Green Recovery and the Japanese Public Policy Agenda

Abstract

As green recovery policy the governments try to expand their public expenditures for gaining both economic recovery and decarbonization simultaneously. This article identifies clear tendency for “greening fiscal policy” in the United States and EU on one hand, and a solid tendency for “fiscal expansion without greening” in Japan on the other hand. This difference can be explained by the Japanese still maintained view that economic growth and decarbonization are in a trade-off relationship. This leads to its policy characteristics that try to keep emission abatement costs of industrial sector as low as possible by allocating only minor emissions reduction responsibilities to industrial sector.

This policy may rescue industrial sector in a short term, but led to very slow industrial structural change, low economic growth rate, and stagnated GHG emission reduction. It is very contrasting with many other countries that improved “carbon productivity (GDP/CO₂ emission) ” by realizing “decoupling (separating economic growth from GHG emission increase) ”. This article clarifies that the　recent Japanese climate change policy released after the Japanese Government’s declaration for carbon neutrality by 2050 is also not escaping from this deficiency.

This article finally introduces author’s research result drawn from a simulation based on macroeconometric model concerning economic impact of carbon neutrality policy on the Japanese economy. This research is based on a policy scenario that attain carbon neutrality bv 2050 by introducing carbon pricing and reinvesting its revenue in decarbonization. Its message is very clear; carbon neutral policy brings about faster economic growth. The Japanese climate change policy needs policy innovation like this.