Conference Agenda

This study employs a computable general equilibrium (CGE) model to quantitatively assess the effects of replacing Japan’s existing energy taxes with a carbon tax. The analysis is based on a static model incorporating 30 goods and 19 sectors, using benchmark data from Japan’s 2015 input-output table and the 3EID emissions database. By integrating detailed energy tax data, the input-output table is adjusted to construct a CGE model that reflects the current structure of energy taxation.

The simulation results show that replacing existing energy taxes with a carbon tax can increase both GDP and welfare, while simultaneously maintaining tax revenue levels and reducing CO₂ emissions. These findings suggest that a carbon tax is more desirable than the current energy tax regime from both economic and environmental perspectives.

In addition, simulation scenarios that introduce carbon tax exemptions for energy-intensive sectors—such as iron and steel or cement—show that such exemptions significantly ease the burden on the targeted sectors while having only a minor effect on overall economic efficiency. Finally, policies that replace only non-automobile-related energy taxes with a carbon tax yield considerably smaller gains in GDP and welfare compared to full replacement policies. Nevertheless, even under these more limited reforms, either positive economic effects or substantial reductions in CO₂ emissions are still observed.