is compensated? The beneficiaries of the Law are the
victims of certain pollution-related diseases who have "lived, worked,
or otherwise been present" in certain designated areas. There are
seven such diseases; four are air-pollution related diseases
(chronic bronchitis, bronchial asthma, asthmatic bronchitis and
pulmonary emphysema), which are "non-specific" diseases in the sense
that they could occur in the absence of air pollution; three are
water-pollution related diseases (Minamata disease, Itai-Itai disease,

i) See Gresser, art. cit., for a detailed discussion of the
Law.

and chronic arsenic poisoning), which are "specific" diseases
because they occur only in the presence of specific water pollutants,
e.g. mercury, cadmium and arsenic.
There are two types of designated areas: Class I and Class TI
areas. Class I areas are areas designated by Cabinet order as being
areas where marked air pollution has arisen and where non-specific
diseases due to the effects of such air pollution are prevalent.
As of March 1976, thirty-seven districts, covering 1,110 km2 have
been designated as Class I areas. Class II areas are areas also
designated by Cabinet order, where specific diseases are prevalent.
2
There are five such areas, covering 800 km . Designation is decided
on the basis of epidemiological studies, and of air (or water) pollu-
tion surveys; as can be expected, inhabitants and local governments
exert pressures for designation, and express discontent when designa-
tion is not granted. Anybody exhibiting one of the specified diseases,
and showing that he (or she) had lived for a certain time (one year
in the case of bronchial asthma and asthmatic bronchitis, two years
in the case of chronic bronchitis and three years in the case of pul-
monary emphysema) in one of the designated areas will be certified
as a victim and eligible for compensation.
As of March 1976, there were about 36,000 people designated
as victims. Table 14 provides some data about such victims.

Table 14

NUMBER OF CERTIFIED VICTIMS FOR THE PURPOSE
OF THE COMPENSATION LAW SCHEME

Non-specific Specific
(air pollution (water pollu- Total
related) tion related)
diseases diseases

31st March, 1970 962 203 1,165
31st March, 1971 3,219 211 3,430
31st March, 1972 6,376 312 6,688
31st March, 1973 8,737 728 9,465
31st March, 1974 13,574 1,184 14,758
31st March, 1975 19,340 1,325 20,665
31st March, 1976 34,190 1,550 35,740
Dead 1,062 185 1,247

Four points can be made about them. First, as can be seen in
Table 14, they are mostly air pollution victims; water pollution
victims account only for about S per cent of the total. Secondly,
there are many children amongst them; children below 10 years of
age account for about 40 per cent of air pollution victims. Thirdly,
as carl be expected, most victims are located in the main large in-
dustrial cities such as Osaka, Tokyo, Amagasaki, Nagoya, Kawasaki.

Fourthly, as shown in Table 14, the number of certified victims has
been increasing at a very rapid rate. This increase does not seem
to reflect an increase in pollution nor in the effects of pollution;
it appears to be a mere consequence of administrative delays: the
process of designation of victims has taken time.
What is being compensated? The Law provides for several kinds
of compensation benefits. First, medical care expenses are reim-
bursed. Second, a physical handicap compensation is paid monthly.
The amount of the compensation paid to a victim is a function of his
age, his sex, and his "class". Victims are classified into four
classes; to each class corresponds a "coverage rate". Special
class victims and Class I victims are people unable to work and badly
hampered in daily life; the coverage for these classes is 100 per
cent. Class II victims are people seriously restricted in work and
impeded in daily life; the coverage rate for Class II is 50 per
cent. Class III victims are people hindered in work and slightly
restricted in daily life; the coverage rate here is 30 per cent.
Let:

a = age of the victim,
s = sex of the victim,
c = coverage rate of the class of the victim,
Was = the average wages of a salary earner of age a
and sex s,
Aa,
s,c = the amount of compensation received by the victim.

The compensation paid will be:

Aa,s,c = 0.80 x c x Wa,s
To give an example, a Class II female aged 45 will receive
about 38,000 yen monthly. The highest compensation, i.e. that paid
to a special class victim, male, aged 50-54, would be 174,000 yen
monthly.(1) In Fiscal Year 1975, the average monthly payment was
about 32,000 yen.(2)
There are other less important types of compensation benefits,

such as "~child compensation allowances", paid to persons raising
children under 15 years of age, designated as victims, and
'tsurvivorst compensation payments", paid to the surviving dependants
of a person certified for a designated illness who dies as a result
of that disease, to make up for the deceased person's lost earnings.

i) It includes 26,000 yen paid to special class victims for nursing
purposes.
2) This figure is obtained by dividing the total amount of dis-
ability compensation paid, by the number of victims over 15
years of age (estimated as the arithmetic mean of the number
of victims at the beginning of the year and at the end of
the year).

Funeral expenses are also reimbursed. In Fiscal Year 1975, the

total amount of compensation benefits (including medical expendi-
tures) was about 15,300 million yen.
Who compensates? is the last question. By and large, compensa-
tion is paid for, or rather financed by, polluters, as shown in
Figure 1. Payments to victims are actually made by local governments.
Money to that effect is provided by a special agency, called the
Pollution Related Health Damage Compensation Association. This
,Association receives a small governmental subsidy, aimed at covering
administrative costs, but the bulk of its resources are provided
by the polluters, in the form of "pollution load levies". The money
flows related to specific water pollution diseases and those related
to non-specific air pollution diseases are in fact distinct.
As far as water pollution is concerned, since polluters can
readily be identified, the Association extends relief to victims
first, and then collects money from the polluter in the form of a
special charge.
For air pollution, polluters cannot be identified, and share
a sort of collective responsibility. It is assumed that this re-
sponsibility can be divided between fixed sources (for 80 per cent)
and mobile sources (for 20 per cent). As a result, 20 per cent of
tax. Thistais are levied by owner Pofllutobion-esthouhthed Hautmblth
tongetx Thstaisnocitionvbut by the Poltia oven-RelatedHat
Daae Comesatsaepidyownerssociautionoie, bthroug the cetalutovrmentl
through the general budget; it was not created for the purpose of
compensation, and its proceeds are much greater than the amount
handed out to the Association; in addition, the base of the tonnage
tax is only loosely associated with pollution discharge. One could
therefore argue that this 20 per cent is not really provided by
polluters, but by road users, or even taxpayers. In 1975, a Task
Force studied "alternative methods of collecting money for health
damage compensation from mobile emission sources"~, but did not find
any better method.
The rest, i.e. the 80 per cent of air pollution related com-
pensation, is indeed provided by polluters, in the form of a pollu-
tion charge or tax paid by smoke and soot emitting facilities. The
base of the tax is the volume of sulphur oxides released during the
preceding year; this volume is not actually measured, but estimated
from the amount of sulphur content of the fuel utilised and from
the amount of stack gas desulphurisation that takes place. The
rate, or rather rates, of the tax are calculated each year (and are
such that the proceeds of the tax will cover 80 per cent of the
amount of compensation to be paid). They vary with the location of
the polluting facility, and are much higher (nine times higher) in
the areas designated for the certification of victims than elsewhere.
They have increased very rapidly over recent years, as shown in
Table 15.

Figure 1
MONEY FLOWS IN THE COMPENSATION LAW SCHEME

Tonnage tax National

I~~~~~~~~~~~~~ 1
Government

' 1 I Certified
Automobiles victim

4-~~~~~~~~~~~~~~~~~~~~~~4
SO2 I Pollution Related
Emitting I Pollution charge Health Damage Local
EmittinCompensation Government

Specified Pollution charge
Plantsor Mtical
Factory ]J Institutions
and Physician

Table 15

RATES OF THE POLLUTION LOAD LEVY

F ~~~~~~(Yen per m3 of SO02 discharged)

Designated areas j Other areas
1974 15.84 1.76

1975 77.31 8.59
1976 209.97 23.33

F or practical reasons, the charge is only levied on "large" polluters
(defined as facilities emitting more than 5,000 m3 per hour in
3
designated areas, and more than 10,000 m per hour elsewhere);
there are about 7,400 such facilities in Japan, but they are re-
ported to account for more than 90 per cent of SO02 discharged.
The burden of the levy is not negligible. In 1976, the pro-
ceeds were about 33,000 million yen, or a little less than
5 million yen per source taxed. One other way to look at it is
to note that, in a designated area, the tax would represent about
17 per cent of the cost of a 3 per cent sulphur content fuel. The
levy can therefore be regarded as a constant incentive to pollution
abatement. The less a polluter discharges, the less he pays.
Economists can only approve of such a scheme by which the polluters
pay not only the costs of pollution abatement, but also the cost
of the residual damage he causes.
F~ ~~Th e 1973 Law, however, has been severely criticised. First,
polluters find it difficult to understand how their contributions,
which are based on pollution discharge, increase at a time when
Ftheir pollution discharges decrease. The explanation is of course
that the increase in the rate of the levy has been greater than
the decrease in pollution discharges; the increase in the rate of
the tax has been made necessary by the increase in the number of
certified victims which, as mentioned above, appears to be a mere
consequence of administrative delays. The scheme would have been
politically more acceptable if a clearer relationship between levies
paid and pollution discharged had been established.
Secondly, polluters also criticise the nine to one difference
between the tax rate for plants located in designated areas and
the tax rate for plants located in non-designated areas. If the
levy is to be seen as an insurance premium to be paid by all pollut-
ing enterprises, there is no reason why some should pay nine times
more than others. If the levy is to be paid by enterprises respon-
sible for pollution diseases, there is no reason why enterprises
located far away from pollution disease areas should pay anything.
It is true that the Law, as designed, introduces simultaneously a
principle of "collective responsibility" for all polluters, and a

principle of "direct responsibility". It has tried to strike a
compromise between these somewhat conflicting principles.
Finally, the Law is criticised by some as being too generous,
and by others as being too restrictive for those polluted. Both
claims can be substantiated. All those who live in a designated
area and who suffer from one of the designated diseases are certified
as victims; it is clear that some of them would have been ill even
if no pollution had taken place in the area; in that sense, they
do not suffer from pollution-related disease; yet, they will be
compensated. Conversely, only those who live in designated areas
can be certified; it is nevertheless quite sure that some of the
people living in other areas are ill because of air pollution;
yet, they will not be compensated. Similar criticisms are voiced
about the amount of the compensation. Some argue that these amounts
are not enough: a Class I victim who, by definition, cannot work,
only gets 80 per cent of the average wage, and is therefore not
even entirely compensated for the economic damage he suffers, let
alone for the moral damage. Others will reply that people who did
not work will also get 80 per cent of the average wage, and that
social security programmes - which grant only 60 per cent in case
of sick leave - are much less generous. It seems clear that, as a
result of the scheme, some pollutees get much better treatment than
others; but the nature of the problem is such that it is not
possible to tell who they are. This merely reflects the difficulty,
or rather the impossibility, of determining with any degree of
certainty who is harmed by pollution and to what extent.
In practice, therefore, the Compensation Law Scheme raises
several delicate problems. Some will be solved; others are of a
more pervasive nature.
The payment of compensation for damage is an important element
of environmental policies in Japan. What is particularly striking
is the limited scope of judiciary compensation - which is in most
other countries the main or the only form of compensation. In
Japan, by contrast, most compensation is arrived at in the frame-
work of a negotiation system which is "before" the court system,
or of an administrative system which is "beyond" the court system.
One could argue that this makes good economic sense because the
legal system, in Japan and elsewhere, is slow, costly, and to some
extent, haphazardous. But a deeper explanation is probably to be
found in the notion of conflict-avoidance. Court trials are, by
nature, conflictual processes in which plaintiffs and defendants
fight, and in which one of them loses - case, money, and face.
In a country where the desire for mutual respect and trust is so
great, trials are socially disruptive, and it is not surprising
that other ways have been devised to settle conflicts, or rather

to suppress them. Thus, in passing the Pollution-Related Health
Damage Compensation Law, the Government was not only trying to
ensure that pollutees would be compensated more quickly, more fully
and more surely than they would have been by the courts; the

Goenmn was also avoiding open conflicts. This explains why the
tool of judiciary compensation, although not much utilised, has
been very influential. The decisions taken by the courts in the
major pollution cases have played a decisive role in the development
and outcome of compensation negotiations, and in the shaping of the
Compensation Lw
The payment of compensation is often criticised on "moral"
grounds. It is said to appear, together with pollution charges, as
the sale of the right to pollute - to damage people's health. There
is some truth in this. But the same can be said of pollution stan-
Fdards: they open the right to pollute (at least up to the level
set by the standard); the difference is that this right is given,
rather than sold. One does not see why this would be more accept-
able. And one sees that it is less efficient, in the sense that
it does not introduce a permanent incentive to decrease pollution
discharges. In addition, once the pollution has occurred, it is
true that people have been harmed. No damage is certainly better
than damage. But compensated damage is better than non-compensated
damage. Furthermore, the payment of compensation is not an alterna-
tive to the setting of standards. The two instruments can be - and
are - used simultaneously.
But the real policy issue is not whether one should be in
favour of or against compensation - because in all countries legal
systems do provide judiciary compensation, and will continue to do
SO. The real issue is whether governments should, as in Japan, set
up and administer systems for compensation.

