Carbon dioxide reduction potential and economic impacts in Japan: application of AIM

Abstract

Using a bottom-up model, the effectiveness of carbon tax policy and a policy mix related to a carbon tax in Japan are assessed to reduce CO₂ emissions to the targeted level in the first commitment period of the Kyoto Protocol. In this simulation, only existing technologies and practical new technologies are treated. From the results of the bottom-up model, the necessary carbon tax to achieve the target, a 2% reduction of the CO₂ emissions in 1990, is found to be 45 000 Japanese yen (JPY)/tC. If the tax revenue is used to decrease the CO₂ reduction cost as a policy mix related to the carbon tax, the required tax rate is decreased to 3400JPY/tC. In this simulation, the technologies that make the greatest contribution to CO₂ emission reduction are highly efficient gasoline vehicles in the transportation sector, and high-performance motors with inverter control and steel industry energy-saving devices in the industrial sector. The CO₂ reduction achieved by these technologies accounts for 44% of the CO₂ reduction in the final energy-demand sectors. The quantity of CO₂ reduction in the residential sector is almost the same as that in the industrial sector. On the other hand, the additional money granted to the industrial sector is less than 30% of that granted to the residential sector, because the price of subsidized technologies in the industrial sector is less than 15000JPY/tC, whereas 27% of the subsidized technologies in the residential sector are more expensive than 15000JPY/tC.