Japan's carbon tax policy: Limitations and policy suggestions.

Abstract

Japan is one of the first Asian countries to implement a carbon tax. With a tax rate of JPY2,89/ t-Co2 ($2.65), Japan is set to attain 26% reduction in carbon emissions by 2030. However, this target is substantially lower than one recommended by environmental scientists, 76% reduction in carbon emissions by 2030 (UNFCCC, 2019). Japan's geographic positioning in the Pacific makes it highly susceptible to climate change. Japan's carbon tax rate is also one of the lowest amongst developed economies. Thus, it is important to revisit Japan's carbon tax policy to bring it in line with international scientific recommendations and standards. This paper reviews Japan's carbon tax policy from a historical and contemporary perspective to identify policy limitations. By considering carbon policy reforms in Germany and U.S., the paper makes subsequent recommendations for carbon policy reforms in Japan. The paper applies qualitative analysis and comparative research methodology to identify Japan's policy limitations. It argues that Japan's carbon tax policy falls short because of its low carbon tax rate, and low effective carbon rates in industrial and electricity sectors. The paper also makes several policy suggestions to address Japan's domestic resistance to potential carbon price improvement and reduced coal dependence.