Editorial: Questions remain over effectiveness of Japan's carbon pricing policy

The Japanese government has decided to introduce a new policy to tackle global warming: carbon pricing. It's a decarbonization effort by asking companies to pay according to the amount of their carbon dioxide emission and also rewarding them for CO2 reductions. The funds from this will help finance the government's technology development aids.

In addition to collecting levies from fossil fuel importers, the government will also have power companies buy emission quotas in an emissions trading market to encourage them going green. Will these initiatives lead to behavior changes in businesses and individuals toward decarbonization?

We applaud the fact that the government came up with the framework. However, carbon pricing will be introduced in fiscal 2028, and emission quotas won't come into effect until fiscal 2033 -- all lagging far behind the European Union and other leaders. Japan's plan cannot dispel the impression that it's too little to achieve net zero greenhouse gas emissions by 2050.

Questions remain over how the levels of burden are decided. The government says it will increase the levies in stages to make up for the planned reduction of renewable energy charges, which are currently added to electricity bills to promote green energy, and of the petroleum and coal tax, slated to start around 2030. It's a way to make sure that industries will not have to shoulder additional burdens, and this is why the Japanese government has opted for carbon pricing that can be flexibly changed around rather than carbon tax where tax rates are decided by law. An idea to introduce a greenhouse gas emissions tax was met with caution within the government and ruling coalition.

However, limiting burdens from the start may lead to a risk in companies slacking off in their decarbonization efforts. The methods should be reviewed if the emission reduction pace proves to be sluggish.

In areas where decarbonization will take time and money, such as iron and steel industries, the government can implement support measures individually. Half-baked policies will not promote emission reductions, and they cannot be expected to foster technological innovations for decarbonization.

What the government is supposed to do is to seek levels of burden that can lead to changes in investment and consumption, as well as innovative changes in the industrial structure.

Japan also must watch out for actions taken by other countries. The EU will impose higher tariffs on imports from countries that don't have the same level of climate change countermeasures in place as the union members. If Japan is deemed lax on greenhouse gas emission policies, it'll harm its competitiveness globally.

A perspective to review the energy taxation as a whole is also needed. If electrification advances further, gasoline tax revenues will fall, taking a toll on resources to maintain infrastructure. Japan's ability to conceptualize a framework for a decarbonization society in a systemic manner is being tested.