The PEP Policy Dialogue is a program where Director Umada invites experts from various policy fields to engage in discussions about social issues and their solutions. It is hosted by the Policy Entrepreneur's Platform (PEP).
In this episode, we welcomed Mr. Yoshiyuki Sagara, Senior Research Fellow at the Institute of Geoeconomics (IOG), to discuss the relationship between economic security and the Climate Tech field.
■■ Speakers
■Guest: Yoshiyuki Sagara
Yoshiyuki Sagara is a senior research fellow at the Asia Pacific Initiative (API), where he focuses on economic security, sanctions, health security policy including COVID-19 response, international conflicts, and Japan’s foreign policy.
Before joining API in 2020, Mr. Sagara had 15 years of career experience working in the United Nations system and the Japanese government, as well as in the tech industry. From 2018 to 2020, he served as Assistant Director of the Second Northeast Asia Division (North Korea desk) at the Ministry of Foreign Affairs of Japan. From 2015 to 2018, he served in the Guidance and Learning Unit within the Policy and Mediation Division of the UN Department of Political Affairs in New York, where he analyzed and disseminated best practices and lessons learned from UN preventive diplomacy and political engagements, such as in Nigeria, Iraq, and Afghanistan. From 2013 to 2015, he served in the International Organization for Migration Sudan, based in Khartoum. As a project development and reporting officer in the Chief of Mission’s Office, he developed and implemented peacebuilding and social cohesion projects in conflict-affected areas of Sudan, especially Darfur. While serving in the Japan International Cooperation Agency (JICA) Headquarters from 2012 to 2013, he managed rural and fishery development projects in Latin America and the Caribbean region. From 2005 to 2011, he worked at DeNA Co., Ltd. in Tokyo and engaged in expanding tech businesses.
Mr. Sagara has been widely published and spoke on public policy, including in the Japan Times. He coauthored a report, The Independent Investigation Commission on the Japanese Government’s Response to COVID-19 (API/ICJC): Report on Best Practices and Lessons Learned (Discover 21, 2021).
He holds a Master of Public Policy from the Graduate School of Public Policy at the University of Tokyo, and a BA in law from Keio University.
■Host: Takaaki Umada (PEP Director)
■■ Collaboration
Institute of Geoeconomics https://apinitiative.org/project/geoeconomics/
Disclaimer: This English translation of the Japanese interview transcript was generated by an AI language model. While efforts have been made to ensure the accuracy of the translation, please be aware that some details may be inaccurate or misinterpreted. We advise readers to refer to the original Japanese video for the most accurate and authoritative source of information. Citing this AI-generated transcript is not recommended for academic or professional purposes. This translation is provided for informational and convenience purposes only.
Umada:
This is Umada from the Policy Entrepreneur's Platform (PEP). We're delighted to have Mr. Sagara join us today to discuss the intersection of climate tech and economic security. Mr. Sagara, thank you for being here.
Sagara:
Thank you for having me.
Umada:
To start, could you tell us a bit about yourself?
Sagara:
Sure. I'm Yoshi Sagara, Senior research fellow at the Institute of Geoeconomics (IOG). PEP and IOG have had various synergies through the International House of Japan (IHJ) and the Asia Pacific Initiative (API) programs, and I am looking forward to today's discussion. My research focuses on economic security policy.
Umada:
Thank you. To begin, I'd like to explain why we chose the topic of Climate Tech and economic security, which may seem unrelated at first glance.
Climate Tech, which refers to technologies and businesses addressing climate change, particularly those led by startups, is gaining momentum worldwide. I believe it’s crucial for various stakeholders to get involved in this field as progress is unlikely without broad participation.
I believe it is crucial for various stakeholders to get involved in this field, as progress is unlikely without broad participation.
I think economic security is closely related to this area, and after discussing this with Mr. Sagara, we planned to have this conversation today.
Mr. Sagara, I understand you've recently been involved in activities related to climate change and Climate Tech within the context of economic security.
Could you share your experiences?
Sagara:
Sure. Climate change and decarbonization are often discussed separately from economic security, but they share common ground in that they can't be fully addressed by market mechanisms alone. This necessitates government intervention through industrial policy, which has brought these issues to the forefront in recent years.
Key areas of focus include semiconductors and computing, cleantech, and biotech.
I've worked in the United Nations system and the Ministry of Foreign Affairs. About 20 years ago, when I was job hunting in university, I never imagined that startups, decarbonization, and security would intersect in this way.