Chapter V

LOCATION

The location of pollution sources (plants, roads, airports,4
etc.) is an essential factor of environmental quality: a given
facility that would be fairly harmless in one place could be very
destructive in another place. Environmental damage is damage
(to someone or something) located somewhere. Economic goods, which
can be transported, exist irrespective of where they are; environ-
mental bads do not. Two consequences follow. First, economic goods
can be added, and environmental bads cannot: it makes sense to
add tons of steel produced all over Japan, but it does not make
sense to add decibels of noise emitted all over Japan; this makes
it difficult to compare economic goods and associated environmental
bads. Second, and more important, while the benefits of economic
goods accrue to all, the damage brought about by related environ-
mental bads affects only a few, but affects them severely.
Controlling the location of developments can and should help
to achieve an acceptable balance between the conflicting interests
of the economy and of local residents, or, to put it otherwise,
between servicing consumers and servicing inhabitants. It can and
should be an important policy instrument.
This issue is important for all countries, but has been
particularly so for Japan. The limited availability of flat land,
the exceptionally high rate of industrial growth, the very type of
economic growth, and the anti-business attitudes that developed
together with anti-pollution awareness, combined to make the problem
particularly serious in Japan. Japan has already had to deal with
some of the difficulties other OECD Member countries will have to
face - sooner or later. This is why her experience in this domain
is of special interest to others.
Broadly speaking, in Japan two types of control are exerted
on the location of polluting facilities:

i) "residents"'" controls, which consist of pressures exerted
by an area's inhabitants to prevent or modify developments;
ii) "administrative" controls, i.e. official systems and pro-
cedures ensuring that locational decisions will be adequate.

The two types of control are of course related: it is because
administrative controls were considered inadequate that residents,
controls spread, and it is largely because residents' controls were
seen as inappropriate that other administrative controls were (or
rather are) introduced.

1. RESIDENTS' CONTROL

A "building permit" is an authorisation granted by a public
authority to build a particular facility in a particular place;
it protects both the prospective developer and the inhabitants
around the prospective development. It would seem that, in the
fifties and the sixties, this instrument was either non-existant
or not utilised in Japan. Many facilities responsible for noise
pollution, such as airports, highways, trains, were situated in
densely populated areas. A number of factories were established on
sea-shores, thus polluting traditional fishing grounds. Three
factors aggravated the situation. First the size of the development
was often huge, and ever-increasing (Japan was making full use of
economies of scale); secondly, iii Japan the public sector is highly
centralised (in Tokyo) and the private sector highly concentrated;
it follows that decisions relative to these developments, which
were often taken by senior public or private officials in their
Tokyo offices, were seen by the local residents involved as
decisions that escaped their control, and were resented as such.
Thirdly, the Japanese people are often passionately attached to
the scarce and therefore valuable lands and sea-shores.
This largely explains the strong, and often efficient, opposi-
tion shown bsr residents' groups or fishermen's co-operatives to a
number of public and private development projects. A brief descrip-
tion of some cases of such opposition may be appropriate.
The best known example is probably that of Narita Airport. In
view of the growing congestion at the existing Tokyo International
Airport at Haneda, in 1965, it was decided to create a new Tokyo
International Airport. A site was selected near Narita City,
60 kms east of Tokyo, in Chiba Prefecture. A special quasi-public
corporation, the New Tokyo International Airport Authority (NTIAA,
later TIAA) was created and given the right to expropriate landowners.
Phase I of the new airport (consisting of a 4,000 m runway, a passenger
terminal building, cargo buildings and a central airport administra-
tion building), was completed in 1972, at a cost of about
150,000 million yen. For more than three years now, the operation
of the airport has been blocked by citizens' groups. It should be
pointed out that this opposition was not entirely based upon

environmental motives, and has become more and more "mpolitical" as
things went on. The case is nevertheless very interesting.
First, local residents, backed by a number of other people,
opposed the construction of the airport. There were battles in
which three policemen were killed; opponents could not prevent the
building of facilities, but they erected, in the axis of the runway,
a 62 m high steel tower that made it impossible to operate the
airport. Although the TIMA has a legal right to tear the tower
down, it hesitated to do so.
Secondly, residents of adjacent areas opposed the trans-
portation of aircraft fuel on their "territories"; several schemes
have been proposed and rejected. A first proposal involved a pipe-
line going from Kashima (an industrial complex 40 kms east of Narita,
in Ibaraki Prefecture), to the airport; Ibaraki Prefecture resi-
dents considered that, in the event of an earthquake (earthquakes
are not infrequent in Japan), the pipeline would break, oil would
spread and inflict very serious damage; they therefore opposed the
scheme. A second proposal consisted also in a pipeline running
from the city of Chiba, an industrial complex 40 kms south-west of
Narita, to the airport. This proposal has also been opposed and -
at least temporarily - defeated by Chiba residents. A third pro-
posal is to transport the fuel by train from Kashima to a fuel
depot near Narita City (and from there to the airport via a 7 kms
pipeline). The proposal again met with opposition from several of
the cities on the railway line. However, after lengthy negotiations,
their opposition was withdrawn at the end of 1975 against "compensa-
tion", taking the form of improvements in rail and road infra-
structure; but it was made clear that the authorisation was only
granted for a three-year period.
In the meantime, the airport is not open to traffic. The
economic waste involved is enormous. The TIMA is heavily in debt
and is currently paying interest amounting to about 30 million yen
per day. The Japanese Government, as well as TIMA, are doing
their best to settle the remaining problems, so as to open the
airport as early as possible.
A number of other cases can be mentioned. In the Osaka Airport
trial mentioned in Chapter TV, the plaintiffs were asking not only
for compensation, but also for a curtailment of airport activities,
namely for a 9 p.m. flight out-off. The Osaka High Court ruled in
their favour. This is also considered to involve a serious economic
loss. It is concerning such a curtailment - not about the amount
of compensation to be paid - that the Government has appealed to
the Supreme Court.
Air transportation is not the only type of transportation
opposed by local residents. The Shinkansen - the so-called "bullet-

train" that links Tokyo with Osaka (515 kms) in little over three
hours, and Tokyo with Fukuoka (1,069 kms) in less than seven hours-
has been strongly criticised for the noise and vibrations it
generates; the Shinkansen line is supposed to be extended north
of Tokyo (up to Morioka), but strong opposition by local residents,
particularly in the area just north of the city of Tokyo, has
delayed the construction of the line. Similarly, expressways,
particularly in urban areas, are being fought by environmentalist
groups. Thus, for instance, the Chuo expressway, which links
Nagoya to Chofu, a small city in the suburbs of Tokyo, was planned
to be linked with the Tokyo Expressway No. 4, which goes from
Tokyo downtown to Takaido, a small city close to Chofu. Completion
of the Chofu-Takaido link provides Tokyo with a main thoroughfare
to accommodate westbound traffic. However, construction of this
short link has been opposed by residents who insisted that a toll-
gate should be completely covered with a canopy; the expressway
was eventually completed in May 1976, but the completion date was
delayed by several years. In Yokohama, a large industrial city
30 kms south-west of Tokyo, the construction of a highway, which is
finished except for 150 m has been temporarily stopped. Many other
examples can be cited in other domains. Projects for steel mills
have been postponed or scaled down (e.g. at Shibushi, in
Kagoshima Prefecture, at Oga, in Akita Prefecture, or at Tomakomai,
in Hokkaido Prefecture). So have petrochemical complexes (e.g.
at Shibushi, in Kagoshima Prefecture). A plan to stock a quan-
tity of oil equivalent to 90 days consumption will be very diffi-
cult to carry through, because of the difficulty of finding
appropriate locations for storage tanks. Nuclear power plants
are-also strongly opposed - and delayed. The examples given
will suffice to show that, in a number of cases, relatively small
groups of people have blocked, modified, or delayed important
projects.
It is important to note that the type of development being
opposed is changing. In the late sixties and in the early seventies,
local residents were essentially opposing private developments, i.e.
polluting factories. Over the last few years, they are increasingly
opposing public developments, such as airports, highways, high-
speed trains, waste disposal facilities, water treatment plants,
etc.
Local residents utilise two instruments: direct action and
legal action. Direct action against a project includes rallies,
demonstrations, and physical obstruction. Legal action is the
filing of a lawsuit, in which the plaintiff asks that the project
be declared unconstitutional or otherwise illegal, and stopped.
Both modes of action involve confrontations. They sometimes end

in negotiated agreements, providing the payment of compensations.
But they always involve high economic and social costs. Economic
costs include lengthening of "gestation periods", i.e. the time-
spans between the beginning of an investment and its completion,
during which resources invested do not produce any good or service;
maturation periods increase with the size of the investment for
obvious technical reasons; if, in addition, they are increased by
residents' opposition, they might become prohibitively long. Big-
ness ends up-having an economic cost that might well offset its
economic advantages (called "economies of scale" in the jargon of
the economists). Economic costs of residents' opposition, when it
succeeds in preventing a particular development, obviously include
the benefits that would have been derived from the project. "Social"
costs are associated with direct and even legal confrontations that
take place between residents and developers, and also between
residents themselves. They are particularly great in a country
like Japan, which values social cohesion so highly.
Furthermore, such economic and social costs are uncertain.
Investors can hardly know whether or not a given project will be
opposed, nor how it will be opposed. The launching of any project
involves a "resident opposition risk" which is in itself a cost.
This certainly makes planning difficult.
Residents' control of developments does protect the environ-
ment, but it does so at great costs. There are reasons to believe
that it is not the best mode of control. This is why the Government
has tried to substitute other modes of control, and to introduce
"administrative controls".

