A computable general equilibrium analysis of environmental tax reform in Japan with a forward-looking dynamic model

Abstract The Japanese government plans to reduce greenhouse gas emissions by 80% 2050. However, it is not yet clear which policy measures the will adopt achieve this goal. In regard, environmental tax reform, combination of carbon regulation and reduction existing distortionary taxes, has attracted much attention. This paper examines effects an reform in Japan. Using a dynamic computable general equilibrium (CGE) model, we analyze quantitative impacts clarify types are most desirable. simulation, introduce consider following four scenarios for use revenue: (1) lump-sum rebate household, (2) cut income (3) corporate taxes (4) consumption taxes. first scenario pure tax, other three reform. Our CGE simulation shows that tends generate more desirable than strong double dividend obtained some cases. particular, show leads terms GDP national income.