October 26, 2005

Japan should introduce carbon tax in 2007: ministry

TOKYO (Reuters) - Japan needs to introduce in January 2007
an environment tax on carbon produced by burning fossil fuels
because doing so would curb energy use and cut greenhouse gases
in line with international efforts to stop global warming, the
Environment Ministry said on Wednesday.

But it said the introduction of an environment tax on
gasoline, diesel and jet fuel should be delayed "for a while"
to avoid putting too much economic burden on end-users as they
were already paying heavy taxes on fossil fuels amid high oil

The ministry said in a statement that the tax should be
2,400 yen on a ton of carbon emitted from fuels. That means the
tax on coal could be 1.58 yen per kilogram and that on gasoline
1.52 yen per liter (4.3 cents per gallon).

The tax would generate income of 37 billion yen a year for
the government and result in a payment of 2,100 yen per year
for an average household.

The proposed tax has raised controversy among industries
and consumers. Strong opposition has come from the Petroleum
Association of Japan (PAJ), the country's largest oil industry
group, as Japanese oil demand has been steadily declining for
the past decade partly because of economic sluggishness.

The PAJ argues that the proposed tax would further curtail
demand for oil products in the world's third-largest oil user,
as consumers are already paying tax equivalent to about 50
percent of the price of gasoline at the pump.

The ministry last year assessed that the proposed tax would
cut gross domestic product (GDP) growth by 0.01 percentage
point when fully introduced. It did not provide specific
figures for a possible reduction in Japan's energy demand.

A ministry official did not specify how long it would delay
the new taxation on gasoline, diesel and jet fuel.

International benchmark U.S. crude oil futures were above
$62 a barrel on Wednesday, having risen about 20 percent since
the beginning of this year.

The ministry said the proposed environment tax would help
Japan to cut carbon emissions by about 43 million tonnes, or
3.5 percent of the greenhouse gas emitted in 1990.

Earlier in October, a government report showed that the
country emitted 1.329 billion tonnes of carbon dioxide (CO2) in
the fiscal year to March 31, 2005, down 0.8 percent from the
previous year.

However, the emission volume was 7.4 percent higher than
that in 1990. The U.N. Kyoto Protocol requires Japan to reduce
its CO2 emissions by 6 percent from that year's level by