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The Economic Effects of Equalizing the Effective Carbon Rate of Sectors: An Input-Output Analysis

In: Carbon Pricing in Japan

Author

Listed:
  • Makoto Sugino

    (Yamagata University)

Abstract

The 2 °C target of the Paris Agreement has stimulated the implementation of carbon reducing policies such as carbon taxes and emission trading schemes, which explicitly applies a price on carbon emitting fuels. However, OECD (2016) reports that the effective carbon rate must be at least 30 Euros per ton of CO2. The effective carbon rate includes the implicit carbon price, e.g. energy taxes, along with the explicit carbon price. Previous studies have focused on the effects of explicit carbon prices. In this chapter, we will focus on the effective carbon rate and estimate the effects of carbon policies that increase the effective carbon rate to the 30 Euro threshold. We find that the short-term effect of a carbon tax that raises the effective carbon rate for all industries above 30 Euros will not only effect energy intensive industries, but also downstream industries that already have high effective carbon rates. Furthermore, we find that the carbon tax implemented in 2012 increase the average effective carbon rate, but increases the difference between taxed emitters and non-taxed emitters. Thus, tax exemption for energy intensive industries sacrifices economic efficiency.

Suggested Citation

  • Makoto Sugino, 2021. "The Economic Effects of Equalizing the Effective Carbon Rate of Sectors: An Input-Output Analysis," Economics, Law, and Institutions in Asia Pacific, in: Toshi H. Arimura & Shigeru Matsumoto (ed.), Carbon Pricing in Japan, chapter 0, pages 197-215, Springer.
    • Handle: RePEc:spr:eclchp:978-981-15-6964-7_11
    DOI: 10.1007/978-981-15-6964-7_11
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    Cited by:

    1. Katsuyuki Nakano & Ken Yamagishi, 2021. "Impact of Carbon Tax Increase on Product Prices in Japan," Energies, MDPI, vol. 14(7), pages 1-19, April.
    2. Satoshi Nakano & Ayu Washizu, 2022. "A Study on Energy Tax Reform for Carbon Pricing Using an Input-Output Table for the Analysis of a Next-Generation Energy System," Energies, MDPI, vol. 15(6), pages 1-20, March.

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