As G8 summit nears, environment tax on fuels eyed


The government is set to consider a so-called environment tax on oil, coal and other greenhouse gas-producing fuels as part of an overall tax reform plan later this year, according to an economic policy draft paper released Tuesday.

“The overall tax system will be re-examined, including the handling of an environment tax in light of the promotion of the low-carbon society,” the draft version says.

This is the first time that an environment tax has been included in the policy paper as part of Japan’s effort to lower greenhouse gas emissions.

The draft reflects the government’s determination to take a leadership role in mapping out a series of steps to achieve a low-carbon society ahead of the Group of Eight summit from July 7 to 9 in Hokkaido, where climate change will be high on the agenda.

Fukuda announced last week a plan to introduce carbon trading on a trial basis later this year with an eye to cutting Japan’s emissions by 60 percent to 80 percent by 2050. Other proposals by Fukuda include raising the proportion of alternative power sources such as solar, nuclear and wind.

According to the draft of the economic policy paper for fiscal 2008, the government will stick to its spending cut targets through fiscal 2011 to reflect Japan’s focus on fiscal health.

The government has decided to cut spending, excluding debt issuance and servicing costs, by ¥11.4 trillion to ¥14.3 trillion over five years in an attempt to balance the budget by fiscal 2011. Japan has the worst debt level among major industrialized countries.

But with recent newspaper polls showing Fukuda’s approval rating continuing to sag — raising the likelihood of an early general election — it is uncertain whether the belt-tightening efforts will be carried out.

Fearing that further reductions in public spending will hurt voter support, ruling party lawmakers are upping the pressure on the government to ease off on spending cuts ahead of a plan to free up road construction revenues for general use in fiscal 2009. They are calling for increased spending on public construction projects to prop up local economies, social security and education.

Fukuda is also facing opposition from big business over introduction of a carbon tax.