An Analysis of the Macro-Economic Costs of Various CO2 Emission Control Policies in Japan *

Abstract

This study attempts quantitative and comparative analyses of the expected macro-economic impacts of various carbon dioxide (CO2) emission control policies. The analytical tool is a long-term general equilibrium model that integrates the behaviors of competitive energy sectors with macro-economic activity. We find that, if the economy adjusts efficiently, the macro-economic costs incurred by CO2 emission controls are not very large. For example, the cost is estimated to be less than 0.5% of GNP on average during the next 50 years to freeze the annual rate of CO2 emissions at the 1990’s level. It is also shown that, among various types of control policies, the introduction of a carbon tax is the most effective method to achieve a proposed target.