AGU RESEARCH

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  • Faculty of Economics Department of Economics
  • Posted on 2023/06/26
  • Economic and quantitative analysis of the effects of carbon pricing
    - Proposing a balance between reducing carbon dioxide emissions and economic growth -
  • Professor Shigeru Matsumoto
  • Faculty of Economics Department of Economics
  • Posted on 2023/06/26
  • Economic and quantitative analysis of the effects of carbon pricing
    - Proposing a balance between reducing carbon dioxide emissions and economic growth -
  • Professor Shigeru Matsumoto

TOPIC

Professor Shigeru Matsumoto (College of Economics) receives the Achievement Award at the 55th (2022) Ichimura Prize for Global Environmental Studies

Key points of the research

In a joint study with Professor Toshihide Arimura of the Faculty of Political Science and Economics at Waseda University and Professor Shiro Takeda College of Economics at Kyoto Sangyo University, we quantitatively analyzed the effectiveness of carbon pricing policies from an economic perspective, which has been noted as having been slow to take hold in Japanese society compared to Western countries. We also made policy recommendations for the future and proposed methods for achieving emissions reductions without significantly slowing down economic activity.

イラスト：矢印

Explore the topic with your teacher

​Professor Shigeru Matsumoto

Faculty of Economics Department of Economics

Graduated from the College of Agriculture and Forestry, University of Tsukuba. Completed a Master's course at the Graduate School of Environmental Studies, University of Tsukuba, and a Department of Economics at the Graduate School of North Carolina State University. Ph.D. (Economics) from North Carolina State University. Specializes in environmental economics and agricultural economics. Takes up issues related to daily life such as energy conservation and diet, and delves deeply into and analyzes them from an economic perspective.

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Quantitative analysis of the impact of carbon pricing policies on households using microdata

Conduct questionnaire surveys and persistently follow up on consumption trends over time for households and individuals, then compile and analyze panel data.

Propose concrete ways to combat global warming without causing significant harm to specific individuals

What kind of award is the Ichimura Prize?

The Ichimura Prize itself has been in existence for 55 years, and was originally established by businessman Ichimura Kiyoshi to recognize people who have made significant contributions to the advancement of industry or academia and have achieved results in the development of industry. The Global Environmental Science Prize that we received this time was awarded at the 51st time in 2018, and up until now, all of the recipients have been researchers in the sciences. At this year's award ceremony, former University of Tokyo President Komiyama, who chaired the judging committee, said that since we can no longer live a life without using energy, environmental issues are a theme that touches on all fields (not just the sciences), and I believe this is why the humanities were also included in the judging this time.

Does this mean that we are no longer in an era where we can think only about technology and environmental issues?

It's easier to understand if we think about it in terms of energy, but in the field of energy conservation research, there is a story called "Jevons' Paradox." It was written in a book by British economist William Stanley Jevons in 1865 during the Industrial Revolution. For example, if we innovate and promote energy conservation, the cost of energy consumption will actually decrease. What used to cost 2,000 yen for energy bills will now cost just 1,500 yen. This will lead to more manufacturing or using more tools to cover the reduced cost. In the end, if energy conservation technology makes things cheaper, it will only increase consumption, not lead to energy conservation. This is "Jevons' Paradox." Even if we evolve air conditioners or televisions, the perspective that energy consumption issues cannot be improved unless we also consider human "behavior" has been brought into the forefront in the past few years, and the content overlaps considerably with the field of economics research. As seen in this Ichimura Prize, I feel that we are moving away from the era in which environmental measures were considered only in the field of engineering.

Does this mean that environmental economics is a new field of study?

I believe that the academic field of environmental economics was established in the United States in the late 1970s. It then became active in Europe in the late 1980s, and in Japan, the Society for Environmental Economics and Policy Studies, chaired by Professor Toshihide Arimura of Waseda University, who is also a recipient of this year's award, and of which I serve as vice-chair, was founded in 1995, so it has been about 30 years since then. In that sense, environmental economics could be said to be a new field that has just been established compared to long-established fields such as macroeconomics and labor economics.

What is environmental economics?

Of course, it is a field of economics, but it includes issues of social security, and while it is economics, it is also environmental, political, and in some cases, it also contains elements of business administration. In the Society for Environmental Economics and Policy Studies that I mentioned earlier, we don't just have professors who study economics, we also have engineers who specialize in information engineering, professors who specialize in law, and professors who are involved in policy, so it is an academic field with a very strong interdisciplinary nuance.

How does environmental economics differ from classical economics?