After graduating, I first worked at an IT venture, then gained practical experience in national security, and now I'm interested in the intersection of economic security and industrial policy.
Regarding your question, I recently attended the Raisina Dialogue, an international conference in India focused on economic security and related issues. I was invited to speak on topics related to global cooperation in the Indo-Pacific region, focusing on diplomacy and security. One particularly interesting point was India's stance on climate change. A senior official from the Indian Ministry of External Affairs expressed India's commitment to contributing to the world through technological advancements aimed at fighting climate change. One of the topics discussed was nuclear power, specifically Small Modular Reactors (SMRs). The senior official mentioned that India aims to promote next-generation nuclear technology.
Another notable discussion was with a senior official from the Ministry of Environment of an African country. This official mentioned that their country currently relies heavily on thermal power for energy but aims to change their energy mix in the medium to long term. They plan to balance their energy sources equally among fossil fuels, renewable energy, and nuclear power. This statement from an emerging African country surprised me. I realized that the intersection of diplomacy, security, energy, and green technology is very profound.
Umada:
It's surprising to hear about these technological aspects.
Sagara:
Yes, the interest around SMRs was unexpected. At last year's COP28, nuclear technology and SMRs gained attention, which likely influenced this. Additionally, for emerging and developing countries, often referred to as the Global South, the issues of energy and food security have become significant challenges affecting their survival and prosperity, especially since Russia's invasion of Ukraine. I caught a glimpse of a growing global expectation for new cleantechs as a potential solution to these challenges.
Umada:
I recently spoke with members of a climate tech organization in the EU who also emphasized energy security. The war in Ukraine demonstrates that national energy independence is crucial, putting a spotlight on technology's role. This aligns with what you mentioned. Did you have other interesting observations from your time in India?
Sagara:
I visited India for the first time in 20 years and felt its economic momentum. There is a strong drive to use technology, even if it's rough around the edges. They were making efforts to employ high-tech equipment even when the wiring and other aspects raised doubts about its correctness. I felt that India's strength lies in its approach of testing technology in the market regardless of the circumstances. There’s a perception in Japan of India’s infrastructure as lacking, particularly regarding unreliable water and electricity. However, some states have made notable progress, attracting Japanese companies to industrial parks with more stable utilities.
Living in Japan, one becomes accustomed to dependable power. We expect near-perfect stability—above 99.9%—for water and electricity. However, during my two years working for the UN in Sudan, a nation currently grappling with civil war, power outages were commonplace even a decade ago, and clean water access was a constant challenge. As a result, it was common practice to secure drinking water oneself, and since the infrastructure couldn't be relied upon for electricity, having a generator was also common. Although this was mostly limited to affluent households, each home and office had a generator. When the power went out, the generator would activate, supplying electricity to the house or the immediate surrounding area. Therefore, water and electricity were not free; people had to obtain them on their own. I believe this is actually standard in many developing countries or in much of the Global South. So from the perspective of those who are accustomed to these generator-based power generation methods, the concept of Small Modular Reactors (SMRs) seems quite reasonable. At the very least, achieving power generation in government institutions or large industrial parks would be beneficial for them. It appears that they are considering energy and cleanliness in a very agile manner, which is quite different from the approach taken in Japan.
Umada:
Japan's well-developed infrastructure makes even minor flaws noticeable. Solar power, while being a renewable energy source, is ineffective at night. Yet in the Global South, this might not be considered a significant disadvantage.
Sagara:
Precisely. Developed regions like the European Union face their own unique context. The EU, with its 27 member states, emphasizes rule-making for coordinated action. This focus on establishing rules is often seen as a defining feature. In relation to cleantech and green initiatives, during the early stages of the COVID-19 crisis in 2020, various countries began implementing significant industrial policies. Among these, the EU initiated a movement called the Green Deal at the end of 2019. With the onset of COVID-19 in 2020, the EU's approach to subsidies was to provide support only if there were reforms and no support if there was no green transformation (GX). They adopted a stringent stance against companies and organizations that emitted CO2. However, they offered support to those committed to decarbonization. This effectively linked decarbonization efforts with industrial structural reforms and transformation. This approach holds valuable lessons for Japan.
Umada:
You've highlighted the importance of rulemaking and the EU's approach. Earlier, you mentioned that both climate change and economic security require such frameworks because market forces alone are insufficient. The U.S. is also implementing policies like the Inflation Reduction Act (IRA), which benefits startups through tax credits and other incentives. It seems to go beyond promoting green industries, encompassing innovation, employment, and even education policy. For example, it provides larger tax credits for companies offering skill training, all tying into the overarching goal of net-zero emissions. This suggests the need for a comprehensive approach with policies integrating these different elements. Do you agree that climate tech's success requires a holistic approach, considering innovation, economic security, and industrial policies together?
