Lessons from results ofintegrated assessment on carbon
tax in Japan
Toshihiko Masui
National Institute for Environmental Studies
http://www-iam.nies.go.jp/aim/index.htm

The 3rd workshop of Japan-UK Joint Research Project onLow-Carbon Societies (LCS)
Hotel Metropolitan Edmont, Tokyo
13-15 February 2008

Messages from model analysis• Based on simulation results in 2003 using AIM (Asia-PacificIntegrated Model)– In order to reduce the CO2 emissions in Japan to achieve Kyoto
Target, marginal CO2 reduction cost, that is necessary carbon
tax rate, is 45,000 JPY/tC.
– When the tax revenue is utilized to lower the prices of equipment
contributing to reduce CO2 emissions, the carbon tax rate is
3,400 JPY/tC.
– Increase of demand of energy saving equipment bring economic
benefit, and as a result, most of economic loss are compensated.

• Carbon tax has both price effect and income effect.
• One year later (in 2004), we updated data and simulated
again;– The shorter the time period until 1st commitment period is, themore expensive CO2 reduction options must be introduced.
• marginal cost: 45,000 JPY/tC -> 60,000 JPY/tC• tax rate: 3,400 JPY/tC -> 3,600 JPY/tC
AIM, NIES

2

Model analysis on CO2 reduction policy
CO2 emissions from fossil fuels [MtCO2]-carbon emissions1250
A

1200
1150

B

1100

C

Cheapest choice
C-tax:
3,000 JPY/tC

D1050
1000

Tech. fix

↑2% reduction of CO2 emissions
from fossil fuels in 1990

30,000 JPY/tC
45,000 JPY/tC

E

950
900
2000

2002

2004

2006

2008

2010

2012

Year

CO2 emissions trajectories by scenarios
AIM, NIES

3

Model analysis on CO2 reduction policy- policy mix with carbon tax and recycling of tax revenueMarginal cost[¥/tC]Tax rate
Amount oftax payment

Marginal cost[¥/tC]

Expenditure forcountermeasures
45,000 JPY/tC

Subsidy
3,400 JPY/tC

Tax rate
Emissions

EmissionsTargetAIM, NIES

PresentTarget

Present4

Carbon tax rate and required additional
investments
for reducing CO2 emissions in Japan
Subsidized measures and devices

Add.
investment

Industrial
sectorBoiler conversion control, High performance motor, High performanceindustrial furnace, Waste plastic injection blast furnace, LDF with closed LDG
recovery, High efficiency continuous annealing, Diffuser bleaching device,High efficiency clinker cooler, Biomass power generation

101.3
bil. JPY/yr

Residential
sectorHigh efficiency air conditioner, High efficiency gas stove, Solar water heater,
High efficiency gas cooking device, High efficiency television, High efficiency
VTR, Latent heat recovery type water heater, High efficiency illuminator, Highefficiency refrigerator, Standby electricity saving, Insulation

353.9
bil. JPY/yr

Commercial
sectorHigh efficiency electric refrigerator, High efficiency air conditioner, Highefficiency gas absorption heat pump, High efficiency gas boiler, Latent heatrecovery type boiler, Solar water heater, High efficiency gas cooking device,High frequency inverter lighting with timer, High efficiency vending machine,
Amorphous transformer, Standby electricity saving, Heat pump, Insulation

194.5
bil. JPY/yr

Transportation
sectorHigh efficiency gasoline private car, High efficiency diesel car, Hybridcommercial car, High efficiency diesel bus, High efficiency small-sized truck,
High efficiency standard-sized track

106.6
bil. JPY/yr

Forestmanagement

Plantation, Weeding, Tree thinning, Multilayered thinning, Improvement ofnatural forest

195.7
bil. JPY/yr

sector

Total
Tax rate to appropriate required subsidiary payments
AIM, NIES

952.0 bil. JPY/yr
3,433 JPY/tC5

Model analysis on CO2 reduction policy
1.1
1.0
0.9
0.8
0.7
0.6
0.50.4
AGR
MIN
M_C
M_O
M_G
FOD
TEX
PLP
CHM
PLS
NMM
STL
NSM
FMT
MCH
ELM
TRE
PRI
OTH
CNS
HET
WTR
SAL
FIN
EST
TRS
PUB
RNT
REP
PRS
GOV
EMC
COL
OIL
GAS
T_C
T_O
T_G
HYD
NUC

Activity in the reference casein the first commitment period = 1.0-Economic impact-sector
Tax

Tax+Subsidy

Activity Change of each sector in the first commitment period(compared to reference case)AIM, NIES6