Report estimates Japan's carbon reduction policy will cost $515bn over 10 years

Japan's policies to reduce greenhouse gas emissions by 2020 will cost $515bn (£256bn) over the next decade, according to a government panel report released yesterday.

In June, the nation set a target to cut emissions by 15 per cent below 2005 levels by 2020.

The largest outlay of the estimated $515bn lies in the $126bn needed to promote electric and other eco-friendly cars, according to the report from a subcommittee of the Advisory Committee for Natural Resources and Energy.

Other sizable expenses include expansion of the use of solar power, which is estimated to have a $84bn price tag, and attempts to improve the energy efficiency of buildings and homes are expected to cost $84bn. Meanwhile, promoting energy-saving home appliances is estimated to cost $73bn over 10 years.

The report estimates that the average household will face increased costs of up to $809 a year to pay for the new policies.

It argues that as a result, household spending would be weakened, lowering Japan’s real GDP by a forecasted 0.6 per cent, while causing a rise in the unemployment rate by 0.2 per cent in 2020.

Some panel members have voiced doubts over the feasibility of paying for the emissions cuts, according to Kyodo News agency. The total estimated cost is nearly equal to Japan's budgeted total general expenditure of $553.8bn for the financial year ending 31 March 2010.

However, the report is likely to face criticism from environmentalists who have repeatedly accused Japan's industry lobby of failing to account for the long-term commercial and environmental benefits associated with the transition to a low-carbon economy.