Possible impacts of environmental taxes, subsidies and emissions trading on the foundry industry: a domestic and global analysis

To create a more practical model for comparing the long-run impact of environmental taxes, subsidies and emissions trading on an industry, using partial equilibrium analysis, this papers examines the long-run impact of (1) a CO2 tax, (2) subsidies for CO2 emissions reduction (e.g. favourable tax treatment for investment in equipment with advanced technology that can reduce CO2 emissions), (3) and CO2 emissions trading on the Japanese foundry industry which is a supporting industry for a machinery industry (e.g., automobile) both domestically and globally. Energy intensity is considered as a key parameter indicating the state of energy conservation technology for equipment. The model is used to estimate the possibilities of (1) analysing the above 3 measures within the same framework, (2) a serious impact of the CO2 tax on the Japanese foundry industry, (3) global and local reductions in the industrial CO2 emissions by a subsidy, (4) serious difficulties in the implementation in emissions trading in this industry, (5) CO2 emissions trading having basically the same effect as CO2 tax or subsidy, (6) global industrial CO2 emissions increase by a tax introduced in industrialised countries only.