We have obtained data from various sources as follows.
Facility-level data: mail survey
We chose the office buildings from among the regulated facilities for several reasons. First, under Tokyo ETS, office buildings represent the largest group among the commercial buildings. Hence, office buildings are the major target of regulations.Footnote 5 Second, among the regulated facilities, office buildings are relatively less influenced by economic fluctuations in terms of energy consumption.
We conducted a mail survey in 2015. We sent questionnaires to 824 owners of office buildings across Japan. The population of office buildings was chosen from the database, which was constructed based on the Act on the Promotion of Global Warming Countermeasures run by the Ministry of the Environment. Facilities that consume energy more than 1500 kl of crude oil equivalent must report their GHG emissions every year. From this database, we were able to obtain a list of the address of all office buildings. We received 414 replies from the office buildings, representing a reasonably high response rate of 50.2%.
Owners of office building were asked to report their CO2 emissions levels from 2009 to 2013. We also asked for electricity consumption and energy consumption, where energy consumption is the sum of electricity consumption and fossil fuel consumption. Respondents were also asked to report the number of employees, the floor area, their experience with the rolling blackouts and any other requests for energy savings from the power companies.
We collected data on electricity prices from a publicly available database of the Federation of Electric Power Companies (FEPC) of Japan. Until the recent deregulation of the retail market in 2016, the Japanese power market had been divided into nine regions: Hokkaido, Tohoku, Tokyo, Chubu, Hokuriku, Kansai, Shikoku, Chugoku and Kyusyu.Footnote 6 We obtain charge revenues and volume of power demand for these nine regions from the FEPC. Following Hosoe and Akiyama (2009), we calculated the electricity price for each region by dividing the charge revenue based on the volume of power demand.
The electricity price has increased in Japan over the past 10 years, from 2006 to 2015 (See Fig. 1). Before the Great East Japan Earthquake in 2011, electricity prices for all companies were fairly similar. However, after the earthquake, the price in the jurisdiction of the TEPCO saw a large increase. In particular, industry and commercial sectors in the TEPCO market faced a growth rate for electricity prices of 12.4% during the period 2010–2013. It was the largest growth rate for electricity prices among the nine regions. For example, during the same period, the second largest and the lowest one were recorded in Kansai region and Hokuriku region with each growth rate being 9.4% and 3.8%, respectively.
TEPCO covers nine prefectures: Tokyo, Saitama, Chiba, Ibaraki, Tochigi, Gunma, Kanagawa, Yamanashi and Shizuoka. Among the nine prefectures, only Tokyo and Saitama have an ETS in place. Therefore, we can disentangle the impact of the ETS from the increase in electricity prices.
Savings requests and the rolling blackout
In addition to electricity prices and ETS, other factors may also influence emissions. The Great East Japan Earthquake in 2011 damaged a few power plants. Most notably, among them is the nuclear power plant in Fukushima. This led to the shutdown of major nuclear power plants. Consequently, TEPCO faced a shortage of power supply. In response to this emergency, TEPCO introduced “rolling blackout”. Under this system, TEPCO intentionally stopped the electricity supply to a designated area. After several hours, another area faced the intentional blackout. In this way, TEPCO managed to supply electricity to their customers with limited capacity. In our survey, we asked if they had experienced the rolling blackout.
Another important aspect is demand-side management. In response to the electricity crisis, the government introduced “request to reduce the electricity consumption”. In our survey, we asked if the owners received this request.
We suspect that these experiences may have given incentives to save energy for consumers. We construct a dummy variable, saving request/rolling blackout, which takes the value one if the building owners faced either the rolling blackout or the request of electricity consumption reduction. In our sample, 41% of facilities faced this request.
Vacancy ratio of office buildings
The emissions from office buildings are influenced by economic activities conducted in each building. To capture the economic activities in the building sector, we use the vacancy rate of office buildings in each region as a proxy for the vacancy rates for a building. We exploit publicly available data from Miki Shoji Co., ltd. which provides information on the office market in seven large business regions in Japan: Sapporo, Sendai, Tokyo, Yokohama, Nagoya, Osaka and Fukuoka. Unfortunately, this dataset does not offer information on all prefectures separately. We then assigned values to the office buildings based on proximity.
Cooling degree days and heating degree days
To control the impact of weather conditions, we include cooling degree days (CDD) and heating degree days (HDD). This information is publicly available from the Japan Meteorological Agency. We calculated the CDD and HDD for each prefecture.
Following the method required by “Act on Promotion of Global Warming Countermeasures,”Footnote 7 owners of office buildings calculate their emissions by multiplying their electricity consumption by the CO2 intensity of the power companies from which they purchase electricity. The CO2 intensity, however, varies across power companies and time. After the earthquake in 2011, power companies had to rely heavily on coal power plants. Consequently, their CO2 intensity sharply increased after 2011. Before the earthquake, in 2009, the CO2 coefficient, on average, was 0.433 kg-CO2 per kWh, and it rose to 0.524 kg-CO2 per kWh in 2013. To control this impact, we include CO2 intensity in the model for CO2 emissions.
Table 2 illustrates the summary statistics. For some variables, we removed outliers from our analysis. Specifically, we excluded the top and bottom 1% of the distributions in the sample. The first panel of Table 2 shows summary statistics for office buildings throughout Japan. On average, the annual CO2 emissions for an office building considering the total sample was 7105 tons of CO2. The summary statistics for office buildings in Tokyo and other regions are shown in the second and third panels of Table 2. From these panels, we find that the annual CO2 emissions from office buildings in Tokyo was 7463 tons of CO2, while office buildings in other regions accounted for 6918 tons of CO2. Hence, office buildings in Tokyo on average emit CO2 more than those in other regions. We also find large differences between buildings in Tokyo and other regions in terms of size. Generally, office buildings in Tokyo have greater floor area and more employees than office buildings in other regions.
Table 3 exhibits the trends of the average annual CO2 emissions from office buildings. The first column shows the emissions in Tokyo. The second column shows emissions in Saitama, which also had an ETS in place. Note that there are only 20 observations in our sample for Saitama. The third column corresponds to emissions from the rest of Japan. One can see that CO2 emissions in Tokyo decreased after the ETS was introduced in 2010, while emissions elsewhere increased in 2013 relative to 2009.