Optimal Energy Policy for a Carbon Tax in Japan

Discussion Papers

No.656

by Tsubasa SHIBATA

March 2017

ABSTRACT

Climate change is a global challenge that must be addressed at the international level. In December 2015, the Paris Agreement was adopted at the 21st session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP21) held in Paris. The Paris agreement is aimed at keeping global temperature increases below 2 °C. Toward this goal, the Japanese government plans to reduce greenhouse gas emissions by 26% by fiscal year 2030 compared with fiscal year 2013. In this study, we evaluate the feasibility of Japan’s energy policy for reducing CO2 emissions. We construct a macroeconometric model linked to an energy model to show the optimal future energy policy for Japan by applying optimal control to the social welfare function.

Keywords: Carbon tax, Energy model, Macroeconometric model, Optimal control
JEL classification: C30, P28, Q43, Q48

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