2. ADMINISTRATIVE CONTROLS

The Japanese Government has tried to control the location of
polluting activities in two manners. First, it has attempted to
locate polluting activities where they would be the least harmful
to the environment, by means of regional planning, i.e. by indica-
ting where they should be located. Secondly, it is trying to pre-
vent the location of polluting activities where they would be most
harmful to the environment, by means of impact assessment procedures.
The first type of control could be called "positive", and the second
labelled "negative". Although, in Japan "positive" controls were
introduced first, we will begin with "negative" controls.
Negative administrative controls, i.e. impact assessment
procedures, are gradually being introduced in Japan. Several texts
have been promulgated to that effect. For instance, in June 1972,
a cabinet resolution, entitled "on Counter-Measures for Environment
Conservation with Regard to Public Works", was issued. It provided

for overall evaluations of ecological effects of major public works
projects. A Law of October 1973 for "Inland Sea Conservation" made
it mandatory for environmental impact assessments to be carried out
for certain plants discharging waste waters into the Inland Sea.
In addition, in 1974, an Office of Environmental Assessment was
created within the Environment Agency. It is reported that in 1974
this office handled about 700 cases. Although information on the
implementation of these texts is not abundant, it seems that impact
assessments developed in the framework of these texts have not been
entirely satisfactory. Questions such as: who should carry out
the assessments, at what stage they should be carried out, what they
should include, and what should be the role of local residents,
apparently did not get very clear answers. Except in the case of
the Inland Sea, there are no indications of projects being rejected
as a result of the impact assessments. In short, this type of
administrative control did not replace residents' control.
This prompted the Japanese Government to prepare a "stronger",
more efficient impact assessment Law. A special Panel of the
Central Council for Control of Environmental Pollution was set up
to prepare a report on the matter. The report, which was completed
in December 1975, is now under study by the Council.
The main features of the proposed system are as follows:

-The environmental impact assessment would be conducted for
those projects, whether public or private, which "could have
a marked effect on the environment". In the case of a massive
regional development plan with multiple elements, an impact
assessment of the entire project would be conducted before
individual component plans are brought under scrutiny.
-What would be assessed is the likely environmental impact of
the project on air, water, soil, living creatures, etc. and
more generally on environmental quality. The concept of an
"essential level of environmental quality" to be maintained
by the project would be introduced. The assessment would
begin, in each case, by establishing this "essential level",
against which the impact of the project will be assessed.
-The role of local inhabitants would be great. It is the
would-be executor of a development project who would prepare
a first draft of the impact assessment. But this first
draft would be made public, and reactions by local inhabitants
and scientists would be solicited. Then the would-be execu-
tor, or if the project requires State approval, the State
authorities, would modify the project (if necessary) and
prepare a final assessment report.

The impact statement procedure proposed is very much along the
lines of impact statement procedures adopted or considered in many

OECD Member countries. The efficiency of any procedure depends very
much on its implementation. It is therefore impossible to know
whether or not this administrative control would be efficient, and
would take the place of residents' controls. As it is, however,
the procedure has been opposed by several quarters. Keidanren, the
Japanese Association of Manufacturers has publicly criticised it.
Several Ministries have been reluctant about it. As a result of this
lack of consensus, the Law has not yet been submitted to the Diet.
The Japanese Government has also introduced another, more
positive, type of control, in the form of national land planning.
The idea that economic development should not be concentrated in a
few congested areas, but rather dispersed over the country, received
early and wide recognition. A number of physical development plans
were prepared and enacted - although not sufficient to balance the
powerful forces leading to increasing concentration.
As early as 1950, a "Comprehensive National Land Development
Law" was enacted; it designated a score of less developed areas
as "specific development areas", where national investment should
concentrate. Concentration of national investment however was not
satisfactory.
In 1962, together with the Income-Doubling Plan, a First
Comprehensive National Development Plan was formulated, again aiming
at reducing regional income disparities, and at eliminating the
evils arising from overcrowding. It proposed that selected local
cities be fostered as "regional centres": in 1962, 15 cities were
designated under the name of "New Industrial Cities". The Plan
also proposed that "growth poles" be designated and fostered as
strategic areas for industrial development in areas outside over-
concentrated areas: in 1964, six such areas, called "Special Areas
for Industrial Consolidation" were designated. But concentration
did not slow down.
In 1969, a Second Comprehensive National Development Plan was
issued. It proposed to "distribute the concentrated land use into
wider regions by dividing total national land into seven blocks, to
inject central managerial functions into the big urban centres of
respective regions, and to connect them by a basic infrastructure
network". The impact of the Plan does not appear to have been very
substantial.
In 1972, Mr. Tanaka, then Minister for International Trade and
Industry, published a book entitled "The Remodelling of the Japanese
Islands", which was to be reflected in a Plan. This Plan provided
for the relocation of industries: "industrial plants in overcrowded
areas will be moved to sparsely populated areas, while construction
of new plants will be encouraged in areas other than the Pacific
coastal belt". The Plan also provided for high speed transportation

and information networks, and for the building of new medium-sized
cities (the figure of 250,000 inhabitants was cited).
Several more concrete steps were taken. Public investments
were directed towards the "new industrial cities" and the "special
Areas for Industrial Consolidation". Economic incentives, such as
taxes on activities located in congested areas, or assistance to
activities located in "development" areas, were utilised.
It is not easy, however, to evaluate the impact of those
various efforts. Table 16 suggests that the spatial concentration
of industrial activities has indeed been stopped in Japan. But it
also shows that the concentration of population has been increasing.
This probably reflects the fact that policy, in Japan as in many
other countries, has concentrated on industry, at a time when the
main source of employment is the tertiary sector.

Table 16

SPATIAL DISTRIBUTION OF ACTIVITIES
AND POPULATION, 1960, 1974

(Per cent)

Share of the 3 largest metropolitan
areas

In terms p~ fIn terms of
shipment a population b)

1955 - 3 6.3
1960 66.7 39.2
1965 66.5 42.8
1970 65.3 45.6
1973 - 46.3
1974 61.3 -

Sources: a) MITI: Industrial Statistics.
b) Statistics Bureau, Prime Minister's Office.
Note: c) The three largest metropolitan areas are Tokyo and its
suburbs (Tokyo, Kanagawa, Saitama, and Chiba Prefectures),
Nagoya and its suburbs (Aichi, Mie, and Gifu Prefectures),
Osaka and its suburbs (Osaka, Kyoto and Hyogo
Prefectures).

The results were probably considered not to be entirely satis-
factory, and in 1974 it was decided to prepare two other plans: a
Land Use Plan, and a Development Plan.
A National Land Use Plan, provided for by a National Land Use
Planning Act passed in 1974, was prepared and accepted by the
Government in 1976. This Act also permitted Prefectural governments
to establish control areas within which all land transactions will
require Government permission, and will take place at prices no
higher than those stipulated by the Government. A specialised

Agency, the National Land Agency, was created in 1974. Its task
will be to ensure that the Plan is implemented.
In addition, a new National Comprehensive Development Plan is
under preparation. A draft has been submitted to the appropriate
Council and should be finalised in 1977. It is supposed to reflect
and to incorporate the major elements of the National Land Use Plan.
The Japanese experience suggests two things. One is that4
controls over the location of developments are so necessary that,
when not provided by administrative procedures and policies, they
may well be introduced - at high economic and social costs - by
local residents. It also appears that the selection of appropriate
sites for public developments may well prove to be much more diffi-
cult than the selection of sites for private developments.
A final point to be made is that there are limits to what can
be achieved by means of development location controls. A few more
polluting activities can be accommodated in a country provided they
are appropriately located, but only a few. Beyond a certain point
no location will be found "appropriate". At that point, it will
become necessary to control, not only the location of developments,
but also the type of development. This has indeed been seriously
considered in Japan. As early as 1971, the Industrial Structure
Council of MITI, in an interim paper entitled "Trade and Industrial
Policies for the 190" recommended "knowledge intensification in

the industrial structure". The same Council, in 1975, issued
another document entitled "Japan's Industrial Structure - A Long
Range Vision" that no longer emphasizes the role of "Knowledge-based
industries", but raises the question of the optimal "type" of
development.

Chapter VI

ACHIEVEMENTS

It is of course difficult to find out whether an environmental
policy has been successful or not. There are no overall indicators
of environmental quality; and even if there were, their evolution
could not be entirely attributed to the efficiency of environmental
policies. It is nevertheless necessary to try and see what has been
achieved by the effort developed in Japan to protect the environment.
To this effect, we shall examine quantitative information showing
how air and water quality has improved or deteriorated in Japan
since the late sixties, and also how it now compares with other
countries. Then, taking into account the fact that pressures on
the environment, due to urbanisation, motorisation and industrialisa-
tion, have increased during the same period, we shall attempt to
assess the efficiency of environmental policies in Japan.

1. EVOLUTION OF ENVIRONMENTAL QUALITY

The clearest, and probably the most important, point is that
the situation concerning pollution by sulphur dioxide has improved
significantly in the past few years, as shown by Table 17, and
illustrated by Figure 2. Yearly average levels of SO 2 concentrations
decreased since 1967 and were, on average lower by 50 per cent in
1974. As a result, the percentage of monitoring stations at which
ambient air quality standards were met increased rapidly.
The situation concerning pollution by carbon monoxide has also
improved significantly in the past few years. In 1975 ambient air
quality standards were met at all monitoring sites.
Available data for Tokyo comes from two different sources, by
which CO pollution is measured differently; both sources show a
significant improvement in recent years (see Table is).
Nitrogen oxides are of importance as pollutants per se and as
precursors of photochemical oxidants. Data concerning them used to
be relatively scarce. Therefore it is more difficult to assess
trends concerning them, although the monitoring network is now
extensive in Japan~. Yearly average concentrations of nitrogen dioxide
tend to grow slowly in Japan, as shown in Table 19.

Table 17

SO2 POLLUTION, 1965-1974

Ground Concentrationa) Monitoring Stations
Levels Meeting Qualit
(p.p.m.) Standards
(%)
1965 0.057 n.a.
1966 0.057 n.a.
1967 0.059 48
1968 0.055 59
1969 0.050 67
1970 0.043 72
1971 0.037 87
1972 0.031 34
1973 0.030 46
1974 0.024 69

Source: Japanese Report, p. 140.
Note:
a) Averages over fifteen stations in operation since 1965.
b) Quality standards for 1967-71 are different from quality
standards for 1972-74.

Table 18

CO POLLUTION IN TOKYO, 1965-1974
(in p.p.m.)

First Source Second Source
1965 3.2
1966 2.9
1967 3.1
1968 3.6 6.4
1969 4.4 5.9
1970 5.7 3.4
1971 4.7 3.1
1972 4.3 2.3
1973 3.7 2.7
1974 3.5 n.a.

Sources and Notes:
First Source: Environment Agency, Quality of the Environment,
1975, p. 74.
Second Source: Tokyo Metropolitan Government, Tokyo Statistical
Yearbook, 1973, p. 461; average over four general
monitoring stations.

Table 19

NO2 AND OXIDANTS POLLUTION, 1970-1975

N0a)b)C
No~a) Oxidants (a )b) 0xidentg
(p.p.m.)3 Warnings
(p.p.m.) (days)

1970 0.032 0.029 7
1971 0.033 0.032 33
1972 0.026 0.029 33
1973 0.038 0.036 45
1974 0.040 0.037 26
1975 0.041 0.042 41

Sources and Notes:
a) Environment Agency, Present State of Air Pollution in Japan,
1976; average over six monitoring stations in operation since
1970.
b) Tokyo Metropolitan Government Report on Air Pollution Monitoring
in 1975, 1976; average over three Tokyo area monitoring stations.
c) Warnings are issued when hourly oxidant concentration exceeds
0.15 p.p.m.

