Lessons from results of integrated 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 on Low-Carbon Societies (LCS) Hotel Metropolitan Edmont, Tokyo 13-15 February 2008
Messages from model analysis • Based on simulation results in 2003 using AIM (Asia-Pacific Integrated 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, the more 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 -carbon emissions- 1250 CO2 emissions from fossil fuels [MtCO2] A 1200 Tech. fix 1150 B Cheapest choice 1100 C-tax: C 3,000 JPY/tC D 1050 30,000 JPY/tC ↑ 2% reduction of CO2 emissions 45,000 JPY/tC 1000 E from fossil fuels in 1990 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 revenue- Marginal cost Marginal cost Marginal cost [¥/tC] [¥/tC] [¥/tC] Expenditure for countermeasures Tax rate 45,000 JPY/tC Amount of Subsidy tax payment 3,400 JPY/tC Tax rate Emissions Emissions Emissions Target Present Target Target Present Present AIM, NIES 4
Carbon tax rate and required additional investments for reducing CO2 emissions in Japan Add. sector Subsidized measures and devices investment Boiler conversion control, High performance motor, High performance Industrial 101.3 industrial furnace, Waste plastic injection blast furnace, LDF with closed LDG sector recovery, High efficiency continuous annealing, Diffuser bleaching device, bil. JPY/yr High efficiency clinker cooler, Biomass power generation High efficiency air conditioner, High efficiency gas stove, Solar water heater, Residential High efficiency gas cooking device, High efficiency television, High efficiency 353.9 sector VTR, Latent heat recovery type water heater, High efficiency illuminator, High bil. JPY/yr efficiency refrigerator, Standby electricity saving, Insulation High efficiency electric refrigerator, High efficiency air conditioner, High Commercial efficiency gas absorption heat pump, High efficiency gas boiler, Latent heat sector 194.5 recovery type boiler, Solar water heater, High efficiency gas cooking device, bil. JPY/yr High frequency inverter lighting with timer, High efficiency vending machine, Amorphous transformer, Standby electricity saving, Heat pump, Insulation Transportation High efficiency gasoline private car, High efficiency diesel car, Hybrid 106.6 sector commercial car, High efficiency diesel bus, High efficiency small-sized truck, bil. JPY/yr High efficiency standard-sized track Forest Plantation, Weeding, Tree thinning, Multilayered thinning, Improvement of 195.7 management natural forest bil. JPY/yr Total 952.0 bil. JPY/yr Tax rate to appropriate required subsidiary payments 3,433 JPY/tC AIM, NIES 5
Model analysis on CO2 reduction policy -Economic impact- 1.1 in the first commitment period = 1.0 Activity in the reference case 1.0 0.9 0.8 0.7 0.6 0.5 0.4 NMM M_O M_G TEX CHM NSM FMT MCH ELM GOV EMC GAS AGR MIN M_C PLP PLS TRE PRI CNS HET SAL EST TRS PUB RNT REP PRS T_O T_G HYD FOD STL OTH WTR FIN COL OIL T_C NUC sector Tax Tax+Subsidy Activity Change of each sector in the first commitment period (compared to reference case) AIM, NIES 6
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