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Wednesday, Oct. 26, 2005

New carbon tax plan limits levy

Ministry excludes several fuels due to high price of oil

Staff writer

The Environment Ministry on Tuesday released a revised version of its carbon tax plan, aimed at discouraging fossil fuel use so Japan can fulfill its Kyoto Protocol obligation to cut global greenhouse gas emissions.

The ministry had submitted an environment tax proposal last year to the Tax Commission but discussion was postponed mainly due to strong opposition from the business community.

What differentiates the new proposal from the previous one is the levy would not be imposed on gasoline, light oil and jet fuel for the time being, given the current high price of crude oil, according to the ministry.

Processors and importers of liquefied petroleum gas and kerosene would have to pay 2,400 yen per ton of carbon mixed in the fuel, the same as the previous proposal. Industries that use coal, natural gas and heavy oil also would pay the same tax rate.

One example of the proposed carbon levy is 1.58 yen per kilogram of coal, the ministry officials said.

They said they expect that the additional costs to industry would be passed on to the public through price increases on goods and services.

Under the new plan, a household would pay an average of 2,100 yen a year for electricity, gas, kerosene and other fuels. In the other plan, the burden was estimated at 3,000 yen.

The ministry expects it would reap annual revenue of 370 billion yen from the tax, compared with 490 billion yen estimated in the previous plan.

Last year, the ministry said part of the revenue would be used to reduce companies' costs, such as social security fees.

But this year, the ministry said the revenue would be used solely for measures to reduce global warming, including the management of forests, which absorb carbon dioxide, and the promotion of energy-saving appliances and renewable energy resources.

Because there has been strong opposition from industries that say the tax would undermine their activities and harm the global competitiveness of Japanese firms, the ministry has proposed the levy be halved for businesses that succeed in curbing greenhouse gas emissions, although it has not specified any amounts.

Environment Minister Yuriko Koike said the plan minimizes the burden on the economy and individual households, taking into consideration the rise in the price of crude oil, while emphasizing the necessity of the levy.

"The ministry is promoting education (on how to reduce global warming) through such measures as the "Cool Biz" and "Warm Biz" campaigns. But we definitely need the environment tax so that all people will be involved (in reducing greenhouse emissions)," Koike told a news conference Tuesday.

As the government discusses new uses of tax revenue in the special account budgets, the ministry said in the plan it would ask the government to allow some of the revenue to be used for programs to stop global warming.

The carbon tax is aimed at curbing carbon dioxide emissions, the main cause of global warming.

Japan hopes the tax along with other measures will help it achieve its Kyoto Protocol target of curbing greenhouse gas emissions by 6 percent from 1990 levels by 2012.

But the country has already fallen behind. Its emissions in fiscal 2004 were 7.4 percent higher than the 1990 levels, according to a report the ministry released Friday.

The revised tax proposal will be submitted to the tax panels of the government and the ruling Liberal Democratic Party, the ministry said.

It hopes to introduce the tax in January 2007, although there is much uncertainty whether the plan will be accepted by the other ministries and industry.

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The Japan Times

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