The ambient concentrations of oxidants depend to a large
extent upon the concentration of precursors such as nitrogen oxides
and hydrocarbons and the climatic conditions such as wind, sunlight,
etc. As for nitrogen oxides, data concerning oxidants has been
gathered more extensively in the past few years only. It is thus
difficult to assess the objective trends. They show an increase in
yearly average concentrations for a set of monitoring stations, as
shown in Table 19. Increases in maximum hourly concentration
averages in cities like Tokyo and Osaka are also reported. The
perception of the problem in Japan is perhaps as important as the
objective phenomenon, since about 43,000 complaints were reported in
1975 due to the health and annoyance effects of photochemical smog,
particularly on school children.
Trends in water quality are less clear. Pollution by organic
matters, as measured by biological oxygen demand in rivers over
recent years, does not seem to have significantly changed, as shown
in Table 20. Available data for a number of rivers, given in
Figure 2, does not suggest a very clear pattern of change either;
pollution levels varied from year to year; for some rivers, things
improved, for others they did not. By and large, pollution by
organic matter did not improve much.
As regards water pollution by harmful substances such as
cadmium or mercury, a very clear improvement took place, which is
shown in Table 21. The percentage of samples exceeding quality
standards decreased dramatically from 1.4 per cent in 1970 to
0.20 per cent in 1974.

Figure 2
SD2 POLLUTION, JAPAN, 1965-1974, AND SELECTED
JAPANESE CITIES, 1970-1974
$o2 (ppmJ

0.06 - JcpaG

0.05 -

0.04 -

0.03 -

0.02 -

0.a -
0.0
a - I I I I I I I I I I
195 1966 19067 196 1969 1970 1971 1972 1973 1974 Yoo,
Sources end Nores: For Japan Table 17. For Japanese Clies, Environment Agency, Present Sfo of
Air PoIlutio in Japan, 1975 (in Japanese) overges over 5 statioons r each city.

Table 20

WATER POLLUTION, 1971-1974

BOD in Riversa) COD in Sea Water a)
1971 77 82
1972 76 84
1973 76 84
1974 78 84

Source: Environment Agency.
Note: a) Percentages of samples meeting quality standards'

Is it possible to tell how Japan compares now with other
countries in terms of environmental quality? Table 22 provides some
fragile data on air quality in some major cities. It suggests that
air quality in Japan is by now comparable to air quality in other
countries.
It is also interesting, although equally difficult to try and
compare water quality in Japan and in other countries. Data on
dissolved oxygen levels in the mid-seventies was compiled for the
rivers utilised in a similar comparison for the late sixties;(1)
it appears in Table 23. Not much can be concluded from this table,
because the Tama River in Tokyo, where organic pollution decreased
significantly, is likely not to be representative of Japanese rivers.
More sophisticated sets of indicators are necessary for international
comparisons.

1) See Table 5 supra.

Figure 3
BOD LEVEL IN MAJOR RIVERS, 1966-1974
PP-
80 -

60 - /
/ \
0 -/ \ Ayase

Meguro
30 -

30 -

10- ./ amao

Toyo

1966 1967 1968 1969 1970 1971 1972 1973 1974 y-.o

Sorce: Ministry of Construction; Locl Governments.

Table 21

POLLUTION BY HARMFUL SUBSTANCES, a) 1970-1974

1970 1974
Cadmium 2.80 0.37
Cyanides 1.50 0.06
Organic phosphorous 0.20 0.00
Lead 2.70 0.37
Chromium (hexavalent) 0.80 0.03
Arsenics 1.00 0.27
Total mercury 1.00 0.01b)
Alkyl mercury 0.00 0.00
Total 1.40 0.20

Source: Japanese Report, pp. 166-167.
Notes: a) Percentages of samples exceeding quality standards;
data is based on more than 16,000 samples for 1970
and more than 160,000 samples for 1974.
b) 1973.

Table 22

AIR QUALITY IN SELECTED CITIES, EARLY OR MID-SEVENTIES
(p.p.m.)

s2a) Ca)a) NOa) 0 b)

Tokyo 0.0270) 1.7d),e) 0.040C) 0.38n),f)
Osaka 0.0270) 1.9d),e) 0.047C) 0.29n),f)
Parish) 0.037 13.0g) n.a. n.a.
London 0.051i) n.a. 0.032j)'k) 0.17j),k)
New York 0.0271)'g) 5.41),g) 0.049l)'g) n.a.
Chicago 0.0131)'g) 4.3l),g) 0.0331)'g) 0.14m)'e)
Los Angeles 0.0131)'g) 3.41),g) 0.0701),g) n.a.

Sources and Notes:
a) Yearly average concentrations, in p.p.m.
b) Yearly maximum concentration average.
c) Environment Agency, Present State of Air Pollution in Japan,
1975; averages over 5 stations; for 1974.
d) Environment Agency, Quality of the Environment in Japan, 1975.
e) 1973; oxidants (03) as measured by Kl method.
f) 1972.
g) 1974.
h) Ministere de la Qualit6 de la Vie; the technique of measurement
of CO changed between 1968 and 1972 and this figure should not
be compared with the figure in Table 6.
i) Greater London Council, 1975 Annual Abstract of Statistics, 1974;
average over 7 stations; the figure is for winter months only
and should be lowered to be compared with figures for other
cities.
j) OECD. Second Report on the Problem of Photochemical Oxidants
and their Precursors in the Atmosphere, 1977.
k) Average over 1972-1973-1974.
1) E.P.A., Monitoring and Air Quality Trends Report 1974, 1976.
m) E.P.A., Photochemical Oxidants in the Ambient Air of the United
States, 1976.
n) OECD, Report on the Problems of Photochemical Oxidants and their
Precursors, 1974.

Table 23

WATER QUALITY IN SELECTED RIVERS, MID-SEVENTIES
(Yearly averages in p.p.m.)

Dissolved Oxygen
Tama River, Tokyo (1974) 5.4
Seine River, Paris (1974) 9.4
Rhine River, Lobith (1972) 4.7
Delaware, Philadelphia n.a.
Thames River, London (1973) 2.6
Rhine River, Braubach (Koblenz) (1973) 4.7

Sources and Notes: as in Table 5.

2. EFFICIENCY OF ENVIRONMENTAL POLICIES

The evolution of environmental quality does not reflect
correctly the efficiency of environmental policies. The efficiency
of a policy should be assessed by comparing what would have happened
without the policy with what actually happened. Had no environ-
mental policies been developed in Japan, discharges associated with
production and consumption activities would have increased at the
rate at which production and consumption increased. So would have
ground concentration levels.
I ~~~This point can best be illustrated in the case of SO2 As
shown in Table 24, fossil fuel consumption, which is the major
source of 302 pollution, increased by about 100 per cent between
1968 and 1974. But SO2 pollution, that is SO2 ground concentration
levels, was halved instead of doubling. Pollution per unit of
polluting activity was therefore decreased by as much as SO per cent.
The case of CO, as shown in Table 25, is a little more complex.
The change in CO concentration in the Tokyo area has been achieved
in spite of an increase in the number of vehicles in this area. The
decrease in on-street traffic in Tokyo might also have contributed
to these results, although lower traffic counts due to increased
congestion may reflect lower speeds and thus more CO pollution.
These successful results are partly due to the early implementation
of CO emission standards on new cars (1966) and their subsequent
strengthening. Three years have thus been necessary to have a
sufficient number of cleaner vehicles with respect to the total

Table 24

FOSSIL FUEL CONSUMPTION AND SO2 GROUND CONCENTRATION,
1968-1 974

Fossil Fuel SO Concentration b) (2)_ 1 6
Consumption a) 2 (p.p.m.) (i
(Million TOE)

(-1 (2) (3)
1968 211 0.055 260
1974 439 0.024 55
F Change + 105% - 56% - 79%

Sources and Notes:
a) Japanese Report, p. 157.
b) Table 17 above.

Table 25

AUTOMOBILES, TRAFFIC, AND CO CONCENTRATIONS, TOKYO
1968-1973

Number of a) Traffic Counts a) CO Conqentra-
Registered at 26 Major tion b)
Vehicles Intersections Levels

1968 2,025,000 2,337 4.4
1973 2,600,000 2,076 3.7
Change + 20% - 11% - 15%

Sources and Notes:
a) Prime Minister's Office, Research Report on Traffic in Large
Cities, Tokyo, 1975 (in Japanese).
b) Environment Agency, Quality of the Environment in Japan, 1975,
Tokyo; average over two automotive exhaust monitoring stations.

stock of motor vehicles to affect the ambient concentrations of CO.
The development of traffic control now reinforces the emission
standard approach, particularly in heavily congested and polluted
areas.
There are relatively few cases in which the relationship
between a particular pollutant and a particular polluting activity
is straightforward. But broad economic magnitudes can be taken as
indicators of polluting activities. Their increase is a measure

Table 26

SELECTED ECONOMIC INDICATORS. JAPAN AND SELECTED
OECD COUNTRIES, 1970-1975
(increase in %)
GNPa) Industriala) Energya)'c) Stock of c)
Output Consumption Automobilesb),

Japan 30 10 34 74
U.S.A. 10 7 14 22
U.K. 10 1 3 35
France 19 12 29 31
Italy 11 9 36 55
Sweden 12 15 9 21
Netherlands 15 15 42 43
OECD 14 19 32

Sources and Notes:
a) OECD.
b) International Road Federation.
c) 1969-1974.

- of an increase in environmental pressures. This increase has slowed
down in the seventies: the industrial production index even de-
creased in 1974 and 1975. Over the period 1970-1975, however, most
economic indicators increased in Japan, and generally increased more
than in most other countries. This is shown in Table 26. Trends
in environmental quality, which range from dramatic improvements to
slight deterioration, but are on the whole rather favourable, and,
Iinasmuch as one can judge, as favourable or more favourable than
in other countries, must be appreciated against this background.
Pollution abatement policies in Japan therefore appear to have been
fairly efficient.

Chapter VII

ECONOMICS

Having tried to analyse the nature and content of pollution
abatement policies in Japan, and having tentatively assessed its
achievements, one comes to questions about the costs of these
policies. Three main questions can be raised:

i) what are the costs of pollution control in Japan?;
ii) who bears these costs?;
iii) what are their economic consequences?

1. ESTIMATES OF POLLUTION CONTROL COSTS

Surprising as it might be, the cost of pollution control is
poorly known. It is difficult to estimate because the concepts
of "pollution control" and of "costs" are ambiguous.
When pollution abatement is achieved by an additional equipment
or treatment, it is relatively easy to single out related expendi-
tures as pollution control costs, but things are more difficult
when pollution abatement is achieved by means of a different pro-
cess. This less polluting process may also happen to be more
productive, or more capital-intensive, or may require larger pro-
duction units. It then becomes very difficult to disentangle cost
increases due to pollution abatement from cost increases due to
other considerations.
The notion of "cost" can be made move precise, by distinguish-
ing between three cost concepts:

- investment costs, i.e. the value of pollution abatement
investments made during one given year; added over time,
investment costs make up a stock of pollution abatement
capital;
- operating costs, i.e. the expenditures in manpower, energy,
etc. made necessary by pollution abatement, also during one
given year;
- economic costs, also called annualised costs, which include:
operating costs, plus depreciation of pollution abatement
capital, plus opportunity costs of pollution abatement capital.

