An assessment of carbon taxation by input–output analysis: Upstream or downstream?

To analyze the ripple effects of CO₂ emissions from the introduction of renewable energy power plants, this study developed input–output tables for analysis of next-generation energy systems (IONGES). The results revealed that the environmental benefits obtained from investing in power plants of the same capacity vary significantly depending on the type of renewable energy. Using the IONGES, under assumptions of three carbon taxation methods (upstream, midstream, and downstream), we calculated the taxable CO₂ emissions induced when producing each good or service and estimated the carbon tax burden associated with the final demand. We found that, in the upstream method, the taxation effects of one unit of carbon tax is concentrated in energy goods such as coal products and petroleum basic, while the effects are relatively dispersed in the downstream taxation method. If renewable energy is added to the government target level in 2030, taxable CO₂ emissions will decrease by 12–13.3%. Compared with the upstream taxation method, in the midstream and downstream methods, the CO₂ emissions induced by each final demand are distributed more evenly across various goods and services. Compared to the downstream taxation method, upstream taxation leads to higher CO₂ emissions from exports, but lower CO₂ emissions from household consumption. This is because energy-intensive industries such as machinery have high export ratios. We analyzed which expenditure categories contribute to the carbon tax burden associated with household consumption. In the case of upstream taxation, households mainly focus on reducing electricity consumption; in the case of downstream taxation, households reduce consumption of various energy-intensive goods and services.