Figure2-4-2 Key Tax Reforms Related to Climate Change Policy in Other Countries

Awareness of environmental problems heightened from the 1980s, and international negotiations on the Framework Convention on Climate Change started (from 19990)
· 1990	Finland	So-called carbon tax (additional duty) introduced
· 1991	Sweden	CO2tax introduced
Norway	CO2tax introduced
1992 Framework Convention on Climate Change adopted 【Took effect in March 1994】, Earth Summit held in June (Rio de Janeiro)
· 1992	Denmark	CO2tax introduced
Netherlands	General fuel tax introduced
· 1993	United Kingdom	Hydrocarbon oil duty raised in phases (until 1999)
· 1996	Netherlands	Regulatory energy tax introduced
1997 Kyoto Protocol adopted 【Took effect in February 2005】
· 1999	Germany	Mineral oil tax raised in phases (until 2003), Electricity tax introduced
Italy	Excises on mineral oils revised (coal, etc. added)
· 2001	United Kingdom	Climate change levy introduced
October 2003 “EC Directive on the Community framework for the taxation of energy products and electricity” issued 【Took effect in January 2004】: Member states set tax rates in excess of the minimum rate for energy products and electricity
· 2004	Netherlands	General fuel tax integrated with the existing energy taxation (Fuel tax on coal continues (Tax on coal)). Regulatory energy tax restructured into energy tax
· 2006	Germany	Excises on mineral oils restructured into Energy tax (coal added)
· 2007	France	Coal tax introduced
· 2008	Switzerland	CO2levy introduced

Source: Data from relevant governments and OECD

oil delivery tax, all imposed on fossil fuels, provisional tax rates set in April 2008 to run for 10 years, were abolished under the tax reform for FY2010. However, these tax rates were retained, for the time being, in consideration of the strained state of public finance and the impact of fossil fuel consumption on global warming. More specifically, while the higher provisional tax rates were abolished, it was decided that tax rates of the gasoline tax, local gasoline tax and light oil delivery tax would be maintained at the pre-reform levels for the time being. However, if the average benchmark gasoline retail price exceeds ¥160 per liter for three successive months, the portions of fuel taxes in excess of the tax rates set under main rules would be suspended. Further, for the automobile weight tax, graded multiple tax rates were established in accordance with environmental burdens of automobile bodies as part of the greening of the tax system. The so-called “eco-car tax reduction” scheme was also maintained.

Meanwhile, regarding overall environmental tax systems, European and other countries have been revamping and strengthening environmental tax systems, including energy and automobile-related taxes, since the 1990s (Figure 2-4-2). In Japan, the ratio of environmental tax revenues to gross domestic demand (GDP) is low relative to the ratios in European countries. Concerning taxation for climate change policy, the Ministry of the Environment convened the expert committee on green tax system and its economic analysis, etc. of the Central Environment Council to deliberate on an economic analysis, etc. of green tax system, including tax for climate change policy. In FY2009, the Ministry of the Environment requested the creation of a tax for climate change policy, while the Ministry of Economy, Trade and Industry also asked for the consideration of a tax for climate change policy. A supplementary provision of the law to partially revise the Income Tax Act in FY2010 referred to the tax for climate change policy and said that “it shall be considered for the time being, including the handling of a tax rate, in order to work out a final draft toward implementation in FY2011.”

Preferential measures for the promotion of low emission vehicles and energy efficient homes were also incorporated in the FY2010 tax reform plan.

Further, the FY2010 tax reform plan called for consideration of the international solidarity tax in order to resolve global issues. The international solidarity tax is drawing attention as one measure to cope with global issues, including environmental problems as well as the international financial crisis and poverty problems. Various taxation methods are under discussion, including the method to tax international financial transactions to secure resources for measures to deal with financial crises and to curb speculative activities, and the method to tax cross-border transportation to secure resources for development support in developing countries. The idea is spreading internationally, with France, Chile and Korea already introducing the airline-ticket solidarity tax.

Regarding the use of revenues from environment-related taxes, it is noteworthy that an economic model analysis conducted by the Task Force of the Ministerial Committee on the Global Warming Issue found that if the climate change policy tax is introduced as a levy on all carbon emissions based on the carbon content and revenues from the tax are appropriated for measures to cope with global warming, the impact on real disposable income would be reduced significantly compared with the case of all revenues flowing back to the household sector.

## Enactment of the Basic Act on Global Warming Countermeasures and Promotion of Measures

In order to clarify the basic direction of Japan’s measures to cope with global warming, the bill for the Basic Act on Global Warming Countermeasures was