Climate Change Taxes and Energy Efficiency in Japan

In 2003 Japan proposed a Climate Change Tax to reduce its CO2 emissions to the level required by the Kyoto Protocol. If implemented, the tax would be levied on fossil fuel use and the revenue distributed to encourage the purchase of energy efficient equipment. Analysis using the MIT Emissions Predic...

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Bibliographic Details
Published in:Environmental & resource economics 2007-06, Vol.37 (2), p.377-410
Main Authors: Kasahara, Satoru, Jacoby, Henry, Ellerman, A, Paltsev, Sergey, Reilly, John
Format: Article
Language:English
Subjects:
Carbon
Carbon dioxide
Carbon dioxide emissions
Carbon sequestration
Climate change
climate change policy
Climate policy
Compliance
Cost control
Economic models
emission trading
Emissions control
Emissions trading
Energy efficiency
Energy utilization
Environmental economics
Environmental policy
Environmental protection
Environmental tax
Exports
Fiscal policy
Fossil fuels
Greenhouse effect
International markets
Japan
Kyoto Protocol
Policy analysis
Statistical analysis
Studies
Subsidies
subsidy
Tax rates
Taxation
Taxes
Welfare
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Summary:In 2003 Japan proposed a Climate Change Tax to reduce its CO2 emissions to the level required by the Kyoto Protocol. If implemented, the tax would be levied on fossil fuel use and the revenue distributed to encourage the purchase of energy efficient equipment. Analysis using the MIT Emissions Prediction and Policy Analysis (EPPA) model shows that this policy is unlikely to bring Japan into compliance with its Kyoto target unless the subsidy encourages improvement in energy intensity well beyond Japan’s recent historical experience. Similar demand-management programs in the US, where there has been extensive experience, have not been nearly as effective as they would need to be to achieve energy efficiency goals of the proposal. The Tax proposal also calls for limits on international emission trading. We find that this limit substantially affects costs of compliance. The welfare loss with full emissions trading is 1/6 that when Japan meets its target though domestic actions only, the carbon price is lower, and there is a smaller loss of energy-intensive exports. Japan can achieve substantial savings from emissions trading even under cases where, for example, the full amount of the Russian allowance is not available in international markets. Copyright Springer Science+Business Media, Inc. 2007
ISSN:0924-6460
1573-1502
DOI:10.1007/s10640-006-9031-1