A DSGE Analysis of Japan’s Energy Policy and Sustainable Economic Development
Year: 2026
Type: article
Abstract: This study examines the impact of Japan’s energy policy on sustainable economic growth from 2005 to 2025. The analysis involved adding carbon externalities to a DSGE model to evaluate the effects of a carbon tax, a renewable energy subsidy, and energy-efficiency improvements. All policies are uniformly assessed within a unified, dynamic, micro-founded macroeconomic model that links energy use and emissions. According to the empirical findings, the carbon tax is the most effective policy for reducing emissions (6.8%). Nonetheless, this improvement incurs economic costs, as output and welfare fall by 0.85% and 0.35%, respectively. Renewable energy subsidies have no unbalanced effect. They reduce emissions by 3.2%. However, they support output by 0.42% and welfare by 0.28%. It occurs through substitution and investment effects. The most prominent outcomes of energy-efficient design are 1.2% increase in output, 0.75% increase in welfare, and 2.5% decrease in emissions. It also indicates the degree of decoupling. The carbon price is vital to achieving decarbonization; however, policies that support improved energy efficiency and clean energy could be accompanied by differential pricing. Findings indicate that a coordinated policy mix would be most effective for Japan in meeting emissions targets without harming growth or improving welfare.
Source: Energies
DOI: 10.3390/en19112626
Author: Mohammed Moosa Ageli
Institution: King Saud University
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $3,137
OpenAlex ID: W7162789775