# 2. Framework-building to move the entire country to lower carbon emissions

The second pillar is framework-building to move the entire country to lower carbon emissions.

## Emissions trading

The Government must certainly play a major role in solving environmental issues. Yet it is the private sector that bears the actual burden of reducing emissions. Hence, there is a need to ensure active use of methods which encourage the development of technologies and the reduction of emissions by pricing $ CO_{2} $ transactions and making full use of market mechanisms.

As one such method, an emissions trading scheme (EU ETS) was introduced within the EU in 2005. Japan should not devote endless time and effort merely to find problems with the scheme. I believe we should rather shift to a more proactive approach, for example propose a more effective set of rules.

It is with this in mind that from autumn this year we will begin an experimental introduction of an integrated domestic market of emissions trading with the inclusion of as many sectors and companies as possible.

Only by having direct experience can one offer persuasive views when the rules of emissions trading are drawn up. It is essential to make effective rules that actually lead to reduction efforts and technological development, while at the same time develop a healthy market which is based on real demand and does not lend itself to money games.

I intend to use the experience thus gained, to clarify the conditions which need to be met, the issues of design that must be dealt with and other relevant matters in the event an emissions trading scheme is to be fully introduced. I will duly consider the type of system that is appropriate for Japanese industries, which are focused on technology and manufacturing.

We will design a system that enhances Japanese qualities, and will exercise leadership in international rulemaking.

## Tax system reform

Policy instruments to accelerate carbon reductions by making use of market mechanisms are certainly not limited to emissions trading. As a means to encourage voluntary efforts to reduce emissions in the private sector, we need proactively to consider using the tax system and bring about a “visualisation” of emissions.

When a fundamental reform of the tax system is considered this autumn, we will not limit consideration to the expenditure purposes of revenue which is to be re-allocated from road construction to general purposes. We will conduct a comprehensive review of the system with a view to promoting a low carbon society, including consideration of an environment tax, and thereby promote greening of the tax system.

This will be done from a broad perspective, and will include the possibility of introducing tax incentives for restricting $ CO_{2} $ emissions from cars, household appliances and housing construction.

Furthermore, developed countries should play a central role in studying the right form of global environmental tax, on which the international community would collaborate, as a source of revenue to be used jointly for developing innovative technologies and assisting developing countries.

## V isualisation

It is not just the industrial sector which needs to take responsibility for its carbon emissions. Each member of the public must take considered and responsible action in order to bring about a low-carbon society.

For this we must visualise $ CO_{2} $ emissions so as to provide the necessary information for consumers to take suitable decisions.

In the UK, a carbon footprint system, which measures and labels the amount of $ CO_{2} $ that is emitted in the course of the production, transport to disposal of goods, and a food mileage system are being experimented, and there are moves to expand these on an international scale.

From the coming fiscal year, I intend to begin the experimental introduction of similar systems so as to enable Japan to engage actively in international rule-making and to achieve further reductions in emissions. I will instruct the relevant ministries and agencies to make preparations in this regard, and I will ask industry to cooperate. Once fully launched, this undertaking should be among the most extensive in the world.