Green Fiscal Reform for a Sustainable Future

Green Fiscal Reform for a Sustainable Future

Reform, Innovation and Renewable Energy

Critical Issues in Environmental Taxation series

Edited by Natalie P. Stoianoff, Larry Kreiser, Bill Butcher, Janet E. Milne and Hope Ashiabor

This timely book focuses on achieving a sustainable future through the reform of green fiscal policy. Green fiscal policies help not only provide the needed financing but may also serve the Sustainable Development Goals adopted by the United Nations in 2015. In this volume environmental tax experts review the development of fiscal carbon policy, consider the impact of green taxation on trade and competition, analyse the lessons learned from national experiences with fuel and energy pricing, and evaluate a variety of green economic instruments.

Chapter 4: Trends in the greening of energy and vehicle tax systems – Japan and the EU

Aya Naito and Yuko Motoki

Subjects: environment, environmental economics, environmental law, environmental politics and policy, management natural resources, law - academic, environmental law, tax law and fiscal policy, politics and public policy, environmental politics and policy


In recent years, Japan has implemented various measures on taxation, including the introduction of the Tax forClimate Change Mitigation (the so-called ‘carbon tax’) in 2012 and greening vehicle taxation. However,Japan’s CO2 emissions from energy use reached a record 1.224 billion tonnes in FY2013. The Japanesegovernment is expected to mobilize every possible means in order to reduce CO2 emissions, and taxationpolicy is one of the tools effective for this purpose. Therefore, to suggest future directionsin greeningJapan’s taxation system, we compare environmental taxes in Japan and four EU countries (Finland,Denmark, Germany and the UK), which are environmentallyadvanced countries on taxation. Wesummarize the latest trend of environmental taxes in Japan then compare it with experiences in EUcountries. For energy taxes, tax rates on fuels in Japan are lower than those of EU countries and, in all thefour EU countries, tax rates on fuels have been raised year by year, but in Japan, for example, the gasoline taxrate has not been increased since 1993. When it comes to carbon taxes, differences between Japan and EUcountries are tax rates and use of revenues. In Japan, carbon tax rates are relatively lower than EUcountries and tax revenue goes into a special account and the revenue is used for promoting renewable energy. In Japan, the emissions reduction effect of taxing carbon is relatively lower than the effect of revenueuse, which is –0.2 per cent and –0.4 to –2.1 per cent respectively. For vehicle taxes, tax bases of Japan’s vehicle taxesare acquisition price, weight of vehicles, and so on, which is different from EU countries’ fuel efficiency. ThusJapan’s vehicle taxes are not functioning as a driver to promote purchasing more energy-efficientvehicles. Based on the results of these comparisons, we expect the Japanese government to put a higher tax on fuel consumption to track the international trend of carbon pricing and thus reduce energyconsumption, and to introduce CO2-based vehicle taxes to increase the share of environmentallyfriendly vehicles in Japan.

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