Sagara:
I often discuss the integration of information and policy. This involves understanding what is happening at the forefront of society, businesses, and academia, as well as identifying the associated risks and threats. This understanding should inform how we coordinate and integrate government policies, which is crucial for progress across all policy areas in Japan. As you mentioned, integrating climate change and decarbonization policies with economic security policies is essential.
Regarding economic security policies, the Economic Security Promotion Act (Act on the Promotion of Ensuring National Security through Integrated Implementation of Economic Measures) was enacted in 2022. This act addresses four key areas that need immediate attention within the realm of economic security: strengthening supply chains, ensuring the stable operation of essential infrastructure, fostering specified critical technologies, and establishing a secret patent system. The Economic Security Promotion Act was enacted in May 2022 to address these four areas. Now, two years later, the government is working on advancing security clearance for economic security. The Ministry of Economy, Trade, and Industry (METI) has been developing an action plan to strengthen the industrial technology foundation related to economic security, which they started in the latter half of 2023. This action plan focuses on strategic industries, including computing, cleantech, biotech, and space defense. Cleantech is included in this, indicating a high level of interest in this area. However, I believe the scope of cleantech within economic security is relatively narrow, as exemplified by the predominant focus on batteries. The dependency on specific countries for electric vehicle (EV) batteries poses a vulnerability in stable supply, which is a concern. Since batteries account for nearly half the cost of EVs, it is understandable that there is significant interest in this area. This involves the use of critical minerals like lithium, which must be supplied stably. Another frequently discussed topic is solar cells. The global dependency on China for solar panels is seen as a supply chain vulnerability. Therefore, next-generation solar cells, such as perovskite solar cells that can be produced using Japanese technology and materials, are gaining attention. However, there might be other areas to consider as well.
In this context, I would like to ask Mr. Umada: one of the objectives of economic security is to protect the health, lives, and prosperity of the people through economic means. In the cleantech industry and startups, are there any technologies or industries that you believe are crucial for economic security and should receive more focus? If so, I would love to hear your thoughts.
Umada:
Climate tech is undoubtedly vital for essential infrastructure. Beyond that, water innovation holds immense potential for economic security. SOURCE Global, a company backed by Bill Gates' venture capital firm, has developed technology using next-generation solar panels to condense water from the air. As these technologies become more cost-effective, they could offer off-grid water solutions, potentially even replacing aging water infrastructure. Investing in these new systems could be more cost-effective than repairing outdated ones. Additionally, advancements in water reuse could further reduce reliance on centralized systems. Imagine a future where access to energy and water is as readily available as renewable energy sources like solar power. This scenario would increase national independence and reduce reliance on other nations. While water access might not be a pressing concern in Japan, it is a substantial challenge for many countries, making such technologies vital for their economic security.
Sagara:
There are several other important issues, but I believe water is extremely crucial. In many countries of the so-called Global South, the number of nations suffering from water scarcity is far greater than we can imagine in Japan. While it certainly affects the impoverished, which were referred to as the “bottom billion” in the past, clean water filters are also critically important in humanitarian aid contexts. When I was working in Sudan, there was a system where water could be purified simply by transferring it through a tube with a filter between water bags, making even river water drinkable. Such technologies were developed by countries in the Middle East. Middle Eastern countries have a strong desire for clean water, leading to the emergence of various startups. These technologies were used in humanitarian aid settings, but maintenance remains a challenge. Filters have a limited number of uses, and they can only be used in emergencies like disasters or conflicts. If Japanese technology or the technology Mr. Umada mentioned earlier could be used to circulate and purify water on-site, it would have significant potential. In similarly challenging conditions, such as in defense settings where water is scarce, such technologies could also be valuable. Within the defense industry, these technologies could be promoted globally as originating from Japan. I believe water could be a key focus as an industry, not only for national interests but also for national wealth.
Umada:
Your point about defense applications highlights the diverse applications of climate tech. Recognizing and embracing these multifaceted benefits is crucial to driving meaningful progress in addressing climate change. Evaluating their societal impact through various policy lenses is essential. Recently, the article “Innovation-Based Economic Security” highlighted the need for innovation to address supply chain risks. This aligns with the goals of the Economic Security Promotion Act. Viewing technology through this lens is crucial for both Climate Tech and economic security.
