Japan needs to impose tough environment tax

The Daily Yomiuri, Asia News Network, Tokyo

How can we reduce emissions of carbon dioxide -- the main cause of global warming -- without hampering economic activities?

Debate on the introduction of an environment tax, seen as one efficient method of achieving this goal, has intensified.

One organization that has begun discussing an environment tax is the Japan Business Federation (Nippon Keidanren), which recently was formed as a merger of the Federation of Economic Organizations (Keidanren) and the Japan Federation of Employers' Associations.

Keidanren had been negative about discussing the introduction of such a tax, but Toyota Motor Corp. Chairman Hiroshi Okuda, who assumed the post of Nippon Keidanren chairman, has said an environment tax must be actively discussed as a countermeasure for global warming. Since then, industry has shown signs that it is softening its stance toward an environment tax.

Meanwhile, a committee studying a tax to counter global warming within the Central Environment Council has compiled an interim report recommending that an "anti-global warming tax" -- a type of environment tax mainly targeting CO2 -- be introduced as soon as possible after 2005.

The government's Council on Economic and Fiscal Policy also has decided to discuss "a taxation system friendly to the global environment" as one element of taxation reforms.

It appears that full-fledged discussions on the introduction of an environment tax in Japan finally are getting under way.

European countries, including Britain, Germany and Sweden, already have introduced environment taxes.

Such taxation systems vary from country to country, but they basically tax fossil fuels, such as gasoline, to curb the consumption of these fuels. The tax revenues are used for anti- global warming measures and to fund the development of environmentally friendly technologies.

Noteworthy among these taxes is Britain's Climate Change Levy, which was introduced in April as a tax on overall energy consumption, including natural gas, in addition to the existing tax on gasoline.

Under this new taxation system, industries that consume massive amounts of energy, including the cement and steel industries, which have concluded agreements with the British government concerning CO2 reduction targets, qualify for an 80 percent rebate on the tax. Companies can participate in a new market for emission reductions by trading their CO2 emissions quotas with other companies.

The new British tax reflects the viewpoint that an environment tax must not hamper competitiveness.

When considering the introduction of an environment tax in this country, handling of the gasoline tax -- one of the taxes whose revenue is specifically designed to be used for road- related projects -- is certain to be a focus of discussion.

The gasoline tax, which is applied at twice the basic rate as a temporary measure, generates revenue of about 2.8 trillion yen a year. The temporary imposition of the 200 percent rate is scheduled to expire at the end of March. However, the National Institute for Environmental Studies estimates that if the tax rate is cut to its original level, gasoline consumption will rise steeply, leading to a drastic increase in CO2 emissions.

Whether the gasoline tax should continue to be applied at the temporary 200 percent rate and whether the revenue it raises should only be used for road development will be topics for discussion in compiling the budget for the next fiscal year. The issue of an environment tax should be introduced as a fresh element in the budget-compilation process, and discussions on it should be promoted.