Environmental Policy

List Of The Committee Members Of Research Panel_List of the committee members_Summary

(SUMMARY)

1. The situation of environmental taxes of foreign countries

(1) Actual situation of environmental taxes in foreign countries

(Centering around carbon tax, carbon / energy tax)

The carbon tax system of five Countries including North European countries (Finland, Denmark, the Netherlands, Norway and Sweden) are not the same, but have Various characteristics, Such as taxation articles, object of taxation, tax rate or reductive measures. The reductive measures are taken in various ways according to the individual conditions of each country.

(2)Effect of environmental taxes and carbon tax

Effect of carbon tax in Sweden
According to the report of Natural Protection Agency (December, 1995), the emission of CO2 had reduced by 8,000 Kt (19% of all emission) from 1987 to 1994, about 60% of the number was attained by imposition of carbon tax.

Effect of carbon tax in Norway
According to the Survey of Norway Central Statistical Bureau, CO2 emissions from the fixed source, such as factories, and the mobile source, Such as automobiles, (which occupies 25% of the whole Norway) was reduced by 3 to 4% (three hundred thousand CO2t) each year from 1991 to 1993 because of the introduction of carbon tax.

(3) Green Tax Reform in OECD

OECD rounded off the report ''ENVIRONMENTAL TAX AND GREEN TAX REFORM," which was approved by the OECD Council in May, 1997. In this report, each subjects of green tax reform, the use of the tax revenue, "Eco-taxes and the employment" double dividend, Eco-taxes and inflation, the distribution implications of eco-taxes and trade and competition issues was reviewed, and it was concluded that "countries should consider the opportunities and potential for greening their tax systems, according to their specific economic, fiscal and environment context."

2. Main points and options a economic instruments as countermeasures against warning

(1)Why tax utilization is required

Limitation of regulating instruments
[1]
It is difficult to regulate directly and comprehensively each of numerous kinds of economic bodies which can cause the global warming and to monitor the implementing situation individually, and it costs too high.
[2]
Incentive is lacked against reduction of carbon oxide emission over the regulating value.
Limitation of autonomous drive

Autonomous drive is very important. But at the same time, because of the following characteristics, it is difficult to say that the global warming problem can be solved only by autonomous drives.

[1]
Only with the autonomous drives, the global warming countermeasures can not always be taken to the socially desirable standard. Therefore they can always be short.
[2]
The autonomous drives can cause such a problem of "free ride" so that the company which took countermeasures against global warming can be economically disadvantageous.
Problems of aiding measures

In aiding measure itself, however, there are various problems, such as the possibility that it can be against the polluter pays principle (PPP) of OECD and social unjustness to provide the polluter with benefit from public fund and the increase of carbon dioxide emission caused by the increase of the number of market entry as well as vested interests, inefficiency of subsidy distribution system, or the possibility of causing of so-called "governmental failure" relating to the choice of the technology to be aided.

Advantage of the economic instruments
[1]
Economic and rational actions of each body are promoted and with each body selecting autonomica11y the most economic drives to reduce carbon dioxide emission through the market mechanism, the optimum reduction of carbon dioxide emission with the lowest cost can be realized in the whole society.
[2]
The economic instruments have continuous incentive effects and have also advantageous influences on the technology development for the reduction of carbon dioxide emission in the long term. As a secondary effect, environmental taxes of carbon tax has the characteristic to bring income.
[3]
In public welfare and transportation sections where carbon dioxide emission has increased drastically these days, the effect of economic instruments are considered big.
Emission trading system

(Advantages)

[1]
Total amount of emission is sure to be controlled as a target.
[2]
In implementing the instruments, the tradable or marketable discharge permits System will give each body enough discretion.

(Problems)

[1]
It is difficult to gain agreement on the distribution of the initial assignment.
[2]
As the emitting origin of carbon dioxide are of various kinds, such as automobiles, as well as business bodies like power plants and ironworks. Therefore, compared with carbon tax, it can be considered that expenses for preparing monitoring and observing systems and those for market creation will specially cost a great deal.

With considering the above points, tax and surcharge system seems to be more realistic than emission trading system as a domestic countermeasure against global warming.
Internationally, the system by which the emission limit is transacted among countries is limited by the transacting bodies. And as the monitorings are comparatively easy, the possibility is much higher.

(2) Concrete design of tax to prevent global warming

1 Taxation body

It seems to be appropriate that the Government should be the subject of taxation because of the following reasons.

