Basic Thinking on the Problem of Global Warming
Today 43 industries participate in the Keidanren Voluntary Action Plan on the Environment, engaging in vigorous efforts to deal with the problems of global warming and waste. Of these 43 industries, 34 in the industrial and energy-converting sectors have subscribed to a common goal of endeavoring "to reduce CO2 emissions from the industrial and energy-converting sectors in fiscal 2010 to below the levels of fiscal 1990," and are working diligently to achieve that target. These efforts have already begun to pay off, as evidenced by declines in CO2 emissions in fiscal 1998 and 1999 of 2.9% and 0.1%, respectively, in comparison to fiscal 1990.
Each year Keidanren carries out detailed follow-up surveys by industry on the state of progress being made under voluntary action plans, and announces the results widely through the Internet and other media. In addition, these results are reviewed annually by non-partisan committees composed of prominent academics, members of NGOs et al., which have been established under related councils of government. Keidanren also reports the results to joint meetings of councils that have been established to review domestic proposals aimed at dealing with the problem of global warming.
Under a BaU scenario (an assumption of "business-as-usual"), CO2 emissions are projected to continue to rise, making achievement of the common goal for industry anything but a foregone conclusion even with further efforts by industry to reduce emissions and with the setting of goals under voluntary action plans that are premised on new nuclear power plants coming on stream and other measures. Moreover, emissions from the transportation, offices and households sector continue to increase, which has raised fears of the fallout spreading to the industrial sector as the nation as a whole endeavors to attain its goals for reduction of emissions. (To begin with, energy efficiency of Japanese industry is already extremely high in comparison with other nations.)
There is a line of thinking that argues that environmental taxes (including carbon taxes and carbon and energy taxes) should be instituted as a means of constraining CO2 emissions. However, for the following reasons, we believe that this approach poses a number of problems, and that such taxes should be evaluated cautiously.
The ability of environmental taxes to suppress CO2 emissions is questionable, as a review of examples from the past would indicate - e.g., trends in energy prices and in demand for gasoline and electric power before and after the oil shocks, etc. And, in a number of European countries where such taxes have been adopted, studies assessing their impact on CO2 reduction show that no country has been able to reduce CO2 emissions, and that some countries have instead recorded higher emissions. The experience certainly does not support a case for substantial benefits from the implementation of such taxes.
The imposition of a tax rate high enough to suppress CO2 emissions would not only lead to a decline in industry's international competitiveness but also obstruct effective voluntary efforts, by causing an outflow of financial resources that would have gone into technological development and capital investment aimed at energy conservation. For industries that are major consumers of energy, even low tax rates would result in enormous tax burdens, making it impossible to carry out conservation-related investments. Furthermore, because production in countries with low rates of energy efficiency would increase, the opposite of what was intended would occur as CO2 emissions rose rather than declined on a global basis.
One view holds that the objective of environmental taxes is to provide the revenue required to cover the costs of dealing with environmental problems. But the approach should not be one simply of charging additional levies; rather efforts should be made to find the necessary revenue through adjustments of expenditure priorities. With respect to a number of other issues, it is also essential that the debate fully consider the impact of such new approaches on individual industries as well as on a system already dealing with taxes on energy and various automobile-related taxes. This point applies to debates on the issue of taxes on "bads" and tax reductions on "goods" - i.e., taxes commensurate with environmental loads on the one hand and tax reductions when environmental loads are not generated on the other - as well as to discussions that are premised on tax-revenue neutrality.
Rather than assume off the bat that taxes will be adopted, there is a need first of all for comprehensive research from a medium to long-term perspective that clarifies the effectiveness of environmental taxes and their impact on the economy and that furthermore deals with such issues as how the new taxes would be adjusted with existing taxes. The results of such studies must then be presented with sufficient persuasiveness to make the case convincingly to industry and the rest of the nation.
With the Kyoto mechanism existing as one option for dealing effectively with the environment, there is a need to bring about a rapid adoption of concrete international rules. In that event, the effective implementation of the Kyoto mechanism will hinge on voluntary participation by the private sector. Hence, there is a need to build a mechanism that makes it easy for the private sector to participate.
Creating a system of domestic emissions trading premised on the establishment of compulsory emissions limits would require extremely tight economic controls and be difficult to administer fairly. For these reasons, Keidanren opposes the establishment of such a system.
Promoting the use of nuclear energy is an unavoidable issue from the standpoint of tackling the problem of global warming. While continuing to invest maximal efforts into ensuring safety and into gaining the understanding of the country's citizens, Keidanren believes that steps should be taken to promote the use of nuclear energy.