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Japan should introduce carbon tax in 2007: ministry

Posted on: Wednesday, 26 October 2005, 03:31 CDT

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 prices.

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 2008-2012.

Source: REUTERS

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