[1]
Global warming is the global size environmental problem which causes and effects relate with each other across multiple local government bodies an the border of countries. As for the ones which affect on the rules of the market itself like taxes, the system Should be constructed from the national points of view.
[2]
In case of taxation at the time of manufacturing or importing, or taxing large scale consumers like electricity companies, as manufacturing or importing facilities or generating facilities are maldistributed regionally, the places of tax payment may be converged at certain areas so that financial arrangement among local governments might be required.
2 Taxation article/object of taxation
[1]
Carbon (CO2 emission repression)
In case of introduction of environmental taxes for repression of CO2 emission as a countermeasure against global warming, it is appropriate that consumption of fossil fuel as energy should be taxed in proportion to the carbon contents of the fuel.
[2]
Carbon + energy (CO2 emission repression + energy use repression)
To repress the load on the environment accompanied by energy use as well as CO2 emission repression, the whole energy can be the object of taxation along with the taxation to the carbon contents. In this case, as for energy, energy consumption by fossil fuel and non-fossil fuel is taxed in proportion to the energy amount.
3 Taxation grades

Taxation tan be carried out at the time of [1] manufacturing and importing, [2] Circulation and [3] consumption.
From the point of reduction of taxation cost, taxation on the upper course of the now, such as the time of manufacturing or importing, is desirable because of lesser number of people obligated to pay their taxes.

4 Aim of taxation
[1]
Reduction of carbon dioxide emission by incentive effects
This is the original theoretical aim of carbon tax. Tax is passed along to costs, and by income effect and substitution effect accompanied by it, use amount of CO2 emission origin can be reduced so that the whole CO2 emission can also be reduced. In addition long-termly it can have plus effects on the development of technology which contributes to prevention of global warming. Even if carbon tax cannot be fully passed along to costs it ends with the same effect long-termly, because the companies which cannot bear the tax will withdraw from the market and the remained companies will promote save-energy technology.
[2]
Aim of financial procurement of subsidy for introduction of save-energy equipment and technology
While increasing investment in save-energy equipment because of the increase of energy cost subsidy is provided for introduction of technology which contributes to prevention of global warming. Through both sides of measures, introduction of technology of good energy efficiency is promoted, and by raising the energy efficiency as a whole, CO2 emission will be reduced.
In this case, it is necessary to properly combine incentive effects and subsidy effects.
[3]
Announcement Effects Through the act of each people to pay taxes in daily life, the existence of global warming and the need of reduction of CO2 emission can be recognized by the people. As an introduction method of carbon tax utilizing this effect, there is "step-by-step carbon tax," by which low-rated carbon tax are imposed initially that will be raised step-by-step afterward.

(Reference)

Mechanism of carbon dioxide emission reduction by introduction of carbon tax
Mechanism of carbon dioxide emission reduction by introduction of carbon tax

5 Taxation level

Though theoretically, proper tax rate should be set at the level where the marginal cost to reduce the emission of CO2 equals to the limit of social damages, the decision of this level requires massive information.
Therefore, with considering other effects of measures, it is general to set the necessary tax rate to attain the goal of CO2 emission established separately. In this case, reviewing of tax rate based on the movement of the whole economy and the gradual hike of tax rate should be considered.

6 The purpose for which tax revenue is spent
[1]
General funds
If environmental taxes like carbon tax are imposed only for incentive purpose, tax revenue is secondary and its use is not specified. There can be two cases; one case is when tax revenue is used as a fund of general policies including environmental policies and the other one is when it is used as funds to reduce other taxes.
[2]
Subsidy to environmental measures
If it is considered to take a subsidizing policies in introduction and promotion of save- energy equipment and technology, the tax revenue from carbon tax can be precedencely appropriated for expenditures for them. The case when securing of original fund for subsidy is included in the purpose of taxation is equivalent to this.
In that case, however, it should be considered that more and more environmental measures are taken, tax revenue will be reduced, and it is necessary not to cause the stiffness of public finance because of the fixed purpose the revenue is spent for.
  • In any case, as for the purpose for which tax revenue is spent for it is necessary to review appropriate measures with considering economical situations or financial situations.
  • Prospect of tax
    In case of 3,000 yen / 1 tons of carbon, about 1,000,000,000,000 (one trillion) yen
    In case of 30,000 yen / 1 tons of carbon, about 10,000,000,000,000 (ten trillion) yen
7 Economical effects

(1) The distributional implications (regressiveness)
According to several simulation results, the existence of regressiveness can be recognized. But it is not considered so big.

(2) Effect on commodity prices
Accompanied by the introduction of carbon tax, commodity prices can be increased only at that time. However, it should be taken granted to bear the cost of it to preserve environment in the first place.

