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Impact of Carbon Tax Increase on Product Prices in Japan

Katsuyuki Nakano () and Ken Yamagishi ()
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Katsuyuki Nakano: College of Policy Science, Ritsumeikan University, Ibaraki 567-8570, Japan
Ken Yamagishi: Sustainable Management Promotion Organization (SuMPO), Tokyo 101-0044, Japan

Energies, 2021, vol. 14, issue 7, 1-19

Abstract: The introduction or strengthening of a carbon tax is being considered in many countries as an economic policy instrument to reduce greenhouse gas (GHG) emissions. However, there is no study analyzing the impact of a carbon tax increase in a uniform method for various products, reflecting the energy taxes and exemptions. Therefore, this study analyzes the price changes of products associated with the introduction of a stronger carbon tax, using Japan as an example. A process-based life cycle assessment database was used to enable a detailed product-level analysis. Five scenarios with different taxation amounts and methods were analyzed. The results show that price changes vary greatly by industry sector and product, even within the same industry sector. For example, seasonal vegetables and recycled plastics are less affected by carbon tax increases. Imported products, such as primary aluminum, are not affected by the Japanese carbon tax change, indicating a risk of carbon leakage. If GHGs other than CO 2 are also taxed, the price of CH 4 and N 2 O emitting products, such as rice and beef, would rise significantly. The method presented in this paper enables companies to assume price changes in procured products due to carbon taxes and policymakers to analyze the impact of such taxes on products.

Keywords: carbon pricing; energy tax; product price; life cycle assessment (LCA); tax exemption; greenhouse gas (GHG); recycling; carbon leakage (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2021
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Handle: RePEc:gam:jeners:v:14:y:2021:i:7:p:1986-:d:529629