Abstract

AbstractRealizing a decarbonized society in consistent with the Paris Agreement, a fundamental transformation of the entire economic and social system is needed, and not only carbon intensive sectors but also all sectors and all stakeholders including households must be decarbonized. This chapter demonstrates increasing expectations for carbon pricing in Japan in this global policy context. After the review of the global trend of carbon pricing, historical progress of carbon pricing in Japan and the existing nation-wide carbon tax, i.e. the Global Warming Countermeasure Tax, is explained. There are also two sub-national carbon pricing schemes in Japan, Tokyo ETS and Saitama ETS, which are explained in Chaps.10.1007/978-981-15-6964-7_6and10.1007/978-981-15-6964-7_7respectively, and not focused in this chapter. We examine the claim that Japan has already implemented high level carbon pricing in terms of various forms of energy taxes. Based on the effective carbon rate which is defined by OECD as the sum of explicit carbon prices and fossil fuel taxes per carbon emission, the nationwide average effective carbon rate of Japan is lower than the average effective carbon rates of OECD countries and its key partner countries. The current carbon pricing schemes in Japan are too modest to realize decarbonization transition and there is a room to upgrade them to exploit full potential of carbon pricing. This chapter discusses adequate levels of carbon prices in compatible with decarbonization transition.

Highlights

  • The Paris Agreement adopted in December 2015 sets out the trend toward decarbonization, which calls for net zero greenhouse gas (GHG) emissions by the latter half of this century

  • One is the marginal abatement cost approach, which assumes that the carbon price to achieve the given reduction target is equal to the marginal abatement cost corresponding to that target, and the other is explicit carbon pricing approach in which the reduction target is achieved as a result of stakeholders response to explicit carbon pricing

  • There seems a general agreement among the literature addressing decarbonization pathways corresponding to post Paris Agreement climate policy that carbon pricing with high price level plays indispensable roles to realize systemic transition towards decarbonized society

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Summary

Introduction

The Paris Agreement adopted in December 2015 sets out the trend toward decarbonization, which calls for net zero GHG emissions by the latter half of this century. A carbon tax with a clearly announced future price schedule may serve to inform the general public the strong commitment of governments to achieve climate goals and enable them to accommodate expected levels of carbon prices in their decision making, which is termed as an announcement effect. Through these functions, carbon pricing is expected to provide enabling conditions of a systemic transformation towards decarbonized society.

Carbon Pricing Initiatives in the World
Lessons Learned from Advanced Carbon Pricing Initiatives
The Current Status of Effective Carbon Rates
The Current Carbon Pricing Initiatives in Japan
The Current Sectoral Effective Carbon Rates in Japan
Discussion on Required Price Level
Findings
Careful Consideration for Revenue Recycling
Conclusion
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