Some data on pollution abatement investment costs is available
in Japan, and can be utilised to analyse these costs in terms of

i) importance;
ii) trends, and
iii) structure.

The fragility of the data base, however, places severe limits
on the validity of such an analysis.(1)
First, anti-pollution investment costs appear to be high in
Japan. They are not well known, but can be estimated, as shown
in Table 27.

Table 27

ANTI-POLLUTION INVESTMENT AND GNP, 1975

Million Yen % of GNP
Central Government a) 285,000 0.2
Local Government b) 1,200,000 0.8
Private Enterprises c) 1,403,000 1.0
Total 2,888,000 2.0

Sources and Notes:
a) Environment Agency.
b) Ministry of Home Affairs; the figure given is estimated on
the basis of 1970-73 data.
c) Appendix I.

Anti-pollution investments are a significant component of GNP.
They are of course an even more significant part of investment.
For the country as a whole the ratio of anti-pollution investments
to total investments appears to be about 7 per cent in 1975. It
was higher for government investments than for private investments.
Some information on the relative importance of anti-pollution
investment in various OECD countries is available and given in
Table 28. The figures for Japan are much higher than for most other
countries. Such data must be handled with great care but it seems
safe to conclude that anti-pollution investments have been much
more important in Japan than elsewhere.

1) See Annex I for two estimates of anti-pollution investments in
the private sector; only the lower estimates are utilised here;
figures and ratios given should therefore be seen as minima.

Table 28
RELATIVE IMPORTANCE OF ANTI-POLLUTION INVESTMENTS
BY PRIVATE ENTERPRISES, JAPAN AND SELECTED
OECD COUNTRIES, 1974
Anti-pollution Anti-pollutionI
Investments by Investments by
Private Private
Enterprises Enterprises
Total Investment GNP
by Private
a) ~~~~Enterprises (% ('
Japan a)4.0 1.0
U.S.A. b) 3.4 0.4
Netherlands o)2.7 0.3I
Sweden c)1.2 0.1
Germany o)2.3 0.3
Norway c)0.5 0.1

Sources and Notes:
a) Appendix I; as stated above, the figures given here are the
lower of the two estimates arrived at.
b) United States Department of Commerce, National Expenditure for
Pollution Abatement and Control, 1972, Survey of Current
Business, 55(2), February 1975, adjusted by the OECD Secretariat.
o) Calculated from replies to OECD questionnaire on Procedures for4
Notification for Financial Assistance in Relation to Pollution
Control Expenditures.

Secondly, anti-pollution investment expenditures have increased
very rapidly over recent years. The trend, which is shown in
Table 29, can be probably ascertained with less uncertainty than
the magnitude. The share of anti-pollution investment in GNP
appears to have roughly doubled since 1970, and this increase seems
to be caused by the rise of anti-pollution investment by enterprises
much more than by governments.
Thirdly, anti-pollution investment costs are very unevenly
distributed between industries. Anti-pollution investment recorded
by MITI in its sample survey were distributed as shown in Table 30.
Five industries (iron and steel, oil, thermal power plants,
pulp and paper, and chemicals) would undertake about 70 per cent
of all anti-pollution investment. In these untypical but important
industries, the ratio of anti-pollution investment to total invest-
ment would be above 20 per cent reaching nearly 50 per cent in the
case of thermal power plants. Three comments can be made about such
high figures. First, this ratio would be substantially lower in
other industries. Secondly, 1974 was a recession year, during which
productive investments were particularly low. Thirdly, most anti-
pollution investments consisted of adding equipment to the stock

of existing capital. Such high ratios are therefore not significant
of longer-term averages.

Table 29

ANTI-POLLUTION INVESTMENT COSTS AS A PERCENTAGE
OF GNP, 1970-1975

Anti-pollution a) Anti-pollution b) Total Anti-
Investment by Investment by pollution
Enterprises Government Investment

1970 0.4 0.6 1.0
1971 0.5 0.8 1.3
1972 0.5 1.0 1.5
1973 0.6 1.0 1.6
1974 0.7 1.0 1.7
.1975 1.0 1.0 2.0

Sources and Notes:
a) Appendix I.
b) Ministry of Home Affairs; figures for 1974 and 1975 for local
government were not available, and have been estimated on the
basis of 1970-1973 data.

Table 30

ANTI-POLLUTION INVESTMENT BY INDUSTRY, 1974
(Per cent)

Share of Total Share of Total
Anti-pollution Investment by
Investment Industry

Iron and Steel 17 17
Oil 13 27
Thermal Power Plants 18 47
Pulp and Paper 5 24
Chemicals 18 25
Other 29 7
Total 100 14

Source: Survey by MITI.

This overall information on anti-pollution investments should
be complemented by more detailed studies on specific sectors. One
such study is available, on the cost of the retrofitting equipment
necessary to meet the fluoride emission standards set in several

countries;(1) the study distinguished between the various processes
utilised, as shown in Table 31. This study would suggest that anti-
pollution investments in Japan are not significantly higher than in
other countries. It would then contradict the overall conclusion
drawn from aggregated data. Part of the explanation might be that
the Japanese data on anti-pollution investment is not readily com-
parable to anti-pollution investment data collected in other
countries.

Table 31

ANTI-POLLUTION INVESTMENTS a) IN ALUMINIUM INDUSTRY,
VARIOUS PROCESSES, JAPAN AND SELECTED COUNTRIES, 1975

($/Ton)

Horizontal Vertical Centre-Worked Side-
Stub-Soderberg Stub-Soderberg Prebake Worked
Prebake
Japan 226 145 46 66
U.S.A. 233 132 72 126
Canada 142 89 n.a. 63
Germany 172 103 72 70
Norway n.a. 126 n.a. 58

Source: OECD.
Note: a) Add on equipment necessary to meet emission standards
for fluoride emission only.

It may also suggest that pollution abatement costs per unit of
pollution abated are not higher in Japan, but that pollution abate-
ment expenditures are greater because the amount of pollution abated
is greater.
Data on anti-pollution investments is not very reliable; but
it is the only available data. There is no published information
on anti-pollution operating costs, nor on the stock of accumulated
anti-pollution investment, and therefore no data on economic costs.
This is unfortunate, because the concept of economic cost is in
many respects the most significant cost concept; it can readily
be compared with total production costs and constitutes an indica-
tion of the economic resources devoted to pollution abatement. This
is why, in spite of the scarcity of data, we tried, by making

1) See Chapter III above for comparative data on fluoride emission
standards in the aluminium industry; one should also note that,
in some other countries, like the United States, anti-pollution
investments in non-ferrous metal are particularly high; see:
Council on Environmental Quality, Environmental Quality (Sixth
Annual Report), 1975, p. 524.

various assumptions, to produce an estimate.(1) The economic cost
of pollution abatement in 1975 according to these fragile estimates,
would amount to about 1.7 per cent of GNP.
This figure is to be compared with the forecasts presented in
Table 32, and which were estimates produced in 1973 of the economic
costs of the pollution abatement programmes envisaged in some OECD
countries.

Table 32

ESTIMATES OF ANNUALISED COSTS OF
POLLUTION ABATEMENT PROGRAMMES ENVISAGED,
SELECTED COUNTRIES, AS A PERCENTAGE OF GNP, 1975 AND 1980

1975 1980

Japan 1.4 - 3.3 n.a.
U.S.A. 0.8 1.4
Germany 0.5 n.a.
Sweden 0.2 - 0.6 n.a.
Netherlands 0.4 1.2
U.K. n.a. 0.1 - 0.4
Italy 0.3 1.0

Source: OECD, Economic Implications of Pollution Control, A General
Assessment, Paris, February 1974, p. 31.

2. FINANCING OF POLLUTION CONTROL COSTS

The next question is: who bears the costs of pollution control
in Japan? The largest part of the burden of pollution control is
borne by private enterprises, in conformity with the polluter pays
principle; but central and local governments contribute in the form
of public investments on the one hand, and of assistance to private
enterprises, on the other hand.
In Japan, as in many other countries, part of the pollution
abatement effort is undertaken by central and local governments.
The setting and the implementation of regulations, the operation
of monitoring facilities, the promotion of environmental research
and surveys, the payment of compensations, and of course, the con-
struction of sewage works, of water treatment plants, and of waste

1) See Appendix II for assumptions and calculations; since
Appendix II utilised the lower of the two series of estimates
arrived at in Appendix I, the figure it produces may be regarded
as a minimum; this discussion refers to total costs, not to
unit costs.

disposal facilities, are all done at a cost borne by central or
local government. Although they seem to be important (see Table 27)
very little is known about expenditures by local governments. More
data are available on expenditures made by the Central Government.(1)
According to data, expenditures undertaken by the Ministry of
Construction (for sewage works, water treatment plants, waste dis-
posal facilities, etc.) are by far the most important item of
central government pollution control expenditures.
Assistance to private enterprises seems to be limited to in-
vestments. It takes the form of tax benefits and of favourable
interest loans.
There are a number of tax incentives for pollution abatement
effort.(2) The most important is probably a 50 per cent special
depreciation in the first year for pollution abatement equipment.
Other depreciations (like a "shortened depreciation" for treatment
of sewage and smoke and soot equipment) or deductions (like a
"special reserve fund" for enterprises with specially large pollu-
tion control costs or large reduction in profits) are also allowed.
The effect of such deductions is to reduce taxable income of enter-
prises; the corporate profit tax being about 50 per cent in Japan,
this means that an enterprise purchasing anti-pollution equipment
for 100 yen will get back 25 yen in the first year; this amounts
to a zero interest loan of 25 yen. We attempted to calculate the
subsidy equivalent of those tax cuts for 1975, and arrived at an
estimate of about 2,600 million yen. If the figure given above
for anti-pollution investment by private enterprise is correct, this
would amount to about 0.2 per cent of anti-pollution investments.
Two other tax incentives are worth mentioning. One is a reduc-
tion in the commodity tax for low pollution automobiles. The other
is a sort of subsidy to desulphurisation that takes the form of a
reduction in customs duty on imported crude oil that is
desulphurised.
Favourable interest loans is the second form of assistance
to enterprises. There are at least four lending programmes for
anti-pollution control in Japan. Table 28 presents their main
characteristics, together with the amount of loans granted in
1975. (3)

1) See: Environment Agency, Quality of the Environment in Japan,
1975, Tokyo 1976, for budgetary approximations for environmental
preservation by Ministry and Agency (p. 143), and by category
of expenditure (p. 144).
2) OECD, Environment Directorate, Procedure for Notification of
Financial Assistance Systems.
3) New plants, even when asked to meet stricter standards than
old plants, are not granted more favourable terms.

These loans play an important role in Japan. First, the ratio
of owned capital to total capital is much lower in Japan than in
other countries, and Japanese enterprises are more than elsewhere
dependent upon banks for investments; since commercial banks are
not particularly keen to grant loans for pollution control invest-
ments, the intervention of specialised institutions is very useful
and in many cases necessary; without these programmes, a number of
enterprises would have found it difficult to finance anti-pollution
investment. Secondly, the interest rates at which these loans are
granted are lower than the market rate which was about 9.1 per cent
in 1975. We have attempted to calculate the "subsidy equivalent"(1)
of these reduced rates, which is shown in Table 33. This subsidy
equivalent appears to be a little more than 10 per cent of the
amount of loans granted. The subsidy equivalent of loans granted
could then be estimated, for 1975, to amount to 1.3 per cent of anti-
pollution investment.

