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About Carbon Taxes

[] What is a Carbon Tax?
A carbon tax is a kind of environmental taxes. It is an excise tax on the producers of raw fossil fuels based on the relative carbon content (coal, oil gas) of those fuels.
So far, five European countries including Finland, Netherlands, Sweden, Norway, and Denmark have adopted carbon taxes (or CO2 tax). Germany, UK and Italy have adopted similar measures.

[] Why Does Japan Need a Carbon Tax?
During the entire 20th century, the average global temperature increased by about 0.6 degrees Celsius. Scientists estimated that, if we emit greenhouse gases at the current rate, by the year 2100 the average global temperature would increase by 1.4 degrees to 5.8 degrees Celsius. Continued global warming could lead to natural disasters including flooding and droughts and have damaging effects on human livelihood. Therefore, we must reduce greenhouse gas emissions including carbon dioxide.

Japan has committed under the Kyoto Protocol to reduce greenhouse gas emissions by 6% from the 1990 level by the year 2012.

However, not only have Japan’s greenhouse gas emissions been increasing, the government hasn’t put forward effective policies to combat global warming. The government needs to take immediate and effective actions to meet its obligations under the Kyoto Protocol.

Click here to learn about the current debate on carbon taxes in Japan and the positions of the major stakeholders

[] How effective is a Carbon Tax?
・ A tax relief will be offered to companies that make efforts to reduce CO2 emissions, thus encouraging companies to reduce emissions.
・ Companies will be motivated to switch to low carbon energy and energy efficient production process.
・ Tax revenues can be used to fund more projects that address climate change.
・ Since carbon tax would raise prices on consumers, in the long run, carbon taxes will affect consumer behaviors, drive out inefficient lifestyles.

[] Characteristics of the Carbon Taxes We Proposed

The Carbon Tax Research Group, formed by JACSES and several other NGOs in Japan, is pushing for carbon taxes in Japan.

Click here to read our full proposal (pdf version, only available in Japanese)

Environmental, economical and social welfare benefits
We propose a policy that balances the environmental effectiveness and economical efficiency. The carbon tax program we proposed would give concerns to low-income population, people living in cold regions and regions lacking public transportation.

Tax rates
In setting the tax rate, we put emphasis on price incentives, and make sure that the tax is phased in so that the companies and consumers, not excessively burdened, will have time to adjust.

Under the current financial crisis, it’s not easy to increase taxes. However, a revenue-neutral tax, taxing “bads” like energy and resource use and not such “goods” as human labor, gives tax breaks to companies and individuals who make efforts to reduce CO2 emissions, while increasing economical burdens of those that don’t. A revenue-neutral carbon tax doesn’t create extra tax burden in the society. The introduction of carbon tax could also reduce other taxes and social insurance premiums.

Use of tax revenues
Tax revenues generated by carbon tax can be used as retirement annuity fund, to reduce other taxes such as labor taxes, and to fund more climate change initiatives.

Concerns for Industries
Since the carbon tax would be revenue-neutral, most of the tax revenues will be returned to companies (in the form of reduced income taxes, for example). Besides, companies that face more competition in the global market and energy-intensive industries will be taxed less at the beginning to allow time for adaptation.

Mixed Policies
We advocate a comprehensive approach to fiscal reforms that integrate changes in the existing energy taxes, fiscal and environmental policies and policymaking process.

Graph: Features of the carbon taxes we proposed


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