A report recently released by the Environment Agency is certain to give further impetus to the debate on environmental taxation. The report, compiled by an expert panel that studies economic methods of implementing environmental policy, says the so-called carbon tax is effective in reducing carbon dioxide emissions, which are primarily responsible for global warming.
The tax, which already exists in some countries, is assessed on levels of carbon dioxide output caused by the consumption of fossil fuels, such as petroleum, natural gas and coal. According to a computer-model study by the panel, a tax of about 1 yen or 2 yen per liter of gasoline, if combined with other measures such as subsidies for emission-rights trading and energy-saving investment, will help reduce emissions significantly. The additional tax revenue is estimated at anywhere between 500 billion yen and 900 billion yen annually. At this rate, says the report, the tax will have only a marginal effect on economic growth, with gross domestic product dipping just 0.3 percent.
The carbon tax is considered an essential to protecting the global environment: It will reduce CO2 emissions, whose greenhouse effects, if left unchecked, are expected to cause disastrous climate changes around the world. The question now is what kind of carbon tax will be most effective in cutting emissions without affecting economic growth. The report provides a good basis for more specific discussions on this subject.
Global warming is a consequence of rapidly rising energy consumption since the Industrial Revolution. Naturally the onus of bringing down emission levels falls squarely on the industrial countries. Under the 1997 Kyoto agreement, Japan is committed to cut its emissions from 2008 through 2012 by 6 percent from their 1990 level. However, it is not clear whether this target will be achieved. The emissions level in fiscal 1997 was already up 9 percent from that in 1990.
Current environmental policy clearly has its limits. Voluntary efforts by industry and the government’s regulatory measures, for instance, are of little help. Despite cries for environmental protection, in the 1990s, emissions continued to increase rapidly in the transport and household sectors. There must be a sure-fire method of arresting — and reversing — the trend.
Some individuals and companies are trying to limit the use of greenhouse gases. Overall, however, the basic pattern of energy consumption remains unchanged. What is needed is a mechanism that will change our lifestyles — one that makes everyone share in a reasonable way the cost of using the global environment. The revenue from this fee should be used to finance environmental programs.
The basic approach to the prevention of global warming is to build an environment-friendly system that makes for long-term emissions reduction in industry and society. The carbon tax will help develop that kind of system. If emissions do not decrease as expected, the tax will have to be raised. As a result, market forces will play a larger role in achieving emissions targets.
The popularity of the carbon tax is on an upswing around the world. A precedent was set in the early 1990s by four Northern European countries and the Netherlands. Then, following the Kyoto meeting in December 1997, which set binding targets for greenhouse-gas emissions, Germany and Italy adopted the tax. Britain and France are set to introduce a similar tax in 2001.
The Kyoto protocol also opened the way for international trading in emissions rights — a market scheme that allows high-emissions countries to buy such rights from low-emissions countries. The idea is to achieve global reductions through country-by-country adjustment of emissions volume. A carbon-tax system will be a precondition for participation in such international auctions of emissions rights.
Signatories to the Kyoto protocol seek its entry into effect in 2002, so there is not much time left for Japan — and other nations that do not have an environmental tax system — to make the necessary preparations. The Japanese government, which plans to ratify the agreement by 2002, must be able to present by that time its own program to achieve its emissions target.
A 1998 poll found that about eight people in 10 were in favor of introducing an environmental tax. If that finding is any guide, the carbon tax will probably be supported by most Japanese, provided that the tax rate is kept reasonably low and that the tax revenue is used exclusively for environmental purposes. It is no exaggeration to say that only countries capable of building an environment-friendly economy will be able to survive global competition of the 21st century.
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