Addressing the Climate Change Issues from Economics

Abstract

We conducted economic research on carbon pricing to achieve the 80 percent Greenhouse Gas emission reduction from the Japanese economy by 2050 with the financial support from Environment Research and Technology Development Fund of the Environmental Restoration and Conservation Agency of Japan (JPMEERF20202008). We found that regional emissions trading schemes in Japan led to the spillover effects, i.e. the CO₂ emission reduction in facilities outside of the regulated areas. We also found that there is more diffusion of energy-saving technologies in buildings in Tokyo compared to other regions without ETS. These findings are examples of innovations towards solving climate change issues. We note that we faced difficulties in analyzing micro data because matching facility level data to the firm was not straightforward. Moreover, measuring innovation was not an easy task. However, we argue that social scientists such as economists can contribute to the promotion of innovation toward climate change.