Table 33

FAVOURABLE INTEREST LOANS PROGRAMMES FOR
ANTI-POLLUTION INVESTMENT IN JAPAN, 1975

Lending Rate Terms Limits (per firm) Amounts Subsidya)
Institution (%) (Years) (106 6 equiva-
yen) (9/6 of (10 yen) ent
Invest.) len)
(106 yen)
Small Busi-
ness Finance
Corp. 7.0 10 150 - 18,000 2,500
People's
Finance Cor-
poration 7.0 10 18 - 1,700 200
Japanese
Development
Bank 8.0 10 - 50 172,300 15,000
Environmen-
tal Pollu-
tion Control 6.85
Service Corp. 10 - 80b) 126,500 19,000
Total 318,500 36,700

Sources: Replies to an OECD questionnaire on Procedures for
Notification of Financial Assistance Systems.
Notes: a) Sum of discounted values of the differences in interests
to be paid;.because of the complexities of the Japanese
loan market, there could be a substantial margin of
error in these calculations arising out of possible
differences between real interest rates on loans and the
subsidised rates.
b) Only 50 per cent in some cases.

1) The subsidy equivalent is the sum of the discounted values of
the differences in interests to be paid.

The subsidy equivalent of the various forms of assistance to
private enterprises for anti-pollution investment would then appear
to be about 2.6 per cent of these investments. Similar ratios have
also been estimated for other countries, as shown in Table 34.
Anti-pollution investment costs are only a fraction of pollution
abatement costs, which are themselves a fraction of production costs;
the impact of assistance schemes on production costs appears to be
small. It seems safe to conclude that by and large the costs of
pollution abatement are borne in accordance with the P.P.P. in
Japan. Assistance granted is a useful incentive, but does not
create significant trade distortions. Table 34 gives estimates of
subsidy equivalent of assistance schemes in Japan and in other
countries. Such figures should be interpreted with great care,
particularly because they may vary greatly from year to year.
But one can note that they tend to suggest that assistance schemes
in Japan are comparable to assistance schemes in other countries.

Table 34

SUBSIDY-EQUIVALENT OF ASSISTANCE SCHEMES AS A
PERCENTAGE OF PRIVATE ANTI-POLLUTION INVESTMENTS,
JAPAN AND SELECTED COUNTRIES, 1975

(Per cent)

Japan 2.6
Germany 9.1
Netherlands (1974) 1.1
Norway -i4.2
Sweden 5.3
U.S.A. 4.5

Sources and Notes:
Computations based on replies to the OECD questionnaire on
Procedures for Notification of Financial Assistance Systems,

3. CONSEQUENCES OF POLLUTION CONTROL COSTS

Pollution control costs, particularly economic costs, are a
measure of the drain on resources exerted by pollution abatement
policies in a country; capital and labour resources that are being
utilised to abate pollution are not being utilised to manufacture
consumption goods, nor productive equipment. Pollution control
expenditures have an opportunity cost. They are a price to be
paid for environmental quality.

This view is correct, but in real life, things are somewhat
more complex. What is expenditure for an enterprise will be income
for another enterprise. Depending upon the state of the economy,
upon businessmen's behaviour, upon fiscal policy, and more generally
upon the whole economic machinery, pollution abatement expenditures
will modify a number of economic flows, that will modify other
flows, etc. In dynamic terms, environmental expenditures should
not only be seen as losses of resources, but as modifications of
economic flows. The net results of these modifications on GNP, on
prices, on employment, on trade, etc. are difficult to predict, but
the important point is that they are not necessarily negative. In
some cases economic consequences may even be quite positive. The
main justification for pollution abatement policies is of course
that they decrease pollution, and pollution costs thereby increas-
ing welfare; but it is important to note that, in practice, the
macro-economic consequences of these policies are not as bad as is
often said. It is widely recognised that GNP is not a good indica-
tor of welfare, and environmental policies should be carried out
even if they were to reduce GNP. It is nevertheless interesting
to know whether they do reduce GNP or not.
The study of the past behaviour of the Japanese economy cannot
be utilised to assess macro-economic consequences of environmental
policies. It would be too easy to say that since 1970, the
Japanese economy has done as well, or better than, most other
economies, and to conclude that environmental policies have had
no adverse impact. The reasoning would not be correct. Environ-
mental expenditures have only been one of the many factors that
influenced the behaviour of the Japanese economic machinery and its
results. No cause-effect relationships between pollution control
costs and macro-economic magnitudes can be established on the
basis of past experience.
The only way to establish such relationships is to utilise
macro-economic models to simulate the development of the economy
with and without pollution abatement policies. All other factors
being thus kept constant, differences in output can be related to
differences in inputs. Several such models have been utilised
in Japan. All of them embody questionable assumptions and utilise
unreliable data; they are therefore open to criticism and their
results should be handled with care; but they provide the only
tentative answers to the very important question: what are the
economic consequences of environmental policies?
One model, developed by Professor S. Shishido and
A. Oshizaka,(1) combines a Leontieff-type input-output model and

1) See: Shuntaro Shishido and Akira Oshizaka, Econometric Analysis
of the Impacts of Pollution Control in Japan, paper presented at
the International Conference for Environmental Protection, organi-
sed by Nippon Keizai Shimbun, 26th-28th May, 1976.

a Keynesian-type macro-economic model. It studies, over a period
of six years, the effects of two types of environmental policies:
a "harder" policy and a "softer" policy, which are defined in terms
of pollution abatement. First, anti-pollution investments required
to achieve these pollution abatement targets are estimated; the
amount calculated to meet the "softer" target,(1) 1.5 per cent of
GNP, is quite comparable to the amount which was actually invested
in anti-pollution equipment. Then, the impact of those additional
investments on GNP, prices, etc., is estimated by the model.
The most striking result of this simulation is that GNP and
employment are practically unaffected by environmental policy. More
precisely, GNP is "reduced" by the deflationary price effects
associated with non-production investment, and at the same time
"increased" by the expansionary income effect resulting from these
anti-pollution investments. In the first years, the positive effect
is even greater than the negative one; later on they balance each
other: for the 6th year, GNP is raised by 0.1 per cent (over what
it would be in the absence of anti-pollution policy) by the "softer"
policy.
A second interesting result of the simulation relates to the
changes in the structure of output and employment that are brought
about by environmental policies. The share of output and employment
increases in primary and fabricated metals and in general
electric machineries, whereas it declines in the food industry,
textile and electricity. This is a rather surprising result: anti-
pollution policies benefit polluting industries! This is because
polluting industries such as the steel industry are the main bene-
ficiaries of anti-pollution investments, although they incur high
pollution abatement costs themselves; for them the income effect
is greater than the price effect.
The model also yields information about prices. Anti-pollution
policies do raise the price level; but this increase is modest.
It is estimated to be, over six years, 1.9 per cent in the case of
the "softer" policy, hardly more than 0.3 per cent per year. Of
course, much higher increases appear in certain sectors, such as
automobiles (5.9 per cent), electricity (6.2 per cent), primary
iron (7.6 per cent), or pulp and paper (7.7 per cent).
A second model has been utilised by Professor Y. Murakami and
J. Tsukui.(2) Unlike the Shishido and Oshizaka model, which is
demand-oriented, this model is supply-oriented. It describes the

1) Public works for sewages are excluded.
2) See: Yasuke Murakami and Jinkichi Tsukui, Economic Costs
Prevention of Pollution. A Dynamic Analysis of Industrial
Structure, paper presented at the International Conference for
Environmental Protection, organised by Nippon Keizai Shimbun,
Tokyo, 26th-28th May, 1976.

economic "path" necessary to maximise consumption over time under a
certain number of constraints. These constraints relate to capital,
labour, production functions, foreign trade, etc. Pollution abate-
ment is introduced as an additional constraint. Here again two
types of pollution abatement policies are introduced: a "harder"
policy which eliminates completely (100 per cent) five major pollu-
taints (SO 2, NOx, BOD, industrial waste, household waste) and a
"softer" policy, which eliminates partially (75 per cent) the same
pollutants. The difference between the paths described by the model
with and without pollution abatement policies indicates the conse-
quences of these policies.
The model could be criticised for being a maximising model. How
can we be sure that economic behaviour and policies are such that
the paths actually followed approximately the best possible paths?
The authors of the model reply that, in the past, actual and ideal
paths have in fact largely coincided. Doubts also could be raised
about pollution generation functions, and pollution abatement
functions, which are indeed quite crude. In spite of its limits,
the model is very interesting. Its main results are given in
Table 35, for the "soft" type of environmental policy.
They again suggest that the overall impact of environmental
policies is not great. Output and consumption - which are what
matters - are not very significantly affected by pollution abate-
ment. Over a period of ten years, consumption is only reduced by
-0.2 per cent, i.e. is practically unchanged. The impact of the
"harder" environmental policy (complete elimination of pollution)
is hardly more worrying: output is reduced by 3.2 per cent (instead
of 0.5 per cent) after ten years, and by 6.5 per cent (instead of
3.0 per cent) after 15 years.
A third model, on which little information is available, has
apparently been utilised by the Economic Planning Agency to assess
the macro-economic impact of stricter pollution abatement policies.
The policy studied is defined by "an increase in the pollution pre-
vention ratio from 10 per cent to 20 per cent". The consequences
P are estimated as shown in Table 36. They are not very different
from the consequences simulated by the other models. The model
P again suggests that the macro-economic impact of stricter environ-
mental policies would not be very great.
None of these three models is entirely satisfactory; the
Shishido-Oshizaka model is purely Keynesian, ignores constraints
on resources; the Murakami-Tsurkui model incorporates many doubt-
ful hypotheses; the Economic Planning Agency model seems rather
crude; all suffer from the lack of reliable data on the structure
and magnitude of pollution abatement costs. Their results must
therefore be interpreted with great care. It should nevertheless

Table 35

CHANGES a) IN MACRO-ECONOMIC VARIABLES GENERATED
OVER TIME BY A SOFT ENVIRONMENTAL POLICYb) AS
ESTIMATED BY MURAKAMI AND TSUKUI

(Per cent)

After 5 Years After 10 Years After 15 Years

Output -2.8 -0.5 -3.0
Consumption -1.4 -0.2 -3.1
Gross Investment +26.9 +1.8 -12.9
Productive Investment +23.1 -3.2 -16.1
Housing Construction +11.1 -2.5 -16.1
Resources Import -16.8 -2.0 +3.7
Exports +1.8 +8.2 +10.7

Source: Adapted from Murakami and Tsukui, op.cit., Table 5-1, p.19.
Notes: a) Magnitude with environmental policy, minus magnitudes
without environmental policy, divided by magnitude
without environmental policy.
b) 75 per cent elimination of pollution generated without
environmental policy in terms of S02, NOx, BOD, Industrial
Waste and Household Wastes.

Table 36

CHANGES IN MACRO-ECONOMIC VARIABLES GENERATED
OVER TIME BY STRICTER ENVIRONMENTAL POLICY, a)
AS ESTIMATED BY ECONOMIC PLANNING AGENCY

(Per cent)

After 5 Years After 10 Years

GNP -0.3 -2.8
Productive Investment -0.4 -7.7
Prices (GNP Deflation) +3.1 +2.9

Source: Economic Planning Agency.
Note: a) For GNP and investment, magnitude generated by a 20 per
cent ratio (of pollution abatement investments to total
investment), minus magnitude generated by a 10 per cent
ratio, divided by magnitude generated by a 10 per cent
ratio.

be pointed out that they strike an optimistic note. They suggest
that the adverse economic consequences of pollution abatement ex-
penditures are not very significant. A more complete picture would
of course take into account the positive economic consequences of
pollution abatement, which are the main rationale for environmental
policies.