Sagara:
Regarding innovation, this is something I definitely wanted to ask Mr. Umada about today: when discussing innovation within the context of economic security or even within science and technology policy, the discussions tend to be somewhat linear and simplistic, with little distinction between technology and industry. There seems to be a lack of discussion on the true social implementation of technology. Mr. Umada, you have published a book on the methodology of social implementation in "Implementing the Future," and I believe the perspective of social implementation will become increasingly important. In discussions on economic security, we sometimes talk about the "Valley of Death," but it's not just the Valley of Death; before that, there is the "Devil River" at the seed stage. After crossing the Devil River, there is the Valley of Death at the patent stage, and then the challenge of crossing the chasm. Beyond industrialization lies the "Darwinian Sea," where one must compete to survive. The process of nurturing a single technology into an industry is indeed long. It's not just about research and development (R&D); commercialization and what is often discussed in the U.S. as Technology-Market Fit are also crucial. We need to seriously consider these aspects. Additionally, speed is essential. The speed of social implementation or agility is important. The term "agile" has become more common in government policies, which feels like a significant change. About a decade ago, when I was working at an IT venture during the advent of smartphones, we realized that waterfall development was inadequate for app development, and agile was the way to go. As a product owner, I held daily meetings, scheduling what to do in 15-minute increments throughout the workday, and the whole process often involved pivoting based on market tests and improvements. This agile approach emerged as a way of system development, and I believe agile policy-making is equally crucial. In the current intense competition and great power rivalry, how we implement agile policies has become a key point. In this context, you mentioned the IRA earlier. Alongside the IRA, the U.S. is also advancing the CHIPS and Science Act, aiming to produce advanced semiconductors domestically. They are supporting companies like TSMC, Samsung, Micron, and GlobalFoundries through this act, with the goal of reducing dependence on China. The CHIPS and Science Act involves substantial financial support, and the actual disbursement of funds began recently with a lead time of about a year and a half. During this period, the U.S. declared China a threat, which heightened China's sense of crisis. China has a semiconductor development fund known as the "Big Fund," and they are now creating a third fund to promote domestic semiconductor production and self-reliance, with investments amounting to trillions of yen. The U.S. intended to advance semiconductor development more quickly, but delays have allowed China to catch up. This highlights the issue of agility within economic security. As I mentioned earlier, it's not just about R&D; the long journey from technology to social implementation and the importance of agility are crucial from an economic security perspective. Mr. Umada, given your experience with Climate Tech, how do you view these issues?
Umada:
As you mentioned, when we talk about innovation in Japan, it tends to lean heavily towards R&D, that is, research and development. I also have the impression that innovation truly becomes meaningful when it is widely adopted. For example, in the current Climate Tech industries like steel, the end product remains the same, but the production method is greener, which adds what is called a "green premium" to the cost. The challenge is how to reduce this green premium. If we focus solely on R&D without considering mass production, it becomes difficult to reduce the green premium. It is important not to view innovation as just R&D. In fact, the U.S. Department of Energy (DOE) has recently been creating various policies under the term RDD&D. RDD&D stands for Research, Development, Demonstration, and Deployment. They emphasize not only R&D but also the demonstration and deployment phases. For each phase, they provide financial policies such as loans for demonstrations to facilitate the process and ensure the widespread social implementation of innovations. Japan is also trying to catch up with these policies. There are efforts to provide subsidies for the demand side after demonstration and deployment. From the perspective of the Climate Tech industry, I believe Japan needs to focus on these areas moving forward. Additionally, employment policies, such as offering five times the credit for skill training and educational policies to channel talent into these areas, are crucial. Integrating these with economic security considerations to create comprehensive and unified policies is likely the direction we need to take in the Climate Tech field.
