Japan METI of Japan releases interim report on economic approaches to achieve carbon neutrality

On August 25, 2021, the Ministry of Economy, Trade and Industry (METI) released the interim report for the “study group on ideal economic and other approaches for achieving worldwide carbon neutrality”. In this report, the following three points were discussed:

  1. Current status of carbon pricing in Japan
  2. Basic principle of carbon pricing
  3. Future direction of policy response

A summary of each point is as follows.

Current status of carbon pricing in Japan

  • Carbon pricing is one of the economic approaches that put a price on carbon and change emitter’s behavior.
  • Carbon pricing not only by the government but also by the private sector exists and is beginning to attract international attention.
  • It is important for the government pricing to take into account trends of pricing in the private sector.
  • As carbon tax in Japan, tax fir climate change mitigation exists (289 JPY/ ton of CO2). In addition, all fossil fuels are subject to some form of energy taxation, and the total tax revenue is approximately 4.3 trillion yen (4057 JPY/ ton of CO2).
  • Overall energy prices, which influence the behavior of industry, consumers, and others, are at high levels by international standards.

Basic principle of carbon pricing

In order to achieve carbon neutrality by 2050, carbon pricing that contributes to growth will be promoted from the perspective of a virtuous cycle between the economy and the environment, based on the following perspectives:

  • It should not discourage companies’ willingness and ability to invest in R&D and equipment, but should encourage innovation and positive investment.
  • Designing systems that do not create disadvantages in the competitive business environment with other countries, taking into account the trends in global business.
  • Signaling that there are multiple paths to changing behavior depending on different situations, such as institution, price and existence of market, and visualization, so the optimal policy mix is essential.
  • The path toward carbon neutrality varies widely depending on the business domain handled by each company. An appropriate time frame should be set based on the status of establishment of alternative technologies in each field and macroeconomic conditions.
  • Encourage consumers to change their behavior so that products that contribute to carbon neutrality are selected in the market.

Future direction of policy response

  • Developing existing domestic credit markets
  • Considering the mechanism of long-term action to change one’s behavior
  • Developing the infrastructure of carbon pricing for growth

 

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The published documents and the related documents can be viewed at the following URLs.