(3) Effect on international trade and competitiveness and "leakage" issues
The possibility of effects on international competitiveness and trade and "leakage," the increase of CO2 emission in other countries, depends on various complex causes, such as work force or wage level.
Therefore, it is meaningless to discuss only effects of environmental taxes.
However, in case of introduction of taxes alone, it should be discussed that the neutralizing measures of such effects is taken temporarily as is shown in North Europe, as a measure in transitional period to reduce short-term effects and mental resistance. It must be also noted that taking neutralizing measures can damage the efficiency of environmental taxes.

<Border tax adjustments>
The "Border tax adjustments," by which domestic tax is adopted to the imports and the exports are exempted from them, is conducted to get rid of the effects of domestic taxes on competitiveness.
The problems pointed about Border tax adjustments are as follows;

[1]
To what extent CO2 emission control effects of carbon tax can be maintained,
[2]
Whether it is approved or not, according to the international trade rules, and
[3]
As for carbon tax, which is imposed on consumption of fossil fuel, border taxes can be imposed technically in product stage.

They should be reviewed, with paying attention to the concrete contents of environmental taxes, progressing situation of worldwidely simultaneous implementation of environmental taxes or adjustability with the dealings of existing energy taxes, including the necessity of Border tax adjustments.

<Reduction and exemption from carbon tax>
Considering the examples in foreign countries, the followings can be subjects of reviewing;

[1]
those out of accord with the meanings of taxation
[2]
those with small possibility of tax collection
[3]
consideration to international competitiveness of the industry (in case that other countries do not take the same measures to strengthen as we do)
[4]
those which contributes to the emission control of carbon dioxide, and others.
8 Relation with existing tax system
-
In introducing carbon tax or carbon and energy tax for the first time, it should be required to consider the relationship with the existing energy-related taxes and automobile-related taxes. For example, the idea that the tax rates according to carbon contents are put on together the existing rate of gasoline taxes, local road taxes, petroleum and gas taxes and light fuel oil acceptance taxes. (In case of carbon and energy taxes, as for power source developing taxes, tax rate should be put on according to the energy amount in the same way.)
-
Many of existing petroleum taxes and others and automobile-related tax is imposed as earmarked taxes and are special funds for road funds and other.
The way these special funds should be is being discussed at the present, the point of view of environmental preservation should be considered thoroughly, with the fact that these taxes have some effects toward emission control of carbon dioxide.

3. Concrete tax option to prevent global warming introducible to our country

(Part 1) Joint carbon tax of low tax rate and subsidy

-
Object of taxation: Carbon
-
Taxation level: 3,000 yen /tC (about 2 yen per one liter of gasoline)
-
Use of tax revenues : Subsidy for countermeasures against global warming
-
Reduction measures
[1]
Those of small possibility of tax collection (fuel of international airline, international marine transport and deep-sea fishery)
[2]
Non-fuel use of petroleum (Use as raw material of petroleum)

(Both 1 and 2 are common on Plan 1 to 4.)

(Plan 2) North Europe type Carbon tax

-
Object of taxation : Carbon
-
Taxation level : 30,000/tC (about 20 yen per one liter of gasoline)
-
Use of tax revenues: General funds
-
Reduction measures
[1]
Special measures are taken to energy gulping industry (steel, chemical or glass etc.),
[2]
Companies which make an agreement with the government about CO2 reduction are exempted from taxes, or
[3]
The whole industrial sections except for consumer and transport sections are exempted from taxes.

(Plan 3) Low tax rate and subsidy joint type carbon and energy tax

-
Object of taxation : Carbon + energy
-
Taxation level : Tax is imposed on Carbon / energy with the rate of 50:50.
Carbon taxation 1,500 yen/tC
The remains are imposed on energy.
-
Use of tax revenues: [1] subsidy to countermeasures against global warming, [2] subsidy to technology development of solar generation etc.
-
Reduction measures: Tax exemption for fuel for co-generation

(Plan 4) Internationally considered step-by-step rated carbon and energy taxes

-
Object of taxation: Carbon + energy
-
Taxation level: Tax is imposed on Carbon / energy with the rate of 50:50.
Carbon taxation: 1,500 yen/tC for the initial year 15,000 yen/tC ten years after
The remains are imposed on energy.
-
Use of tax revenues is spent: [1] General funds, [2] subsidy for measures for CO2 reduction of developing countries
-
Reduction measures: [1] Implementation of arrangement of boundary taxes, [2] Tax exemption for small consumption
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