Utilization of the potential energy in wastes is essential for achieving sustainable development. This will not only reduce pollutants and greenhouse gases (GHG) from wastes, but also provide many other advantages. Emission taxes and subsidies are thought the most applicable and effective for promoting effective use of the potential energy in wastes. The aim of this study was to evaluate the effects of these economic policies on the use of the potential energy in wastes. A socioeconomic model based on I/O was constructed to consider the flow of wastes and energy. This model is a dynamic optimizing model that considers the change of production through investment. New industries producing energy from wastes, as well as emission taxes and the subsidies were introduced into the model. The results of the simulation showed that three new energy industries achieved production and were able to replace fossil fuels or change the industrial structure to decrease the consumption of fossil fuels. In the presence of these new industries, GDP increased under severe GHG constraints, and GHG emissions decreased below the target for the Kyoto Protocol if the tax rate was more than 20,000 yen per ton carbon, and emission taxes and subsidies were introduced. JEL Classification: Q42, Q48, Q53