I. Basic Concept Regarding Economic Instruments - E. :Utilization of Economic Instruments in Environmental Policies - Taxes and Charges

I. Basic Concept Regarding Economic Instruments

E. Future Considerations for Using Economic Instruments

As seen above, there is a deepening understanding of the complementary impact of economic measures with other government policies designed to integrate the environment and economy, as revealed in the resulting effectiveness and technological developments induced by economic measures. Implementation of economic measures is ongoing.

The OECD and its member countries have continued to conduct research since the 1970s on the relationship between the environment and the economy, as well as promote and implement government policies such as the policy of casting the burden on entities causing pollution. In particular, the meeting of OECD environment ministers in 1991 issued a proclamation regarding the integration of environmental policies with economic policies as the first of the three basic concepts of "environmental strategies in the 1990s." As one measure, they looked at the importance of combining restrictive measures with economic measures and agreed upon the "OECD Board Recommendation on the use of Economic Measures in Environmental Policies." Based on the guidelines stated in the recommendation, each country embarked on their own individual policies and endeavors. Many of the economic measures undertaken involved taxes and surcharges, and in recent years, there has been an increasing number of countries considering the implementation of energy taxes that take the environment into consideration, as well as other taxable items and revisions in existing tax systems.

At the ministerial level, the OECD Environmental Policy Committee held in February 1996 welcomed these international endeavors. The Committee commended countries for taking advantage of measures based on market mechanics and heightened efficiency, and carrying out work on dispersed pollutant sources that are hard to locate and are costly to deal with. The Committee reconfirmed the "environmental strategies in the 1990s" and called for further integration of environmental and economic policies. Furthermore, the Committee plans to continue research and discussions on the impact of the disincentives of subsidies and taxes on the environment, on case studies and evaluation methods of each country to heighten the impact and efficiency of economic measures, and on effective combinations of restrictive measures with other government policies.

Meanwhile, following the decision reached in April 1995 by the First Meeting of Concluding Nation of the Treaty on Framework of Weather Changes, the countries are working on coming up with reduction targets to be implemented after the year 2000 for gas emission that causes the greenhouse effect, as well as making legal documents such as protocol that includes the agreement of such government policies. In conjunction with the above move, the OECD and the Institute of Economic Affairs (IEA) are working together to come up with measures to reduce gas emission that causes the greenhouse effect and strengthen the source that absorbs such gas emission. These measures are to be implemented jointly by developed countries in the future. The various political measures taken up here include economic measures such as taxation (CO2/energy tax), abolishment of subsidies, and pricing of goods including the full cost on the environment such as surcharges on atmospheric pollution.

As shown previously, our country's examples of economic measures in environmental policies are still very limited. This is because the restrictive measures in environmental policies have been quite effective. However, in order to realize the long-term target of sustainable development under the basic concept and framework of the Basic Environmental Plan, it is necessary to embark on the common international agenda, which is the integration of the environment and economy, use of economic measures, and effective combination of economic measures with other political measures.

The first half of this report has revealed what is considered the basic concept of economic measures by examining research and use of such measures overseas. The latter half of this report will examine the basic concept behind points of argument regarding environmental taxes and surcharges. For future consideration, we hope to promote public debate by making clear the actual economic measures thought to be appropriate for the individual environmental policies.

• To consider areas in detail in which actual implementation, potential problems, as well as the need and the plausibility of economic measures, are possible in the individual areas of environmental policies by taking into consideration the current situation and problems within government policies, as well as looking into examples provided by other countries.
• Because it is necessary to effectively combine economic measures with other restrictive measures and other policy measures, such as the promotion of voluntary measures to come up with realistic government policies, it also becomes necessary to research the effectiveness and the target of the political measures, as well as their problems and effective combinations.
• Research and discussion on the impact and influence of economic measures from the perspective of economic studies have been going on. However, it also becomes necessary to consider the legal aspects necessary to legalize economic measures, to consider these measures on the local level, such as charging for waste processing, and how to carry out nation-wide implementation.
• Understanding and cooperation of the public is necessary for implementing economic measures. Furthermore, it is particularly important to deepen the understanding of the public on the purpose as well as the problems of economic measures, as well as the effect and the impact of individual economic measures. It is necessary to deepen the understanding and stimulate the interest of the public by listening, as opportunity warrants, to their opinions on the significance of economic measures and problems entailing actual implementation, as well as their effect and impact in order to realize a sustainable society in the long term.
• As medium-term projects, there are methods such as evaluating the cost on the environment and conducting other quantitative research that illustrates the relationship between socioeconomic activity and the environment, as well as analysis on the costs and advantages of government policies to raise the efficiency and impact of the policies. Furthermore, it is necessary to conduct research and development projects for issues related to the integration of the environment and the economy, such as environmental targets aimed to realize the long-term objective of the Basic Environment Plan, as well as research and implementation of the environmental costs of supporting such projects.