Abstract
The carbon tax is a market-based countermeasure for mitigating greenhouse gas (GHG) emissions that has received considerable attention around the world because a carbon tax is theoretically able to reduce GHG emissions at minimum cost. However, there are objections to the tax because the burdens of cost for specific energy-intensive industries, such as the coal and petroleum industries, may be large. This chapter conducts an economic impact analysis of a carbon tax proposal that was discussed by the Tokyo Tax Commission. The tax rate we examined was 3,415 Yen/t-CO2. Specifically, we used an input-output framework to examine the economic impacts of this carbon tax proposal for each industry and the ways in which energy-intensive sectors may avoid or mitigate this cost burden.
In addition, we estimated the short-term impacts of the carbon tax proposal on those households that use the tax rate discussed by the Tokyo Tax Commission. An interesting feature of the proposed tax is the downstream taxation of electricity, whereby households directly pay the carbon tax for electricity usage. To examine the impact of this tax on households, we use the data from the “Family Income and Expenditure Survey” and link the price change determined from the Input-output model to the quantity listed in the survey.
We find that for some commodities, the price increase was greater than 5 %, and on average, the price increase was 1.2 %. For households, the results revealed that the tax burden was higher for low-income households and households living in cooler regions.
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Notes
- 1.
An environmental tax was included in the “FS 2011 Tax Reform proposal,” which was announced in December 2010 (Ministry of Finance Japan 2010).
- 2.
Whereas the Tokyo Tax Commission used “global warming” rather than “climate change,” we use these words interchangeably in this chapter.
- 3.
See page 55 of Park (2009) for details.
- 4.
The “light oil delivery tax” is comprised of the principal tax rate of 15.0 Yen/l and a temporary tax rate of 17.1 Yen/l.
- 5.
The midterm report by the Tokyo Tax Commission also reports the results using a tax rate of 3,415 Yen/t-CO2 (12,522 Yen/t-C) as a reference case. The results for the reference case are presented in Sugino et al. (2012).
- 6.
The Japanese IO table (basic classification) has 520 rows and 407 columns. Each row depicts products, whereas the columns depict industries. In other words, the IO table is rectangular, as there are more products than industries. The Leontief inverse matrix shown in Eq. 7.1 is calculated using the information in the 520 by 407 matrix. However, the number of rows and columns must be the same to obtain the Leontief inverse matrix.
- 7.
In both cases, the taxes on gasoline and diesel fuel for automobile use were exempted.
- 8.
See Sugino et al. (2012) for comparable results using the 2,049 Yen/t-CO2 tax rate.
- 9.
See Appendix 7.1 for the price increase for each industry.
- 10.
The Retail Price Survey reports prices of goods every year in three different categories: prefectural capital and cities with more than 150,000 people, cities with between 50,000 and 150,000 people and cities with fewer than 50,000 people. We used the prices listed in the table for prefectural capitals and cities with more than 150,000 people to calculate the average city gas price.
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Appendix 7.1
Appendix 7.1
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Arimura, T.H., Iwata, K. (2015). Economic Impacts of the GHG Tax on the Japanese Economy: Short-Term Analysis. In: An Evaluation of Japanese Environmental Regulations. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-9947-8_7
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