Japan's CO2 reduction target may cost households up to $8,600 a year

Meeting Japan's emissions-reduction target may cost households between $1,465 (£878) and $8,600 a year, according to a government-appointed task force.

The group warned that achieving the nation's stated target of cutting CO2 emissions by 25 per cent on 1990 levels by 2020 would lead to a significant fall in disposable income for households, based on the assumption that the goal would be achieved only through domestic efforts – without the purchase of carbon offsets from overseas – and that the nation's economy expands 1.3 per cent annually.

The estimates are lower than earlier calculations by the Liberal Democratic Party (LDP), which put the cost of a 25 per cent emissions cut at a minimum of $4,000 per year. The LDP, which ruled the country until September, had set a more lenient eight per cent reduction goal on 1990 levels by 2020.

Environment minister Sakihito Ozawa said yesterday that the LDP’s figures were "too exaggerated", adding that the burden on households would be lower if Japan acquired carbon credits from abroad.

The task force predicted that if 15 per cent of the 25 per cent reduction goal came from CO2 offsets, the annual decline in household disposable income would be between $338 and $3,150.

A national cap-and-trade system and environmental tax will be mapped out by the government next year, said Ozawa. At that time, officials will re-examine the economic impact of its climate change policies, he added.

The debate over the economic impact of efforts to curb carbon emissions has become increasingly heated in Japan, with carbon-intensive industries arguing that prime minister Yukio Hatoyama's pledge to deliver deep cuts in carbon emissions would damage the economy. However, the government is currently standing by the target, while green groups have consistently argued that reports warning of increased costs have failed to account for the economic benefits associated with a shift towards lower-carbon business models.