In the chain that links high pollution abatement expenditures
and low macro-economic consequences, a key element is the develop-
ment of a new sector, the anti-pollution equipment sector. Some
information on this sector is appropriate.
In 1974, there were about 280 enterprises engaged in this
line of production. Most of them, particularly large enterprises,
were also producing many other kinds of equipment. The labour force
employed in anti-pollution equipment production was estimated at
about 30,000 people. Sales were estimated at about
500,000 million yen by one source(1) and 680,000 million yen by
another.(2) The structure of the market is shown in Table 37.

Table 37

ANTI-POLLUTION EQUIPMENT MARKET, 1974

(Per cent)

Type of Equipment Type of Client
Air 45 Private 67
Water 38 Public 32
Waste 16 Export I
Noise 1
1100 1100

Table 38

GROWTH OF ANTI-POLLUTION EQUIPMENT SALES, 1969-74

Million yen Index
1969 143,000 100
1970 195,000 136
1971 302,000 211
1972 375,000 262
1973 488,000 341
1974 677,000 473

Source: Japan Industrial Machinery Association.

1) A survey by MITI.
2) A survey by Japan Industrial Machinery Association.

The market, and the industry have of course grown very rapidly
over recent years, as shown in Table 38. The anti-pollution equip-
ment industry is a growing and dynamic industry in Japan. It is a
profitable industry. It is not yet much of an export industry, but
it is easy to predict that it will become one, because markets for
anti-pollution equipment will be created by environmental policies
in foreign countries and because Japanese manufacturers will have
developed a very real experience in this area at home.

Chapter VIII

CONCLUSIONS

The experience of Japan in the field of environmental policy
is particularly interesting. The concern for environmental protec-
tion that developed in Japan in the early stages of industrialisa-
tion disappeared in the thirties. In the post World War II period,
there was nothing to protect the environment from the pressures
resulting from rapid industrialisation. GDP per square kilometre,
a rough indicator of such pressure, was greater in Japan than in
any other OECD country.(l) In addition, it increased more rapidly
in Japan than anywhere else. The type of growth that prevailed in
Japan - heavy reliance on industry, large-scale developments, rela-
tive neglect of social infrastructure - was also environmentally
disruptive. By the late sixties, Japan had become one of the most
polluted countries in the world. A rather abrupt change in societal
attitudes then took place. Environmental disruption, which had
been, at least apparently, relatively well-tolerated became un-
acceptable leading to the quick development and implementation of
strong and multifaceted policies. An attempt has been made to
analyse these policies. If we had to summarise this experience in
one sentence we would say that Japan has won many pollution abatement
battles, but has not yet won the war for environmental quality.

1. POLLUTION ABATEMENT

Many conclusions can be drawn from the Japanese experience in
pollution abatement policies. The most important ones relate to:

i) the results;
ii) the nature; and
iii) the costs of these policies.

1) In 1974 GDP per square kilometre of inhabitable land was about
20 times greater in Japan than in the United States, 6 times
greater than in the United Kingdom, and twice as great as in
the Netherlands.

The first conclusion to be drawn concerning pollution abate-
ment policies in Japan is that by and large they have been successful.
Japan has undoubtedly reversed rising pollution trends for a number
of pollutants, particularly in the fields of air pollution and of
toxic chemicals. Ambient concentrations of S02, particles, CO (to
a lesser extent), PCBs, cadmium, mercury, etc., have been greatly
reduced. By now the air breathed in the main Japanese cities is
quite as "clean" as the air of American, French, British or German
cities, and it is definitely cleaner than the air of major agglomera-
tions of many less-developed countries. The most important, or at
least the best known, sources of pollution-related diseases appear
to have been largely eliminated in Japan.
It is true that the 1974-75 recession, which hit Japan, as
other OECD Member countries, made things easier. But it certainly
cannot be taken as the major explanation for environmental improve-
ments. First, marked improvements took place before the recession,
at a time when economic and industrial activity were increasing at
very rapid rates. Secondly, the recession did not affect all sources
of pollution: the stock of automobiles in use in Japan, for instance,
did increase rapidly in 1974 and 1975. The Japanese experience,
therefore, brings support to the idea that there is no automatic
relationship between production and pollution. There is no inherent
contradiction between economic growth and environmental quality,
and it is possible to increase production while decreasing pollu-
tion - provided appropriate mechanisms are developed.
However, one should also note that ambient concentrations
have not been drastically improved for all pollutants. NOx pollu-
tion, BOD and COD, for instance, have not yet been significantly
reduced. It is only in the fields where crash programmes were
designed and implemented that great successes were scored.
A second set of conclusions relates to the nature of Japanese
pollution abatement policies. They seem to have relied basically
upon the setting of ambient standards by the national Government,
coupled with the setting of emission standards by local governments.
For most pollutants, rather strict ambient standards have been
established at the national level, by the administration under very
general guidance given by Law. In order to achieve these ambient
standards, sets of emission standards are basic requirements, which
are often made more stringent by local governments. In many cases,
local governments engage in plant-by-plant negotiations and agree-
ments to define emission allowances for each major polluting
facility in the area.
Direct and often detailed interference in the economic opera-
tion of enterprises has therefore been the main tool of environmental
policies in Japan. Businessmen receive "orders" from central or

local government bureaucracies as to the amount of pollution they
are allowed to discharge, and the types of processes they can choose.
In other words, Japan has relied to a large extent upon planning
mechanisms, to reduce pollution. The market is a system where
information is transmitted by prices, not by directives, and where
action is motivated by profit, not by compliance. It is widely
recognised that pollution is a case of "market failure", i.e. that
uncorrected market mechanisms breed pollution. This leaves policy-
makers with the following choice;

i) keep the market mechanism, and correct it by modifying
,the prices (which means in practice taxing pollution), or
ii) reject the market mechanism and replace it by planning.

Japan has basically followed the second course. It may have
increased costs; there are good theoretical reasons to believe that
market mechanisms are as a rule more cost-efficient than planning
mechanisms; i.e. that they achieve a given objective at a lower
cost. It certainly increased the power of the administration. But
it worked.
The Japanese approach also appears to have had strong moral
overtones. It did not attempt to nicely balance costs and benefits,
along the lines advocated by environmental economists. Pollution
abatement was a must, a moral obligation, backed by very strong
political pressures. Stringent measures were taken with only limited
knowledge of dose-effect relationships, and with even more limited
knowledge of economic costs and consequences involved. Such measures
were not very strongly opposed by the business community, beca-ise
it felt that its image, and its place in Japanese society, was at
stake.

It is interesting to note that this approach worked rather
well. Many apparent decisions proved to be particularly wise
decisions. Automobile emission standards are a case inA point.
The standards for NO exhausts set in Japan were so stringent that
x
they were generally considered "unmeetable"; yet, in a matter of
years, several automobile manufacturers developed the necessary
techniques. The standards had actually been set without a detailed
examination of whether they could be met; had such an examination
been conducted, the standards would probably have been less strict,
and low-pollution cars would -never have been developed. Similarly,
the bans that were imposed on some toxic chemicals (such as P055)
or processes (such as mercury-using processes for manufacturing
F caustic soda) and which were thought at first to create insuperable
difficulties for the industries concerned, actually led to technolo-
gical innovations.
W~hat happened is that science and technology provided answers
to most of the problems raised. The possibilities of science and

technology are such that they extend the frontiers of rationality.
A rational decision is a decision that takes into consideration costs
and benefits; the trouble is that it is not only very difficult to
determine benefits (i.e. damages avoided), it is often impossible
to estimate costs. Costs of processes that have not yet been in-
vented cannot be estimated. They are said to be very high or even
("it can't be done") infinite, but may well turn out to be reason-
able. And it is a decision based upon such overestimated costs
that is irrational. The Japanese experience in the field of pollu-
tion abatement lends support to the idea that to a large extent it
is not technology that should constrain policy choices, but policy
choices that should constrain technology.
The third conclusion concerns the economic costs and conse-
quences of pollution abatement policies in Japan. It is obvious
that pollution abatement brought visible and invisible benefits.
But it was carried out at a cost. Pollution abatement costs which
are not very well known in Japan, seem to have been particularly
high, higher than in other countries.
In 1975, anti-pollution expenditures (investments, plus operat-
ing costs) amounted to about 3 per cent of GNP and the economic
cost (depreciation of anti-pollution equipment, plus opportunity
cost of capital, plus operating costs) could be estimated to be
somewhat below 2 per cent of GNP.(1) In some industries, such as
pulp and paper, steel, electricity, and chemicals, pollution abate-
ment significantly increased production costs.
But - and this is the important point - the impact of such
additional costs on the Japanese economy does not appear to have
been great, or even significant. Indeed the competitiveness of
Japanese industry was not seriously impaired. What is a cost to
one enterprise is income to another enterprise - and may well bring
additional business to the first enterprise. It is not easy to
pinpoint all the consequences of pollution abatement policies as
they spread out through the economic machinery.
A mere look at "what happened" in the early seventies is not
enough, because pollution abatement was only one of the factors
that affected the economy during this period; one can note, how-
ever, that growth rates did not slow down until the 1974-75 world-
wide recession, and that higher (than other countries) pollution
abatement costs did not prevent Japan from achieving higher (than
most countries) GNP growth rates, lower unemployment rates, and a
reasonably favourable balance-of-payments.
The best way to estimate the economic consequences of pollu-
tion abatement costs is to utilise macro-economic models that
simulate the behaviour of the economy with pollution abatement,
all "other things constant". Japan is probably the only country

(1) See Appendix II.
86

where several such models have been utilised by research groups,
Sif not by policy-makers. The outputs of these models must be
handled with great care. However, it is interesting to note that
they all suggest that the impact of relatively high pollution abate-
ment costs on macro-economic magnitudes, such as GNP, employment,
prices, and foreign trade, is practically negligible. This, in
theory, should only take place in an economy operating below full
capacity - which has not been the case of Japan, and makes the
results all the more interesting.
Pollution abatement policies do introduce changes in the
economy: some industries, and the areas where they are located,
are hit, and the problems thus created must be taken very seriously,
but the Japanese experience suggests that the overall effects should
not cause particular worries.

2. ENVIRONMENTAL QUALITY

The Japanese experience can also show that ambient concentra-
tion levels are but one dimension of environmental quality, and that
pollution abatement should be only one aspect of environmental
policies. In Japan, in the late sixties, environmental discontent
focussed on pollution and environmental policies concentrated on
pollution abatement. The result was somewhat surprising: although
Fthese policies largely succeeded in abating pollution, they did
not succeed in eliminating environmental discontent. The illness,
so to speak, survived the elimination of its main cause. This
would suggest that the real cause of environmental discontent was
not - and is not - increasing pollution, but decreasing environmental
quality. Environmental quality, or as it is often called "amenities",
refers to quietness, beauty, privacy, social relations and other
non-measured elements of the "quality of life". People were not
so much suffering from high ambient concentration levels as from
the gradual degradation of their living environment. The reasons
why they complained about pollution, not amenities, are twofold.
Pollution problems are fairly well defined: pollution levels can
be measured, pollution sources can be identified; amenities, by
contrast, are difficult to define and are a much vaguer concept.
Also, pollution has an impact on health, whereas amenities "lonly"~
impinge on well-being. Politically, the abatement of pollution was,
therefore, a much better battlefield than the provision of amneni-
ties. What could be called "apparent" social demand was for pollu-
tion abatement; but "real" social demand was for the provision of
amenities. It is because environmental policies satisfied only this
apparent social demand, and largely ignored the real social demand,
that they did not eliminate environmental discontent.