Economics is an academic field that inevitably tends to be patterned. The more detailed the study, the more deductive it becomes, fitting phenomena into past patterns. Economics is premised on a mathematical economic theory model, and when analyzing data on human behavior patterns, data suitable for that analysis is collected and analyzed. There is a tendency to then confirm what patterns actually exist. That is how powerful the economic models that have been created up until now have been.
However, in the new world of economics, as in environmental economics, such theoretical perspectives have been set aside for the time being, and the stance has been to "first look at behavior." The analysis of the impact of carbon pricing policies on household finances, which I was in charge of, took the approach of first looking at trends in household consumption.

Could it be that the ability to "observe behavior" is behind these changes?

I think this is probably thanks to my predecessors who have studied environmental economics. First of all, data analysis and other things have progressed in the United States because information disclosure has been much more advanced than in Japan. Probably from around the mid-1980s, data collected on a household or individual basis could be accessed and used for analysis by applying. Therefore, the family structure of each household and the consumption behavior of each family member have been available for research since then. The same is true in the UK. However, in Japan, although such data was of course collected by government offices, it was stipulated that it was to be used for policy purposes, so it took a long time to use it for research. Thanks to the persistent negotiations of my predecessors, the situation changed dramatically from around the 2000s, and finally, little by little, data became available for research, and it became possible to "observe behavior."

However, I don't think that just collecting data automatically results in a paper.

That's right. The data itself is valuable, so some can be used as is, but there are also cases where we have to be creative, so I'd say it goes both ways. For example, we can now receive data on energy consumption from the Ministry of the Environment, and let's say we get a figure for each month called "electricity bill." However, that alone doesn't tell us the amount of usage, so we also need to look at fluctuations in electricity bills and prices by region. We need to pay close attention to changes in those small details.
In this study, we conducted various questionnaire surveys and followed up on the same households for about four years, researching household finances while taking into account behavioral patterns and fluctuations in electricity bills. By creating panel data with the same households/people on one axis and consumption trends on the other, we were able to examine how people behave when changes occur in social conditions, etc. By making use of this valuable data and using our own ingenuity, we were able to predict the impact that energy conservation measures such as carbon pricing would have on household finances and consider how much energy savings can be expected.

What are your thoughts on the future of the relationship between household finances and energy conservation?

This time, as part of a survey of household energy consumption, I also visited cold regions several times. Heating is a very large factor when considering energy consumption. I also spoke to city hall officials in cold regions about things like "what kind of subsidy systems for heating costs are available," but when I visited small municipalities, I felt that few people were thinking about energy conservation issues.
Of course, people understand the importance of energy conservation, but the reality is that they don't really think about it that much in their daily lives. So I think it's important to first change that mindset.

What is important to make changes, even in small ways?

The first thing to do is to think. In this research, we looked at the impact of policies on household finances, but when thinking from that perspective, I've recently begun to think that we need to think about the purposes for which individuals use energy. For example, heating costs are essential for our lives. But there are many other elements of energy consumption that are indispensable for human life. We have no choice but to use energy to live.
On the other hand, although it is an extreme example, it is not necessarily the case that a wealthy person needs a cruiser for leisure. Therefore, rather than simply taxing energy consumption in the future, I think it will be necessary to tax in a way that is tailored to how the energy is used.

It's important to look at the details rather than simply generalizing about household energy consumption.

Then, the issue of households is also a big one. After all, the size of a household is a huge factor when talking about energy, and lighting and heating can be shared among family members, right? In terms of electricity bills, refrigerators are very large, but these can also be shared among the household. However, the number of single-person households is now on the rise, and energy is not shared but consumed individually, so energy efficiency is steadily declining. In terms of living alone, the impact is even greater for elderly people living alone, who spend a lot of time in their own rooms and often use air conditioning and other equipment very frequently, so the impact on energy consumption is huge. When thinking about environmental economics, we must also consider these social issues.

Have any measures been tried overseas to promote energy conservation at home?

Electricity supply must be adjusted according to peak times, so keeping the peaks low is meaningful. To that end, attempts are being made around the world to change the electricity bill burden by time of day. For example, by making electricity bills a little cheaper after 11pm, people could set a timer to do laundry and other things in the middle of the night. However, in Sweden, this policy is said to have caused problems in that people ended up going to bed later to do their laundry in the middle of the night, which increased the burden on them.

Reducing energy consumption does mean that inconvenience will occur somewhere.

That's right. I think that since the Industrial Revolution, energy has been consumed to save time. Therefore, improving "behavior" and reducing energy consumption also means that society must accept some inconvenience. As with the laundry example, it is not desirable for individuals to shoulder an increased burden in order to reduce or adjust energy consumption. I would like to continue thinking about energy consumption in the home together with young researchers, while considering what kind of society is desirable in the future.

Related links

College of Economics Department of Economics

University website news: "Professor Shigeru Matsumoto (College of Economics) and others receive the first Achievement Award at the 55th Ichimura Prize for Global Environmental Studies (2022)"

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