Renewables Update

In support of the future generations in Japanese

9 July 2015 Tomas Kåberger, Chair of Executive Board, Japan Renewable Energy Foundation

A baby born in Japan today may come to dislike the present government of Japan for two reasons:

Instead of having the current generation taxpayers finance government expenses, the government borrows almost half the money it spends, leaving it to the following generations to pay.

Instead of developing sustainable energy supply, the government lets the current generation produce nuclear waste, radioactive pollution as well as greenhouse gases from fossil fuels that will make life difficult when the children born today have reached their middle age.

Taxing people to finance public spending is difficult without harming the economy. Whatever you put a tax on will become more expensive and less will be used. If you tax rice, less rice will be consumed. It you tax consumption in general, consumption will decrease.

Economist developing theories on how this should be done in an optimal way, however found an obvious first hand opportunity: There are activities in society that result in damages, such as environmental pollution, that no one pays for. As these costs that are not paid, do not contribute to the price, the price is too low and consumption become too large. So, if the government introduces a tax that is equivalent to the cost of the environmental pollution, this will contribute to the public finance and at the same time help the economy to work better.

In particular for the Government of Japan, this offers an opportunity to make Japan a country more attractive for a new generation Japanese. Introducing environmental taxes on emission of carbon dioxide from fossil fuels and on production of nuclear waste and radioactive pollution would at the same time reduce the budget deficit and guide the markets to avoid activities that create environmental damages and costs for future Japanese people.

There are examples to follow. Several European countries have introduced environmental taxes and they have managed to both improve their environmental performance and their economic sustainability.

A tax on the imported fossil fuels in proportion to the amount of CO2 emitted when combusted is easy to charge as the fossil fuels are imported. A tax already of a few yen per kg of CO2 would make a significant contribution to the state budget and discourage imported energy and make domestic energy sources more profitable.

It would tend to improve the balance of trade, create opportunities for developing bioenergy industries in rural parts of Japan, in addition to help state finance and the environment.

But as it would be against the interest of some powerful Japanese companies, it is not possible in Japan, only in Europe. But why should politicians in Japan not do what is best for the future of Japan?