Opportunities and Barriers of Implementing Carbon Tax policy in Northeast Asia: A Comparative Analysis

the 11th Global Conference on Environmental Taxation
2011
Discussion Paper

This paper gives a glance of carbon emission status, the latest efforts and policy progress in Japan, China and Korea, and provides an integrative summary of previous discussions of carbon tax policy based on a comprehensive literature overview. By using the information collected from these countries, a comparative analysis is conducted to identify opportunities and barriers of implementing carbon tax policy in this region from a multiplier viewpoint.
The overview indicates the great importance of the design of carbon tax scheme, including the scope, tax level, collection and utilization of the tax, which requests much more discussions for convincing the decision-makers. Existing macro analysis at national level by using dynamic computable general equilibrium (CGE) model confirms the primary negative impact of carbon tax on the economy, especially on the energy and trade intensive sectors. However, the impact may be alleviated via properly relieving the heavily affected sectors. The double dividend may arise by using revenues from carbon tax to finance reductions in pre-existing irrational taxes. Our comparison identifies the problems of target countries in implementing carbon tax policy due to political resistance and energy structure characteristics. In Japan, against from industrial lobbies is the most crucial factor blocked the practice of carbon tax. The centralized administrative system of China may shorten the period for the introduction of this policy partly due to the consideration of country profile fighting against climate change. The general attitude towards the carbon tax in Korea is rather positive among the environmental specialists. As the taxation of carbon causes a shift from coal to other low carbon energy, the energy tax would be a more stable approach for Japan and Korea which highly rely on energy import from abroad. Keeping energy security and a variety of energy sources would be their first policy priority.
As the way forward, discussions of acceptability to carbon tax from the perspective of individual companies are useful. Their reactions to optional tax scenarios and corresponding behavioral changes, especially on technological innovations and the choice of greener technologies, bear in-depth analysis.

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