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Climate Change Taxes and Energy Efficiency in Japan

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Author Info

  • Satoru Kasahara
  • Sergey Paltsev

    ()

  • John Reilly
  • Henry Jacoby
  • A. Ellerman
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    Abstract

    In 2003 Japan proposed a Climate Change Tax to reduce its CO2 emissions to the level required by the Kyoto Protocol. If implemented, the tax would be levied on fossil fuel use and the revenue distributed to encourage the purchase of energy efficient equipment. Analysis using the MIT Emissions Prediction and Policy Analysis (EPPA) model shows that this policy is unlikely to bring Japan into compliance with its Kyoto target unless the subsidy encourages improvement in energy intensity well beyond Japan’s recent historical experience. Similar demand-management programs in the US, where there has been extensive experience, have not been nearly as effective as they would need to be to achieve energy efficiency goals of the proposal. The Tax proposal also calls for limits on international emission trading. We find that this limit substantially affects costs of compliance. The welfare loss with full emissions trading is 1/6 that when Japan meets its target though domestic actions only, the carbon price is lower, and there is a smaller loss of energy-intensive exports. Japan can achieve substantial savings from emissions trading even under cases where, for example, the full amount of the Russian allowance is not available in international markets. Copyright Springer Science+Business Media, Inc. 2007

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    File URL: http://hdl.handle.net/10.1007/s10640-006-9031-1
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    Bibliographic Info

    Article provided by European Association of Environmental and Resource Economists in its journal Environmental and Resource Economics.

    Volume (Year): 37 (2007)
    Issue (Month): 2 (June)
    Pages: 377-410
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    Handle: RePEc:kap:enreec:v:37:y:2007:i:2:p:377-410

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    Web page: http://www.springerlink.com/link.asp?id=100263

    For corrections or technical questions regarding this item, or to correct its listing, contact: (Guenther Eichhorn) or (Christopher F. Baum).

    Related research

    Keywords: climate change policy; emission trading; energy efficiency; subsidy;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    1. Mustafa H. Babiker & Gilbert E. Metcalf & John Reilly, 2002. "Tax Distortions and Global Climate Policy," NBER Working Papers 9136, National Bureau of Economic Research, Inc.
    2. Claudia Kemfert & Wietze Lise & Richard Tol, 2004. "Games of Climate Change with International Trade," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 28(2), pages 209-232, June.
    3. Babiker, Mustafa & Reilly, John & Ellerman, Denny, 2000. "Japanese Nuclear Power and the Kyoto Agreement," Journal of the Japanese and International Economies, Elsevier, vol. 14(3), pages 169-188, September.
    4. Sergey V. Paltsev, 2001. "The Kyoto Protocol: Regional and Sectoral Contributions to the Carbon Leakage," The Energy Journal, International Association for Energy Economics, vol. 22(4), pages 53-80.
    5. David S. Loughran & Jonathan Kulick, 2004. "Demand-Side Management and Energy Efficiency in the United States," The Energy Journal, International Association for Energy Economics, vol. 25(1), pages 19-44.
    6. Bohringer, Christoph, 1998. "The synthesis of bottom-up and top-down in energy policy modeling," Energy Economics, Elsevier, vol. 20(3), pages 233-248, June.
    7. Jacoby, Henry D. & Reilly, John M. & McFarland, James R. & Paltsev, Sergey, 2006. "Technology and technical change in the MIT EPPA model," Energy Economics, Elsevier, vol. 28(5-6), pages 610-631, November.
    8. Patrick Matschoss & Heinz Welsch, 2006. "International Emissions Trading and Induced Carbon-Saving Technological Change: Effects of Restricting the Trade in Carbon Rights," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 33(2), pages 169-198, 02.
    9. Henry D. Jacoby & Richard S. Eckaus & A. Denny Ellerman & Ronald G. Prinn & David M. Reiner & Zili Yang, 1997. "CO2 Emissions Limits: Economic Adjustments and the Distribution of Burdens," The Energy Journal, International Association for Energy Economics, vol. 18(3), pages 31-58.
    10. Jean-Marc Burniaux & Joaquim Oliveira Martins, 2000. "Carbon Emission Leakages: A General Equilibrium View," OECD Economics Department Working Papers 242, OECD Publishing.
    11. Matti Liski & Juha Virrankoski, 2004. "Frictions in Project-Based Supply of Permits," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 28(3), pages 347-365, July.
    12. Felder Stefan & Rutherford Thomas F., 1993. "Unilateral CO2 Reductions and Carbon Leakage: The Consequences of International Trade in Oil and Basic Materials," Journal of Environmental Economics and Management, Elsevier, vol. 25(2), pages 162-176, September.
    13. Kainuma, Mikiko & Matsuoka, Yuzuru & Morita, Tsuneyuki, 2000. "The AIM/end-use model and its application to forecast Japanese carbon dioxide emissions," European Journal of Operational Research, Elsevier, vol. 122(2), pages 416-425, April.
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