Japan: DPJ To Consider Carbon Tax

Mary Swire, Tax-News.com, Hong Kong

31 July 2009

The Democratic Party of Japan (DPJ), which is poised to defeat the long-running Liberal Democratic Party (LDP) government in August, will consider introducing a carbon tax, one of a number of measures in its election manifesto which set out ambitious plans to reduce carbon emissions by 25% on 1990 levels by 2020.

The 25% target is in stark contrast to the LDP’s more conservative approach to tackling climate change. Prime minister Taro Aso announced an 8% target in June; however, Japan has so far failed to meet its previous target of a 6% reduction on 1990 levels by 2012 – since then, emission levels have instead risen by 8.7%. The LDP’s 8% target was criticized by the UN as politically weak, setting a poor example to developing economies that have so far failed to commit to more ambitious emission cutting levels.

DPJ leader Katsuya Okada said his party’s aims are more attuned to targets set by the EU (20%) and G8 (80%) by 2050.

Okada said his government, in addition to introducing a carbon tax, would seek to legislate to cap emissions and to establish a carbon trading system, as well as obligating electricity suppliers to purchase renewable energy at fixed incentive prices.

Business leaders have voiced strong opposition to the proposals, warning of the huge costs that will arise to meet the target as the country recovers from its worst recession since the Second World War. Nippon Keidanren (the Japanese Business Federation) opposes emission reduction targets exceeding 6%. Its leader, Fujio Mitarai, had already expressed concern that Aso’s proposal of 8% was an “extremely tough goal.” But Okada believes the move will bring greater investment into Japan and help develop new industries.

Japan is the world’s fifth largest polluter. The DPJ would aim to include the 25% target in a new accord to be agreed in Copenhagen in December, which is to replace the Kyoto Protocol.

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