Sagara:
You mentioned a very important perspective on how to connect innovation to social implementation, including the role of human resources. This also ties into the discussion on how to effectively develop industrial policies. At our Institute of Geoeconomics, we will soon publish a book titled "What is Economic Security?" In this book, I wrote about economic security in the health and medical fields, and I introduced the case of mRNA vaccines. This was a significant innovation aimed at protecting the lives and health of people worldwide. The mRNA vaccine was almost on the brink of commercialization, and through initiatives like the U.S.'s Operation Warp Speed and the competitive social implementation efforts in Japan and Europe, it was brought to market in less than a year. This is a very interesting case. What particularly caught my attention was the approach taken by the U.K. The U.K. adopted a venture capitalist (VC) approach to vaccine procurement, which was quite fascinating. The government brought in a life sciences venture capitalist, Kate Bingham, to lead the effort. She assembled an exceptional team, including former diplomats, lawyers, and scientists, and advanced vaccine procurement using VC methods. They created a portfolio of promising vaccine candidates, which then moved through the stages of animal (preclinical) trials and human (clinical) trials, including Phase I, Phase II, and Phase III. In a VC approach, you start with seeds, move to early stages, and then to late stages, considering capital and personnel policies along the way. The U.K. succeeded in vaccine procurement by increasing investment at each stage of clinical trials, a method known as follow-on investment. This success is exemplified by the fact that the U.K. was the first in the world to administer Pfizer's mRNA vaccine. This is something Japan can learn a lot from. Kate Bingham has given talks where she explained that when she became responsible for vaccine procurement, she had to consider the UK's strategy. Since the U.K. had left the EU, it was a small market for vaccine manufacturers. Therefore, she emphasized that the U.K. needed to become the best customer for vaccine companies. Given its smaller market size compared to the U.S., Japan, and Europe, she understood from the outset that the U.K. would easily lose in a simple procurement competition. This was something she had considered by design from the beginning. In terms of budget size, both the US and Japan had very large allocations. However, by employing a VC-like approach, they quickly assembled a portfolio and advanced through Phase I, Phase II, and Phase III with remarkable speed. This is something we can learn from the U.K. At our API, we established “The Independent Investigation Commission on the Japanese Government’s Response to COVID-19” and conducted a review of the COVID-19 response, which we published as a report in October 2020. We dedicated a chapter to vaccines, even though vaccine discussions were not prominent in early 2020. The topic first gained attention in Japan around December 2020, when the U.K. started administering the Pfizer-BioNTech mRNA vaccine. Our review revealed that the Ministry of Health, Labour, and Welfare and other government officials were strategically considering vaccine procurement. In hindsight, there were elements similar to the VC approach, but these experiences were tacit knowledge accumulated in the minds of bureaucrats and not systematically organized. I believe that reading "Implementing the Future" would be very beneficial for government officials. In this sense, adopting a VC-like approach to industrial policy or "Government as a Venture Capitalist" will become increasingly important. What do you think are the challenges or areas for improvement in the government's use of VC methods and social implementation? Are there any examples from other countries that could be useful?
Umada:
Japan has traditionally focused on the supply side of innovation. However, I think we need to shift our perspective more towards the demand side. For example, we need to consider how to create green demand, what kinds of policy packages to develop for deployment, and how to address the latter stages of innovation. By shifting our focus to these areas, we might discover various new policies. Another approach could be applying policies from other fields to industrial policy. Earlier, we discussed vaccines and the Advance Market Commitment used in vaccines—where a commitment is made to purchase a product if it meets certain specifications—can be applied to the Climate Tech field. For instance, in the area of direct air capture of CO2, there are movements to make advanced commitments to purchase at a certain price if the technology meets specific specifications, thereby encouraging specific innovations. In this sense, I believe it will become necessary to develop truly holistic policies in the future by shifting towards the demand side and comprehensively considering various industrial, health, and economic security policies.
Sagara:
I believe we need to learn from your methodology, even in the context of economic security.
Umada:
Both economic security and climate change are important, so it is crucial to exchange knowledge with each other. Within the government, there is a tendency for ministries and agencies to operate in silos, which is an organizational inevitability. However, by effectively bridging these silos, think tanks outside the government might be able to play a role in this. By linking these areas effectively, we can provide policy insights from third parties or the private sector, which could help guide Japanese society in the right direction. Personally, I think it would be beneficial to bring such ideas from external sources. We are nearing the end of our discussion, but if you have any final messages or comments, Mr. Sagara, please feel free to share them.
Sagara:
Thank you very much for this valuable opportunity today. I believe that Climate Tech is still an area that has not received enough attention within the context of economic security. Economic security tends to be associated with semiconductors, but as I mentioned earlier, it encompasses not only computing, AI, quantum technology, and semiconductors but also cleantech and biotech. I briefly discussed this broader perspective in our upcoming publication from the Institute of Geoeconomics titled "What is Economic Security?" emphasizing the necessity to promote policies with a broad and comprehensive perspective. I hope that the research on economic security and geoeconomics being advanced by the Institute of Geoeconomics, along with the research by PEP, can continue to create synergies and be disseminated through the API and the International House of Japan.
Umada:
This was our first session, and I truly appreciate your participation today, Mr. Sagara.
Sagara:
Thank you very much.