Staff writer

Can Japan employ the carrot-and-stick approach in its automobile tax system to prompt consumers to buy "greener" cars and achieve international commitments to reduce carbon dioxide emissions?

The Transport Ministry is expected to unveil a detailed plan next week for a new auto tax system to be effected in fiscal 2000 that imposes levies on cars based on fuel-efficiency.

The system is aimed at steering consumers toward greener vehicles by slapping lower taxes on fuel-efficient cars and higher ones on gas-guzzlers.

Under a trial calculation made earlier this year by an advisory panel to the ministry, a tax based on engine displacement levied on the most fuel-efficient car among models introduced in fiscal 1995 would be reduced to 9,500 yen, about one-fourth the existing tax. Meanwhile, the tax on the least fuel-efficient model would be 123,000 yen, about 1.4 times higher than the current rate.

Ministry officials said, however, that the figures in the final plan will be different.

The ministry is targeting cars because they account for about 90 percent of the carbon dioxide emitted by the nation's transportation sector.

Similarly, the Environment Agency has proposed varying tax rates on vehicles based on their emission of gases such as nitrogen oxides and photochemical oxidants. The agency's plan mainly targets trucks.

Owners of environmentally friendly cars currently get tax breaks. For example, a buyer of Toyota Motor Corp.'s 2.15 million yen hybrid car Prius gets a tax reduction of some 50,000 yen at the point of sale.

But currently there are no tax penalties on less environmentally friendly cars.

"We are trying to bring about a new way of thinking on taxes. Only giving incentives (to buy fuel-efficient cars) is like providing first aid but not a cure," a Transport Ministry official said.

The government hopes that a high-low tax system, as opposed to merely extending tax breaks, will enable it to maintain a relatively smooth inflow of vehicle tax revenues.

The Transport Ministry and the Environment Agency will submit their tax proposals to the Finance Ministry later this month, with the hope that they will be implemented in the next fiscal year.

The green tax idea comes after past government efforts to reduce emissions of carbon dioxide and other harmful gases failed in the face of an increase in car ownership in Japan.

The government has restricted emissions of certain gases from cars, regulated fuel ingredients and put tax incentives on environmentally friendly cars.

Meanwhile, the number of registered vehicles has risen by 38.4 percent over a 10-year period, from 52.3 million in fiscal 1987 to 72.9 million in fiscal 1997. The total driving distance of cars grew 34.3 percent over the same period.

"The effects of our measures have been offset by the increase in automobiles," an Environmental Agency official said.

Statistics back up that assessment. For example, the average concentration of nitrogen dioxide in the air, which stood at 0.019 parts per million in fiscal 1979, was nearly unchanged two decades later -- at 0.017 ppm in fiscal 1997, according to the Environment Agency.

As part of international efforts to combat global warming, Japan is committed to reducing its emission of global warming gases, including carbon dioxide, by 6 percent from 1990 levels by around 2010 under the agreement at the Third Conference of Parties to the U.N. Framework Convention on Climate Change (COP3) held in Kyoto in 1997.

But the target does not seem easy. Carbon dioxide emissions from the transport sector, which account for about 20 percent of the nation's total, increased 19 percent between fiscal 1990 and fiscal 1996.

Some European countries, including Germany, France and Denmark, have adopted an auto tax system based on fuel-efficiency and emissions of harmful gases, according to the Transport Ministry.

However, a rocky road is ahead before those pushing for a green tax in Japan can hammer out a consensus.

The Japan Automobile Manufacturers Association expressed its opposition to a green tax, saying Japanese consumers already pay higher auto-related taxes than in other industrialized countries.

Owners of cars with an engine displacement of 1,800cc priced at 1.3 million yen are required to pay an average 130,000 yen a year for six kinds of auto-related taxes, on top of insurance and maintenance costs, JAMA estimates.

"Automobile-related taxes can be as much as 1.2 million yen over nine years. With that amount, you can buy another car," said Hisayoshi Umemoto, a spokesman for JAMA. "We support the purpose of the taxes, but we are against any hasty launch of a new tax system on automobiles."

If the proposed taxes are launched amid the current stagnant economy, they would also prompt consumers not to buy new cars, rather than promoting the spread of greener cars, Umemoto said.

The tax proposals come as automakers are struggling to develop environmentally friendly technology to meet stricter regulations, placing another burden on them, Umemoto said.

Instead of green taxes, JAMA is calling for implementing an auto-related tax system simpler than the current one, including a levy on fuel.

Car owners currently pay taxes to buy and own cars based on weight and engine displacement. They also pay taxes when they buy fuel. Auto-related tax revenues are mainly spent on road construction and maintenance.

However, reviewing and changing automobile taxes is a touchy issue, because bureaucrats and lawmakers have vested interests in the revenues.

In fiscal 1998, auto-related taxes, excluding those on fuel, amounting to about 4.6 trillion yen went into the central and local government coffers.