The need for developed countries to take a lead in the global fight against climate change is generally acknowledged and was intrinsic to the 2015 Paris climate change agreement. An understanding of the way in which environmental policy in advanced nations has developed and which policies have had a significant impact on the reduction in the emissions of various pollutants may yield important policy prescriptions relevant to the current climate change negotiations. In this paper we consider how Japan's little-known environmental interest rate policy and voluntary pollution control agreements contributed to Japan's ecological modernization and how these policies compare with the more traditional regulatory approach. Our results show that Japan's use of an environmental interest rate policy was an effective policy as a complement to the more traditional regulatory approach.

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