[News] Japan's new carbon tax to cost utilities $1bln annually

Reuters

 

TOKYO: Japan's new tax on carbon emissions will cost utilities about 80 billion yen ($1.02 billion) annually from 2016, adding to their already high costs of running power stations after the Fukushima crisis shut most of the country's nuclear plants, a government backed think-tank said.

Japan will gradually phase in the tax on oil, natural gas and coal over the next five years, in a move that will hit the balance sheets of businesses from refineries and power plants to factories and gas stations.

The tax will be added to existing levies already imposed on fossil fuels, and will generate about 260 billion yen in additional revenue annually from April 2016, the Ministry of Finance says.

The tax, which will be used to fund green initiatives, will be introduced in three phases, with the first increase adding between 12-31 percent on existing levies.

Yu Nagatomi, a researcher at the Institute of Energy Economics of Japan, said nearly a third of the 2016 revenue, or 80 billion yen, will come from the country's power companies, including Tokyo Electric Power Co (Tepco), the operator of the Fukushima Daiichi plant hit by three reactor meltdowns last March.

 The remainder will be paid by other primary users of fossil fuels.

Utilities have mostly funded their energy purchases through debt, and have avoided passing on the cost to consumers, except for Tepco which was nationalised this year, but the new taxes could force a change of heart.

"The government must reconsider the environment tax, including the advisability of raising tax rates in future," the English-language version of the Daily Yomiuri, Japan's best selling newspaper, said in an editorial on Wednesday.

Kansai Electric Power Co and other regional utilities are mostly reporting losses, yet have not sought the required government permission to raise tariffs.

"It's time for an open and honest discussion of who is going to pay for the increased fuel bills," said Nagatomi.

Nippon Keidanren, the country's biggest business lobby, last week called on the government to rethink the new tax because it raises energy costs further and might push companies to move operations to countries that regulate carbon emissions less.

Japan has no immediate plan to review the new levies, a trade ministry official said on Wednesday.

The Federation of Electric Power Companies of Japan, which represents the country's 10 big power utilities, has no plan to make a representation on the new tax, a federation spokesman said.

Almost 30 percent of Japan's energy needs were met by the country's 50 nuclear reactors until last year's earthquake and tsunami caused the meltdowns at the Fukushima Daiichi plant, resulting in a backlash against atomic power.

Prime Minister Yoshihiko Noda's cabinet last month took account of anti-nuclear sentiment in devising a new energy policy that sought to end reliance on nuclear power by the 2030s by fostering renewable energy sources and supporting energy conservation.

A nationwide safety shutdown of the country's nuclear power plants since last year has added an estimated 3.1 trillion yen to the cost of importing fuel for oil, gas and coal power stations in the 12 months through March next year.