The Impact on Japanese Industry of Alternative Carbon Mitigation Policies
AbstractTo address the climate change issue, developed nations have considered introducing carbon pricing mechanisms in the form of a carbon tax or an emissions trading scheme (ETS). Despite the small number of programs actually in operation, these mechanisms remain under active discussion in a number of countries, including Japan. Using an input–output model of the Japanese economy, this paper analyzes the effects of carbon pricing on Japan’s industrial sector. We also examine the impact of a rebate program of the type proposed for energy intensive trade exposed (EITE) industries in U.S. legislation, the Waxman–Markey bill (H.R. 2454), and in the European Union’s ETS. We find that a carbon pricing scheme would impose a disproportionate burden on a limited number of sectors—namely, pig iron, crude steel (converters), cement, and other EITE industries. We also find that the determinant of the increase in total cost differs among industries, depending on the relative inputs of directly combusted fossil fuel, electricity, or steam, as well as intermediate goods. Out of 401 industries, 23 would be eligible for rebates if a Waxman–Markey type of program were adopted in Japan. Specifically, the 85 percent rebate provided to eligible industries under H.R. 2454 would significantly reduce the cost of direct and indirect fossil fuel usage. The E.U. criteria identify 120 industries eligible for rebates. However, the E.U. program only covers direct emissions while the U.S. program includes indirect emissions as well. Overall, despite the differences in coverage, we find that the Waxman–Markey and E.U. rebate programs have roughly similar impacts in reducing the average burdens on EITE industries.
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Bibliographic InfoPaper provided by Resources For the Future in its series Discussion Papers with number dp-12-17.
Date of creation: 13 Jul 2012
Date of revision:
carbon price; competitiveness; input-output analysis; output-based allocations; carbon leakage;
Find related papers by JEL classification:
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-29 (All new papers)
- NEP-ENE-2012-07-29 (Energy Economics)
- NEP-ENV-2012-07-29 (Environmental Economics)
- NEP-RES-2012-07-29 (Resource Economics)
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.:
- Morgenstern, Richard & Shih, Jhih-Shyang & Ho, Mun & Zhang, Xuehua, 2002.
"The Near-Term Impacts of Carbon Mitigation Policies on Manufacturing Industries,"
dp-02-06-, Resources For the Future.
- Morgenstern, Richard D. & Ho, Mun & Shih, J.-S.Jhih-Shyang & Zhang, Xuehua, 2004. "The near-term impacts of carbon mitigation policies on manufacturing industries," Energy Policy, Elsevier, vol. 32(16), pages 1825-1841, November.
- Ho, Mun S. & Morgenstern, Richard & Shih, Jhih-Shyang, 2008. "Impact of Carbon Price Policies on U.S. Industry," Discussion Papers dp-08-37, Resources For the Future.
- Metcalf, Gilbert E., 2013. "Using the Tax System To Address Competition Issues with a Carbon Tax," Discussion Papers dp-13-30, Resources For the Future.
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