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10,000 yen carbon tax would allow for economic growth: MOE estimate

  • June 22, 2021
  • , Nikkei , p. 5
  • JMH Translation

The Ministry of the  Environment (MOE) held an experts’ meeting on June 21 to discuss carbon pricing, which applies a price to carbon dioxide (CO2) emissions. An estimate released at the meeting showed that a tax of 10,000 yen per one ton of carbon emissions would not prevent economic growth if the tax revenue were used for energy saving investments. The aim of the carbon tax is to institute mandatory measures to encourage companies to reduce their emissions. The Ministry of Economy, Trade and Industry (METI) takes a cautious stance toward imposing carbon tax, maintaining that an excessive burden on companies could impede growth. The government plans to coordinate between these positions.


The Development Bank of Japan Group’s Value Management Institute (VMI) and the National Institute for Environmental Studies (NIES) both provided estimates. The estimates calculated the effect of emissions reductions and the real gross domestic product (GDP) in 2030 if the global warming tax, or the carbon tax, were raised by about 1,000 yen, 3,000 yen, 5,000 yen, and 10,000 yen per ton of emissions from 2022. The current tax is 289 yen per ton.


The VMI estimate showed that increasing the carbon tax by 10,000 yen would lead to a greater real GDP in 2030 compared with a scenario in which the carbon tax were unchanged, if half the tax revenue were used for corporate investments in energy saving facilities. According to the NIES estimate, a simple 10,000 yen tax increase would lead to a 0.9% contraction in real GDP for 2030. If the tax revenue were invested in energy saving measures in companies and homes, the GDP would only decrease by 0.1%.


In addition to a carbon tax, the MOE aims to introduce a system of mandatory emission reductions, These include measures such as emissions trading, which impose an emissions cap on companies. Companies may buy and sell their emissions allowances to offset deficiencies.


The Ministry of Economy, Trade and Industry (METI), which has been holding experts’ meetings separately from MOE since February 2021, takes a cautious stance toward mandatory measures. Industries without established decarbonization technology, such as steel, note that a carbon tax would impose additional burdens without decreasing emissions. METI, which emphasizes supporting companies in taking voluntary measures, is aiming to revitalize the free market system that allows companies to trade reductions. (Abridged)

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