The Japanese people and the Japanese authorities are now trying
to develop broader-based environmental policies, dealing not only
with pollution control but also with the preservation of their
natural and cultural heritage and with the promotion of well-being
in general.
This is indeed a new and difficult task. It will require new
types of instruments and mechanisms. It-is more difficult than
pollution abatement, because the problems at hand are mainly of a
social, not just technical nature. The setting of standards will
certainly not be sufficient and technological innovations will not
be of much help. What is required is careful global planning,
which could be described as the use of mechanisms to prevent environ-
mentally dangerous developments and to promote environmentally
desirable developments. Mechanisms of the first type are more or
less available, under the names of technology assessment and impact
statement procedures, but are difficult to implement. Mechanisms
of the second type are not quite ready as yet. This kind of
planning has to take into account both the nature and the location
of developments; it has to find out what to do, and where to do
it. This is why land use planning has an important role to play.
In this new type of environmental policies to be developed the
key element is probably the organisation of public participation.
The possible Iong--term, indirect costs of a given project are often
difficult to imagine; the possible long-term, indirect benefits
of another project are even more difficult to think of. This can
only be done if a number of people - including the people involved-
participate in the decision-making processes. This is difficult
to organise, and will be done at great cost. But there are some
reasons to believe that Japan is well equipped to do it, and that
it will in the years to come, improve environmental quality as
efficiently as it reduced pollution levels.

Appendix I

ESTIMATES OF ANTI-POLLUTION INVESTMENTS
IN THE PRIVATE SECTOR, 1970-75

Anti-pollution investments in the private sector are not very
well known and have to be estimated. Two procedures can be
utilised. The first or direct one utilises various incomplete
surveys about anti-pollution investments by enterprises. The second
or indirect one is based upon surveys of anti-pollution equipment
sales to enterprises. They do not give identical results.

1. DIRECT ESTIMATES

Total private investments can be divided into three types:

i) investments undertaken by enterprises for which MITI is
responsible, i.e. enterprises with a capital over
100,000,000 yen in the main industrial sectors, hereafter
referred to as "MITI enterprises";
ii) investments undertaken by other manufacturing enterprises,
and
iii) investments undertaken by non-manufacturing enterprises.

Data on total private investments can be found in national
accounts; in 1974 it was about 22,929 billion yen. Data on (i)
is published by MITI; in 1974 it was about 5,761 billion yen.
Data on (ii) and (iii) can therefore be obtained by subtraction.
The ratio of (ii) to (ii) + (iii) is known to be 0.4 and can be
utilised to figure out (ii) and (iii); in 1974 investments in
other manufacturing enterprises were about 6,867 billion yen and in-
vestments in non-manufacturing enterprises some 10,302 billion yen.
We then estimate, for each type of investment, the amount of
associated anti-pollution investments.
As regards "MITI enterprises", an annual survey is undertaken
in which enterprises (at the firm's, not establishment level) are
asked to report on their "anti-pollution investments", as well as
on their total investments. This data is published, and even

tabulated sector by sector. It is often quoted, although citations
do not always make it clear that it applies to "MITI enterprises"
only, not to "Japanese enterprises". Ratios of anti-pollution invest-
ments to total investments that emerge from this survey are of
course not typical of the private sector as a whole. In 1974,
according to that survey, anti-pollution investments in "MITI
enterprises" amounted to about 818 billion yen.
As regards "other manufacturing enterprises", data from the
Small Business Finance Corporation can be utilised. This Corpora-
tion issues series of ratios of anti-pollution investments to total
investments in the enterprises for which it is responsible. Those
ratios can be assumed to apply to "other manufacturing enterprises".
In 1974, the ratio was 7.5 per cent, and anti-pollution investments
can therefore be estimated to be: 6,867 x 7.5 per cent=
515 billion yen.
As regards "non-manufacturing enterprises" anti-pollution
investments can be neglected.
Calculations for 1974 can be summarised as follows:

Total Anti-
Investments pollution Ratio
(billion Investments (%
yen) (billion
yen)
MITI enterprises 5 -,761 818 14.2
Other manufacturing
enterprises 6,867 515 7.5
Non-manufacturing
enterprises 10,302 - 0.0
Total, private sector 22,929 1,333 5.8

Calculations for the years 1970-1975 are shown in Table A.

2. INDIRECT ESTIMATES

There are two sources of data on anti-pollution equipment
sales. One is a survey by MITI; the other is a survey by the
Japan Industrial Machinery Association. Figures estimated by the
Japan Industrial Machinery Association are 30 - 40 per cent higher
than figures produced by MITI.
Anti-pollution equipment sales can be broken down between
sales to the private sector and sales to the public sector. In
1974, the ratio of sales to the private sector to total sales was
estimated to be 67 per cent. Assuming that this ratio has been
constant over the period, one can build a series of anti-pollution
equipffent sales to the private sector.

TABLE A. Estimates of anti-pollution investments in the private sector, direct method, 1970-75

Tota Total2((5) (6) (7) ()
)(2) 4Total Shareof Anti-pollution Anti-pollution Share of
iTotal Total Total Anti-pollution anti-pollution investment investment anti-pollution
investment investment investment investment investment investment
in private in in other in MITI in other private in private
r manufacturing enterprises mmanu facturing enterpringses sectortr
sector enterprises manufacturing enterpri sector
( billion �) N)

1970 14,494 3,094 4,560 164 1.5 68 232 1.6

1971 14,908 4,154 4,302 270 3.1 133 403 2.7

1972 16,723 3,891 5,132 323 4.6 236 559 3.3

1973 22,304 4,489 7,126 440 5.6 399 839 3.8

1974 22,929 5,760 6,867 818 7.5 515 1,333 5.8

1975 21,072 6,652 5,768 1,264 9.0 519 1,783 8.5

Sources and Notes:

(1), (2), (4) are series established by MITI.

(5) is a series established by Small Business Finance Corporation.

(3) = CT1) - (2170.4.

(6) = (5) x (3).

(7) = (4) + (6).

(8) = T7) : (11T100.

Table B

ESTIMATES OF ANTI-POLLUTION INVESTMENTS IN THE PRIVATE SECTOR
INDIRECT METHOD, 1970-1975

Total Anti-pollution Anti-pollution Ratio of
investment Anti-pollution investment by investment by anti-pollution
Year in private equipment sales private sector private sector investment in
enterprises (billion yen) (billion yen) (billion yen) private enter-
(billion yen) prises
(%)
(1) (2) (3) (4) (5)
1970 14,494 195 131 262 1.8
1971 14,908 302 202 404 2.7
1972 16,723 375 251 502 3.0
1973 22,304 488 327 654 2.9
1974 22,929 677 454 908 4.0
1975 21,072 n.a. n.a. 1,403a) 6.6

Sources and Notes:
1) is a series established by MITI.
2) is a series established by the Japan Industrial Machinery Association.
3) = (2) x 0.67; 0.67 is the ratio of sales to the private sector to total sales in 1974, which is assumed
to be constant over the period.
4) = (3): 0.50; 0.50 is assumed to be the ratio of anti-pollution equipment to anti-pollution investment.
5) = /T4): (127 100.
a) The figure for 1975 was calculated by applying to the 1974 figure (908) the increase noted in the replies
to the MITI questionnaire on anti-pollution investment (54 per cent).

Anti-pollution investments consist partly of anti-pollution
equipment, and of other (mostly civil engineering) types of equip-
ment. Officials of various institutions, such as the Japan Develop-
ment Bank and the Environmental Pollution Control Service Corpora-
tion, were asked about the ratio of anti-pollution equipment to
total anti-pollution investment. Although their replies were only
informed guesses, it seems safe to say that this ratio is not below
50 per cent. By dividing the amount of anti-pollution equipment
by this ratio, one can arrive at an estimate of anti-pollution
investments in the private sector.
Calculations for the years 1970-1975 appear in Table B.
Both direct and indirect estimates are rather crude, and must
be utilised with great care. Indirect estimates, which are about
20 per cent lower than direct estimates, may be more reliable (or
rather less unreliable). These are some reasons why direct estimates
could be on the high side. Enterprises replying to MITI might be
tempted to overstate their "anti-pollution investments"; the
vagueness of the concept makes it easy. The oil industry, for
instance, includes in its anti-pollution investments not only the
investments required to meet emission standards imposed upon the
industry, but also the investments required to desulphurise the
fuels it refines, and not much is known about the series coming
from the Small Business Finance Corporation. Indirect estimates
seems unlikely to be too low. It is true that some anti-pollution
equipment production could have escaped the series either because
the data does not include anti-pollution equipment which does not
call for outside equipment manufacturers, or because some anti-
pollution equipment manufacturers are not members of the Japanese
Industrial Manufacturing Association. On the other hand, we have
utilised the source that gives the highest figures; the ratio of
anti-pollution equipment to anti-pollution investment that has been
retained (50 -per cent) appeared to be minimum; had a higher ratio
been utilised, estimates of anti-pollution investments would have
been lower.

APPENDIX II. Estimate of the economic cost of pollution abatement

1. We first estimated K, the stock of anti-pollution capital at the beginning of 1975 by: (i) estimating the total yearly anti-pollution
investments in current prices; (ii) transforming the series into a series In 1975 prices; (iii) accounting for the depreciation (at
a rate of 10% per year) of those investments according to their age; (iv) adding the figures thus obtained for each year, as shown
in the following table):

(1) (2) (3) (4) (5) (6) (7) (8)
Anti-pollution Total-anti- Anti-pollution Total anti- Price index Total anti- Remaining Remaining
investment in pollution investment pollution (machinery pollution capital Capital
MITI sample of investment by investment and investment ratio (8)=(6)x(7)
big enterprises by private government (4)=(2)+(3) equipment) (1975 (1975 price)
(current prices) enterprises (current (current rices)
(current prices) prices) (6)=(5)x100
prices)

1966 27 94 64.6 61 0.1 6

1967 46 160 65.9 105 0.2 21

1968 62 216 66.1 142 0.3 43

1969 107 373 67.6 252 0.4 101

1970 188 262 394 656 69.9 459 0.5 230

1971 306 404 634 1,038 69.6 712 0.6 427

1972 331 502 876 1,377 71.0 978 0.7 685

1973 485 654 1,077 1,731 79.6 1,378 0.8 1,102

1974 923 908 1,320 2,228 98.9 2,203 0.9 2,007

1975 1,178 1,403 1,484 2,887 100 2,887 0.5 1,444

TOTAL(K) - - 6,066

2. E, Economic cost, equals D, depreciation costs for the wear and tear of the stock of capital equipment utilised, plus I, opportunity
cost of this stock of capital, plus 0, operating costs: E = D + I + 0,

D can be estimated to be 10% of K.

I can be approximated by K times the interest rate, which was also about 10% in 1975.

0 can, on the basis of data available for other OECD countries, be estimated to be about equal to D + I.

E = (0.1 + 0.1 + 0.2) K = 0.4 K = 0.4 x 6,066 = 2,426.

E 2 426
=8 = 144 9125 = 1.7%
3. As a by-product, S, anti-pollution expenditures, can be estimated. S equals N, anti-pollution investments plus 0, operating costs.
In 1975:
S = N + S = 2,887 + 0,2 K S = 2,887 + 1,213 S = 4,100 4100
144,915 = 2,83%

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