Japan needs a major carbon tax hike, former vice minister says

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Japan needs to significantly increase its carbon tax as soon as possible in order to get on track for meeting its climate goals, according to a former senior official at the Finance Ministry.

“Carbon pricing should be made a policy priority,” Rintaro Tamaki, 68, who served as vice minister and currency chief, said in an interview. “The government should help people’s mindset change through a price signal, and get on with it quickly.”

Japan’s current levy on fossil fuel charges ¥0.76 per liter. Tamaki says that level is too low and needs to be raised significantly to encourage behavioral change among consumers.

The world’s third-largest economy set itself a target of net zero carbon emissions by 2050 in autumn 2020. But many experts say that target will be difficult to achieve given the current trajectory.

Tamaki argued that the eight years through 2030 are crucial to achieving the 2050 goal. The government currently aims to cut greenhouse gas emissions by 46% from 2013 levels by 2030.

“We need to strengthen the 2030 goals,” said Tamaki, who served as deputy secretary-general of the OECD following his time at the ministry. “Losing even one year in the process is a serious matter, because the curbs become too steep to tackle.”

The environment ministry had requested the introduction of a more substantial carbon tax in this year’s annual tax revisions, but the government backed away from the proposal following industry protests.

Tamaki suggested that carbon taxes should be hiked soon, and the government should draw up a roadmap on how they will keep rising over 10 to 20 years.

“The present and the future are a zero-sum game,” said Tamaki. “If you only take ordinary actions in the present you’ll wind up having to take drastic actions in the future. If you act more aggressively now, you can secure more options for action in the future.”

If carbon pricing isn’t introduced fast enough to prompt change, more drastic measures will likely have to be taken, said Tamaki, who has been president of the Japan Center for International Finance since 2017.

“For example, all short-haul flights and private jets may have to be banned. Or all SUVs scrapped,” said Tamaki. “We’ll automatically hit a stage where we’ll have to respond with government intervention.”

On the question of introducing green bonds, Tamaki said such a move would have had more impact if it was done two or three years ago and there are now more important policies to pursue, like hiking the carbon tax.

“It wouldn’t be a bad thing,” he said of green bonds. “But the situation’s moved on so much.”

He agreed with the International Energy Agency and COP26 that the crucial time for action is in the 2020s, and without major progress in the next eight years Japan won’t be able to hit its 2050 target without drastic actions.

“Of course this will hurt a lot of people as well,” Tamaki said of moving quickly now. “But if we don’t do it, we’ll be seeing much worse.”

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