A discussion paper published by the Research Institute of Economy, Trade and Industry (RIETI) on "Analysis of the Impact of Emissions Trading Systems on Manufacturing Plant Productivity in Japan". This paper empirically analyzes the effects of the emissions trading systems (ETS) in Tokyo and Saitama Prefecture on manufacturing productivity.
Key Points
1. Research Overview
- Authors: Guanyu Lu (Waseda University), Kenta Tanaka (Musashi University), Toshihide Arimura (RIETI Faculty Fellow)
- Publication Date: June 2025
- Document Number: 25-E-063
- Research Project: Comprehensive Research on Japan's Climate Change Policies: GX, EU Carbon Border Adjustment and U.S. Climate Policy
2. Research Background and Objectives
- Research Subject: Emissions Trading Systems (ETS) in Tokyo and Saitama Prefecture
- Analysis Focus: Impact on manufacturing plant productivity
- Importance: Empirical verification of the relationship between environmental regulations and corporate productivity
- Policy Significance: Contributing to the development of effective climate change mitigation strategies
3. Research Methodology
- Data Used:
- Economic Census for Business Activity
- Census of Manufactures
- Analysis Targets: Regulated and non-regulated manufacturing plants
- Measurement Indicator: Total Factor Productivity (TFP)
- Analysis Method: Difference-in-Differences
4. Major Findings
- Productivity Improvement:
- TFP increased at regulated plants
- Significant improvement compared to non-regulated plants
- Effects manifested during ETS implementation period
- Testing the Porter Hypothesis: Suggests environmental regulations may promote productivity improvement
5. Role of Capital Investment
- Differences in Investment Patterns:
- Different investment trends between regulated and non-regulated plants
- Equipment renewal promoted at regulated plants
- Mechanisms:
- Investment in energy-saving equipment
- Efficiency improvements in production processes
- Promotion of technological innovation
6. Policy Implications
- Double Dividend of Environmental Regulations:
- Achievement of greenhouse gas reductions
- Realization of corporate productivity improvements
- Importance of System Design:
- Properly designed ETS does not harm corporate competitiveness
- Rather promotes technological innovation and efficiency
7. Characteristics of Japan's ETS Systems
- Tokyo Cap-and-Trade:
- Implemented since 2010
- Targets large-scale facilities
- Saitama ETS:
- Implemented since 2011
- Linked with Tokyo's system
- System Achievements: Achieving both greenhouse gas reduction and productivity improvement
8. Research Contributions
- Academic Contributions:
- First comprehensive analysis of ETS effects in Japan
- Providing new insights to environmental economics
- Practical Contributions:
- Providing empirical evidence to policymakers
- Implications for corporate environmental strategy development
- International Significance: Reference case for ETS design in other countries
9. Future Prospects
- Research Extensions:
- Impact analysis on other industries
- Verification of long-term effects
- Policy Applications:
- Material for considering nationwide ETS implementation
- Carbon pricing policy design
This research is an important study demonstrating that environmental regulations do not necessarily harm corporate competitiveness, and that properly designed systems can enable both environmental protection and economic growth. In particular, the empirical analysis using Japanese examples provides useful evidence for policy formulation.