Japan delays carbon tax reform to curb living costs, Nikkei says

Japan is delaying plans to revise how it taxes carbon, the Nikkei newspaper reported, potentially slowing efforts to wean itself off fossil fuels.

The government will postpone the introduction of a new carbon tax that was planned for the fiscal year starting April 2023, the Nikkei said Tuesday without attribution. Policy makers decided it would add to already surging living costs, it said.

It’s at least the second time the changes have been pushed back. The environment ministry had requested the introduction of a more substantial carbon levy in the previous annual tax revisions, but the government backed away from the proposal amid industry protests. No details on the level of the new tax have been released.

Japan was the first country in Asia to impose a levy on fossil fuel emitters, in 2012, but it’s set at just 289 yen ($1.97) per ton of CO2-equivalent. Critics say that’s far too low to spur changes in electricity generation and the behavior of major industries.

The delays will make it harder for Japan to reach targets to cut greenhouse gas emissions 46% from 2013 levels by the end of this decade, and then reach net zero by 2050. Tokyo is rushing to release policies to ease the burden of faster inflation on households. A higher tax on emitters may have result in more expensive power bills for consumers.

Resource-poor Japan is highly dependent on fossil fuels to power its economy, with natural gas and coal used to generate most of the nation’s electricity. While price gains in Japan are lower than in many developed nations, the impact is magnified by a rapidly weakening yen. – BLOOMBERG