ACDE seminar: A computable general equilibrium analysis of energy tax reform for carbon mitigation in Japan

This seminar explores the effects of a hypothetical carbon taxation scenario for Japan.

This study employs a CGE model to quantitatively examine the effects of replacing Japan's existing energy taxes with a carbon tax. The model is a static one with 24 goods and 14 sectors for Japan, utilizing data from the 2015 Japanese input-output table and 3EID. Detailed energy tax data are used to adjust the input-output table, enabling the construction of a CGE model that includes current energy taxes. The results indicate that replacing the existing energy taxes with a carbon tax enhances GDP and welfare while maintaining constant tax revenues and reducing carbon dioxide emissions. This finding suggests that a carbon tax is preferable to the existing energy taxes for both environmental and economic reasons. Furthermore, the transition to a carbon tax would lead to increased production of petroleum products and boost sectors that use these products. This is attributed to the current structure of the energy tax, which imposes a heavy burden on petroleum-based energy. Finally, an analysis of a scenario where the iron-and-steel and cement sectors are exempted from the carbon tax reveals that such an exemption has minimal impact on the overall economic efficiency but significantly alleviates the burden on the exempted sectors.

Speaker: Professor Toshi Arimura, Waseda University, Japan