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Saturday, Nov. 6, 2004

Ministry proposes 2,400 yen per ton carbon tax plan


Staff writer

The Environment Ministry unveiled a carbon tax Friday to discourage use of fossil fuels and promote the use of energy-saving appliances so Japan can meet its obligations under the Kyoto Protocol.

Who exactly will pay for the "environment tax," however, would depend on the type of fuel, according to the plan.

Processors and importers of such fuels as gasoline, kerosene and liquefied petroleum gas, for example, would have to pay 2,400 yen per ton of carbon contained in the fuel -- a burden they are expected to pass on in the retail price.

It is estimated that households would have to pay about 3,000 yen a year on average for their use of electricity, gasoline for automobiles and other fuel. For example, consumers are expected to pay 1.5 yen more per liter of gasoline, the ministry said.

In anticipation of industry opposition, the ministry said it kept the carbon tax low and offered various tax breaks to business. Even so, the ministry expects to reap annual revenues of 490 billion yen.

The carbon tax is aimed at curbing emissions of carbon dioxide, which is considered the main cause of global warming. It is hoped that lower energy use, combined with higher use of energy-saving appliances, will help Japan cut greenhouse gas emissions by 4 percent from 1990 levels.

Combined with other regulations, Japan hopes to achieve its Kyoto Protocol target of cutting greenhouse gas emissions by 6 percent from 1990 levels by 2012, officials said. But Japan is lagging behind. Its emissions in fiscal 2002 were 7.6 percent higher than 1990 levels.

Under the ministry's plan, which it hopes to introduce in January 2006, the carbon tax will be levied on either importers and processors, or consumers, depending on the fuel in question. Gasoline processors are expected to pass on some of their burden to consumers at the pumps. The same will happen with electricity, with consumers paying the tax through their electricity bills.

In August last year, a committee of the ministry's panel proposed a tax of 3,400 yen per ton of carbon, which is equivalent to 2 yen per liter of gasoline. But that rate was reduced in Friday's plan to keep opposition to a minimum.

"To lessen the burden on the economy and households, the ministry set the tax rate at the minimum required level," Environment Minister Yuriko Koike told a news conference Friday.

Even a reduced tax will be effective enough to cut use of fossil fuels, Koike said.

The business community and the Ministry of Economy, Trade and Industry have strongly opposed a carbon tax on grounds that it would dampen corporate activity. In response, the ministry proposed tax breaks for some industry sectors.

According to the plan, coal and coke used in steel production are exempt from taxation. The levy would be also be reduced by 20 percent to 50 percent for coal, heavy oil, natural gas, city gas and electricity used by such heavy users as paper and textile manufacturers.

"We incorporated various tax reduction measures, so that the international competitiveness of the industries will not be undermined," Koike said.

In addition, 150 billion yen of the projected 490 billion yen in revenue will be used to offset corporate costs, including social insurance fees for employees, the ministry said.

The rest of the revenue will be spent on promoting the use of energy-saving vehicles and appliances.

The plan was submitted to the ruling Liberal Democratic Party's policy group on environmental issues and will be further discussed at the government's tax commission and the Central Environment Council, according to the ministry officials.



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