Effects of Internal Carbon Pricing on Carbon Emission Efficiency: Evidence from Japanese Companies

Jin-Li Hu (), Satoshi Honma () and Mei-Fang Liu ()
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Satoshi Honma: Tokai University, School of Political Science and Economics
Mei-Fang Liu: National Yang Ming Chiao Tung University, Institute of Business and Management

Chapter 2 in Carbon Neutrality, Climate Resilience and Sustainable Development in Asia, 2026, pp 23-52 from Springer

Abstract: Abstract This study analyzes data from 35 listed Japanese companies from 2013 to 2017. Carbon emissions are divided into three sectors which are directly generated emission by the company's production (scope 1), indirectly generated emission by the company's own purchased energy (scope 2), and all indirect emissions generated outside the company (scope 3). A cost stochastic frontier analysis (SFA) in the form of translog function was applied to capture carbon emission inefficiency and random error term. The empirical results revealed that (1) Internal carbon pricing reduced the inefficiency of scope 2 emissions. (2) Companies’ financial returns improved the environmental performances, but random error had a greater impact on scope 3 emission inefficiency. (3) The regressors, which are factor prices, effectively constructed the frontier function and measured the carbon emission efficiency. (4) Industry types have impacts on carbon emission efficiency, and the time-varying inefficiency was observed. Finally, this study applies the cost-SFA to estimate carbon emission efficiency, which measures the efficiency of an undesirable output, in order to arouse the attention of carbon reduction by enterprises.

Keywords: Internal carbon pricing; Carbon emission efficiency; Stochastic frontier analysis (SFA); Japanese companies; Scopes 1 2 and 3 (search for similar items in EconPapers)
Date: 2026
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DOI: 10.1007/978-981-95-5613-7_2

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