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Economic Impacts of Carbon Tax in a General Equilibrium Framework: Empirical Study of Japan

Author

Listed:
  • Naoyuki Yoshino

    (Keio University, Tokyo, Japan)

  • Ehsan Rasoulinezhad

    (Faculty of World Studies, University of Tehran, Tehran, Iran)

  • Farhad Taghizadeh-Hesary

    (School of Global Studies, Tokai University, Japan4TOKAI Research Institute for Environment and Sustainability (TRIES), Japan)

Abstract

This study tries to find new insights of implementations of carbon tax policy as a suitable way to reach the long-term zero-carbon plan. This paper explores how carbon tax can affect the macroeconomy in Japan through the structural vector autoregression (S-VAR) technique conducted for the quarterly data throughout 2005–2020. A theoretical general equilibrium model backs the empirical analysis. The major findings reveal that any increase in energy price from the carbon tax will lead to an increase in interest rate, exchange rate, and consumer price index while there is a negative relationship between energy price increase from carbon tax and real gross domestic product (GDP) in Japan. Carbon Policy Refolution (Reform+Evolution), refunding carbon tax revenues, and adaptation of long-term policy of net zero GHG emissions by 2050 with the current situation of Japan’s power sectors are the major practical policies of this study.

Suggested Citation

  • Naoyuki Yoshino & Ehsan Rasoulinezhad & Farhad Taghizadeh-Hesary, 2021. "Economic Impacts of Carbon Tax in a General Equilibrium Framework: Empirical Study of Japan," Journal of Environmental Assessment Policy and Management (JEAPM), World Scientific Publishing Co. Pte. Ltd., vol. 23(01n02), pages 1-25, June.
    • Handle: RePEc:wsi:jeapmx:v:23:y:2021:i:01n02:n:s1464333222500144
    DOI: 10.1142/S1464333222500144
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