The Japanese Double Whammy

Haninonen, Japan's largest coal facility

A double whammy for energy companies in Japan: it’s really breathtaking:

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.

Leaving aside the value of a carbon tax, about which reasonable minds can disagree, that’s a lot of money. For a country that has recently had to switch on some coal and oil plants to spell the nuclear energy shutdown, it just feels – mean. And as long as the companies pay the levy, it doesn’t actually help reduce carbon emissions.

Now, to be fair, the government wants to put the money into renewable energy sources. I don’t really understand well enough where the government’s interests intersects with those of industry. Furthermore, the story doesn’t explain whether this money will subsidize industry efforts in a public-private partnership or go forward as a government project. I read a report suggesting that the government could lower other taxes, but it was speculative. Other details just, um, detail the pain.

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.

And if a country is importing its energy resources, what’s the result? 

These rising costs may cause a trade deficit for the second straight year through March 2013, the institute said.

And ratepayers?

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

 That could be bluster on the part of the energy companies, but the money does have to come from somewhere. Again, there are some plausible relief notions mentioned here and there, but very vaguely. It’s really all bad all the way through.

Don’t get me wrong. Carbon taxes, cap-and-trade, even the flow of free enterprise can bring about carbon emission reductions while limiting the financial pain caused to ratepayers.

But Japan has a viable solution – not a total solution, but a good one. To paraphrase the sheriff in the John McCain ad a couple of years ago, Turn on the dang nuclear facilities.