Environment Ministry Considers Full-Scale Introduction of ‘Carbon Tax’

The Environment Ministry, moving to achieve its goal of net-zero greenhouse gas emissions by 2050, is considering the full-scale introduction of a “carbon tax” on companies based on their amount of emissions.

The tax rate would be raised gradually in stages to mitigate the sudden burden, and the revenues would be used for measures aimed at decarbonization. A draft plan will be presented to a subcommittee of the Central Environment Council on Tuesday.

In 2012, Japan introduced a tax to combat global warming — in essence, a sort of carbon tax — that taxes importers of fossil fuels such as crude oil and gas according to their carbon dioxide emissions. However, at just ¥289 per ton, the tax rate is an order of magnitude lower than in Europe, where the rate is approximately ¥14,400 in Sweden, ¥5,500 in France, and ¥3,000 in Denmark.

The Environment Ministry has determined that a full-scale introduction of a carbon tax is essential for converting the industrial structure in a bid to reduce CO2 emissions. It envisions either an increase in the tax to combat global warming or the introduction of a new tax on carbon.

However, if the level of taxation is suddenly raised to that of Europe, it will have a large impact on the economy and society. For this reason, the tax will be kept low at first, then raised gradually in order to encourage companies to make systematic efforts toward decarbonization.

Since the business community is concerned about how measures will affect their global competitiveness, tax exemptions and refunds will be available for industries where it is difficult to convert over to technologies that do not use fossil fuels. By earmarking tax revenues for decarbonization policies, the aim is to encourage technological innovation and lead to economic growth.

The Environment Ministry will design a practical system based on discussions of the Central Environment Council and a study group separately organized by the Economy, Trade and Industry Ministry.

As early as this summer, the Environment Ministry will make a request to the Finance Ministry to revise the tax system, making it possible for the government and the ruling parties to debate at the end of year such matters as the pros and cons of full-scale introduction, the tax rate, and the timing of implementation.