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Japan's Kyoto Drive, in Reverse
[Analysis] Gasoline price cuts might hurt the nation's environmental credentials
Hisane Masaki (hmasaki)     Print Article 
Published 2008-04-06 14:52 (KST)   
Gasoline price cuts in Japan could not have come at a more awkward time diplomatically for the world's second-biggest economy and major emitter of gases widely blamed for global warming.

While lower gasoline prices, albeit likely to be short-lived, have come as a boon to Japanese motorists, they might hurt the nation's environmental credentials ahead of the summit of the Group of Eight (G8) leading industrialized nations in Hokkaido, northern Japan in early July.

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Gasoline price cuts began on April 1 after a long-lasting but provisionally higher gasoline tax rate, which was still lower than in most other industrialized countries, was allowed to expire the day before due to strong objections from opposition parties.

The five-year "first commitment period" of the Kyoto Protocol on curbing global warming also officially started in Japan on April 1, the first day of the nation's fiscal year.

Gasoline is one of fossil fuels whose burning has resulted in increased global emissions of carbon dioxide (CO2), a primary heat-trapping greenhouse gas (GHG) that contributes to global warming. Japanese government officials say that gasoline price cuts might send a wrong message to the international community and raise doubts about the nation's firm commitment to the fight against climate change.

With climate change expected to top the agenda at the G8 summit, Prime Minister Yasuo Fukuda and other government officials have expressed Japan's strong desire to take the leadership role in international efforts to establish a new framework to replace the Kyoto Protocol, which expires in 2012. Negotiations on a post-Kyoto regime are under way to reach an agreement by the end of 2009.

G8 comprises the United States, Canada, the United Kingdom, Germany, France, Italy, Japan and Russia. Japan will also invite leaders from eight leading non-G8 GHG emitters, including China and India, for an "expanded dialogue" on climate change to be held on the last day of the G8 summit, in a bid to get them on board in reducing global emissions.

In early March, Fukuda inaugurated a panel of experts to discuss ways to address global warming, including the possible introduction of a mandatory GHG emissions trading system, ahead of the G8 summit. The 12-member panel is headed by business tycoon Hiroshi Okuda, a senior advisor for Toyota Motor Corp and special advisor to the prime minister.

Okuda once served as Toyota Motor chairman and as head of the Japan Business Federation (Nippon Keidanren), the nation's most powerful business lobby. Okuda still wields considerable influence in Japanese business circles. It is widely believed that Fukuda picked Okuda as his panel's head to quell opposition from some businesses to tougher anti-global warming measures, including a mandatory GHG emissions trading system.

The ruling and opposition parties have been locked in a sharp confrontation in the Diet, Japan's parliament, over a government tax bill aimed at maintaining provisionally higher rates for gasoline and other road-related taxes. At the center of the dispute is the tax surcharge of about 25 yen (24 US cents) per liter of gasoline.

The rates for road-related taxes were raised in the 1970s to expedite road development projects across the country. The higher rates were introduced as a provisional measure but have been maintained since. At present, revenues from such taxes, which will total an estimated 5.4 trillion yen in fiscal 2008, which started on April 1, are still mostly earmarked for road-related projects.

The government and the ruling parties have warned that without the provisionally higher rates, tax revenue shortfalls totaling about 2.6 trillion yen would occur annually - 1.7 trillion yen for the state and 900 billion yen for local governments.

The largest opposition group, the Democratic Party of Japan (DPJ), demanded that the provisionally increased road-related tax rates be scrapped from April 1 and that revenues from such taxes, which the party claims - and many experts agree - have often been used wastefully, be fully allocated for general purposes.

On March 27, only four days before the expiry date of the provisionally higher rates for gasoline and other road-related taxes, Fukuda, who doubles as president of the ruling Liberal Democratic Party (LDP), announced a compromise plan despite anticipated resistance from some lawmakers within the LDP.

Rejecting an opposition demand to scrap the provisionally higher rates for road-related taxes from April 1, Fukuda promised to use all of the estimated 5.4 trillion yen revenues from such taxes for general purposes from fiscal 2009.

But the DPJ immediately dismissed Fukuda's compromise plan as insufficient. Until Friday, the DPJ-led opposition camp had refused to even hold deliberations on the government tax bill in the House of Councilors, or the Upper House of the bicameral Diet, where the ruling camp lacks a majority. The bill cleared the ruling camp-controlled House of Representatives, or the Lower House, at the end of February.

The LDP-led coalition, which wants to reinstate the provisionally higher road-related tax rates as soon as possible despite an anticipated public backlash against a resurge in gasoline prices, is now poised to resort to the constitutional power it currently enjoys in the Lower House to railroad through the controversial tax bill later this month.

If the opposition-controlled Upper House votes down the bill, the ruling coalition-dominated Lower House can override the Upper House decision on the strength of the LDP-led coalition's two-thirds majority.

Under Article 59 of the constitution, a bill can be sent back to the Lower House for a second vote if the Upper House votes it down or holds off on taking a vote on it within 60 days of receiving it - by April 29 in the case of the contentious tax bill. The bill will become law if passed in the second Lower House vote with the support of a two-thirds majority.

The ruling camp used the rarely used constitutional power in January to enact a controversial bill to resume Japan's refueling mission in the Indian Ocean in support of the United States-led anti-terrorism operations in Afghanistan.

Despite the expiry of the gasoline tax surcharge on gasoline, prices for the fuel have not yet gone down automatically by the same amount nationwide as most gas stations first need to sell the already taxed gasoline stored in their tanks. The gasoline tax is levied when oil wholesalers ship their products.

Still, many gas stations began to offer discounts at a loss immediately to survive cut-throat competition. According to a survey released by the Oil Information Center on Wednesday, the nationwide average retail price of regular gasoline stood at 142.2 yen per liter on April 1, down 10.7 yen from the day before.
Hisane Masaki is a Tokyo-based journalist, commentator and scholar on international politics and economy. This is the first part of an article that originally appeared on Asia Times on April 5.
©2008 OhmyNews
Other articles by reporter Hisane Masaki

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