TY - JOUR
T1 - A computable general equilibrium analysis of environmental tax reform in Japan with a forward-looking dynamic model
AU - Takeda, Shiro
AU - Arimura, Toshi H.
N1 - Funding Information:
We appreciate comments from Kanemi Ban, Akira Yokoyama, Kiyoshi Fujikawa, Makoto Sugino, Soocheol Lee and Seung-Joon Park. We are also grateful for the administrative support provided by Yukie Iwatsuka. This research was supported by the Environment Research and Technology Development Fund (JPMEERF20172007 and JPMEERF20202008) of the Environmental Restoration and Conservation Agency and JSPS KAKENHI Grant Number JP18K01633. We also appreciate the financial support from the Foundation of Japanese Bankers.
Publisher Copyright:
© 2021, The Author(s).
PY - 2021/3
Y1 - 2021/3
N2 - The Japanese government plans to reduce greenhouse gas emissions by 80% by 2050. However, it is not yet clear which policy measures the government will adopt to achieve this goal. In this regard, environmental tax reform, which is the combination of carbon regulation and the reduction of existing distortionary taxes, has attracted much attention. This paper examines the effects of an environmental tax reform in Japan. Using a dynamic computable general equilibrium (CGE) model, we analyze the quantitative impacts of an environmental tax reform and clarify which types of environmental tax reform are the most desirable. In the simulation, we introduce a carbon tax and consider the following four scenarios for the use of the carbon tax revenue: (1) a lump-sum rebate to the household, (2) a cut in income taxes, (3) a cut in corporate taxes and (4) a cut in consumption taxes. The first scenario is a pure carbon tax, and the other three scenarios are types of environmental tax reform. Our CGE simulation shows that (1) environmental tax reform tends to generate more desirable impacts than the pure carbon tax and that (2) the strong double dividend is obtained in some cases. In particular, we show that a cut in corporate taxes leads to the most desirable policy in terms of GDP and national income.
AB - The Japanese government plans to reduce greenhouse gas emissions by 80% by 2050. However, it is not yet clear which policy measures the government will adopt to achieve this goal. In this regard, environmental tax reform, which is the combination of carbon regulation and the reduction of existing distortionary taxes, has attracted much attention. This paper examines the effects of an environmental tax reform in Japan. Using a dynamic computable general equilibrium (CGE) model, we analyze the quantitative impacts of an environmental tax reform and clarify which types of environmental tax reform are the most desirable. In the simulation, we introduce a carbon tax and consider the following four scenarios for the use of the carbon tax revenue: (1) a lump-sum rebate to the household, (2) a cut in income taxes, (3) a cut in corporate taxes and (4) a cut in consumption taxes. The first scenario is a pure carbon tax, and the other three scenarios are types of environmental tax reform. Our CGE simulation shows that (1) environmental tax reform tends to generate more desirable impacts than the pure carbon tax and that (2) the strong double dividend is obtained in some cases. In particular, we show that a cut in corporate taxes leads to the most desirable policy in terms of GDP and national income.
KW - Carbon tax
KW - Climate change
KW - Computable general equilibrium
KW - Double dividend
KW - Environmental tax reform
KW - Paris agreement
KW - Tax interaction effects
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U2 - 10.1007/s11625-021-00903-4
DO - 10.1007/s11625-021-00903-4
M3 - Article
AN - SCOPUS:85099931885
SN - 1862-4065
VL - 16
SP - 503
EP - 521
JO - Sustainability Science
JF - Sustainability Science
IS - 2
ER -
