Willingness to pay for carbon tax in Japan

Inspired by Scandinavia's carbon tax reforms, Japan's Ministry of the Environment first considered emissions trading systems (ETS) and carbon taxes in 1995. As a policy tool to address climate change, Japan is dedicated to the design and development of a carbon tax. Current plans include introducing a surcharge on fossil fuel supplies in 2028. This paper aims to investigate the policy's acceptability using the Contingent Valuation Method (CVM) to quantify data from 1627 respondents and estimate and compare the willingness to pay (WTP) for a carbon tax among the Japanese population and Tokyo residents. Additionally, this study includes a supplementary analysis of the WTP distribution between Japan and Tokyo and examines the key factors contributing to the increase in the proportion of respondents at the maximum truncation point of the WTP amount in the WTP graph for the Japanese sample compared to the preceding monetary threshold. The results indicate that the allocation of carbon tax revenues as subsidies for clean energy technologies led to the highest median WTP in the Japanese sample, which was 4008 JPY ($29, 1 USD = 140.53 JPY, average for 2023). A Tobit regression model was used to track the factors influencing willingness to pay, revealing that gender, education, household income, and understanding of the carbon tax were highly correlated with overall willingness to pay. Among them, the highly educated Japanese population expressed greater concern about the transparency of the carbon tax procedures. High-income groups and corporate executives demonstrated a relatively higher willingness to pay when using carbon tax revenues to subsidize clean energy technologies. Tokyo's sample reveals a degree of regional heterogeneity in willingness to pay, indicating that Tokyo's experience with the carbon tax faces challenges in its promotion across Japan. Japan's carbon tax policy strategies hold potential for promotion in surrounding regions and developing countries. Additionally, the study concludes with policy recommendations based on the analysis results.