The government will collect the environmental protection tax instead of pollutant discharge fees, as well as levy a tax on carbon dioxide emissions, Jia Chen, head of the ministry’s tax policy division, wrote in an article published on the MOF’s website.

It will be the local taxation authority, rather than the environmental protection department, that will collect the taxes.

The government is also looking into the possibility of taxing energy-intensive products such as batteries, as well as luxury goods such as aircraft that are not used for public transportation, according to Jia.

To conserve natural resources, the government will push forward resource tax reforms by taxing coal based on prices instead of sales volume, as well as raising coal taxes. A resource tax will also be levied on water.

The Responding to Climate Change website looks at how this new effort will work with the current trial cap-and -trade program that China announced early this year:

Joanna Lewis, assistant professor at Georgetown University and an expert in Chinese energy policy told RTCC it is unclear how the two would work together.

“The government has been discussing the implementation of a carbon tax for several years so it will be interesting to see if it happens this year,” she said.

It is also not yet clear whether the tax would apply to the same facilities covered under the pilot cap and trade programs for CO2, and if so how the two programs would interact.”

“Further regulation of CO2 could help to address current air pollution challenges if the environmental protection tax includes a range of pollutants, or if facilities curbing emissions through means that end up reducing other pollutants as well.

At the Atlantic, James Fallows summarizes several of the main points worth considering when discussing the carbon tax:

Here are your talking points for the next time this topic comes up at a dinner party:
Environmental carnage of all sorts is a truly major emergency in China, both in the short term and as a potential limit on the country’s development;

Chinese emissions are a problem not just for its own people but also for the world. It has now overtaken the U.S. as the biggest carbon emitter; most of the coal that is burned anywhere on Earth is burned in China.

Contrary to what you might think, China’s economy is relatively less efficient, and more polluting, than those of rich countries. It takes more energy to heat and cool the standard Chinese building than one in Europe or the US; Chinese farmers use more water, fertilizer, and pesticide per unit of output than is typical even with mechanized farming in the US; Chinese factories put out more air and water pollution per dollar of production than rich-country counterparts. On a per capita basis, the Chinese economy uses less energy than America’s. On a per dollar (or per RMB) basis, it uses more. Simplest way to remember this point: China’s economy is nowhere near as large as America’s now, but it puts out more emissions.

In a blog post, Ella Chou raises several questions that come up with the announcement:

The point of a carbon tax, be in China or elsewhere, is to set the price signal straight. We tax income; we tax property; we tax goods and services — all the things we want more of, so wouldn’t it be logic to actually tax the thing we want less of: pollution?

My environmental law professor Jody Freeman, who served as Counselor for Energy and Climate Change in the Obama White House before coming back to Harvard, told us that she used to say two words to almost everyone she met at the White House – “carbon tax”, and they would look at her as if she was crazy. This needs to be changed. If the giant climate rally in DC this past Sunday is any indication, that is we need a sensible policy to address the reality and challenges of climate change now. And in the case of China, I think starting with adjusting the distorted price signals, while giving due consideration to the widening income gaps and social injustices, is essential.

[...] As previously stated, this environmental tax is mainly converted from pollution discharge fees. Previously, pollution discharge was inspected by and the fee was charged by environmental protection bureaus. The environmental tax, however, is collected by the tax bureau according to the amount of pollution discharged by factories, and that amount is corroborated by the environmental protection bureau. That is to say, the environmental protection bureau becomes an agency that collects statistics for tax purposes.

Chou also points out the proposed tax itself would be “puny” (10 yuan [US $1.5] per ton of carbon dioxide in 2012, with gradual increase to 50 yuan [$7.9] per ton by 2020). For Forbes, Tim Worstall writes that even though it is small, the tax could still be effective:

But there’s two things which should be pointed out about even this lower number.

The first is that there’s a reasonable assumption that if the Chinese Government starts taxing fossil fuels then it will also, at the same time, stop subsidising them. And it does indeed subsidise the use of fossil fuels in a very large way. So the effect would be much larger than just the tax itself: it would also include the removal of the subsidies. And do note that the International Energy Authority has stated that simply removing those fossil fuel subsidies (not just in China, but in Russia, Iran, Saudi and so on as well, the places which cumulatively spend hundreds of billions a year on such subsidies. And no, we, the advanced or industrialised nations, we really don’t offer such subsidies, not in any great amount at least and all entirely dwarfed by the taxes we impose on such fuels.) would take us one third to one half of the way to controlling climate change all on its own.

So that’s good news, even given the low level of the tax. And it is a low level: lower than Tol or William Nordhaus would suggest for example. And yet it is obeying another basic rule which both would advocate. That a tax should start small and then grow. The reason being that this allows industry to adjust along with the capital cycle.

A post on the Washington Post blog points out that the economic impact of the tax will likely reach beyond’s China’s borders:

Much of the cost of China’s carbon tax would be borne by other countries. Last year, John Lee of the Center for International Security Studies argued that any carbon tax in China would mostly fall on the country’s exporters, who would in turn pass the cost on to consumers in the United States and Europe. “Beijing has consistently argued that the end-consumer country, and not the producer country, should bear the burden of paying for carbon emissions,” Lee notes.

Now, that’s still a significant step. Export manufacturing is responsible for anywhere from 20 percent to 50 percent of China’s greenhouse-gas emissions, after all. But it does help explain why Chinese officials are relatively sympathetic to this idea.

But, as the post also points out, China’s proposal is larger than anything under consideration by the U.S. Congress.

© Sophie Beach for China Digital Times (CDT), 2013. | Permalink | No comment | Add to del.icio.us
Post tags: carbon tax, greenhouse gas emissions, sustainable development
Download Tools to Circumvent the Great Firewall

Why is a carbon tax a good idea? For a start, some estimates suggest levying a carbon tax could help encourage improvements in industrial energy efficiency of anywhere from 5 percent to 25 percent. And levying a carbon tax can also help save energy by increasing fossil fuel prices. In 2009, Beijing’s municipal government imposed a carbon tax on gasoline for the first time. Despite car numbers increasing by 40 percent, gasoline consumption increased by just a few percentage points, while diesel consumption fell.

Levying a carbon tax would also help reduce carbon emissions. China’s economy is expected to continue to be dominated by coal, which remains the cheapest and most readily available large-scale energy source in the country. A carbon tax would encourage both private and state-owned enterprises to reduce emissions.

There is a downside – carbon taxes are likely to be regressive, meaning the poor would ultimately likely be hit hardest as they saw prices rise. With this in mind, then, the Chinese government would do well to consider combining a carbon tax with other measures.

See also a McKinsey Group podcast in which several leaders of its China practices discuss, among other aspects, what government policy changes are needed to ensure that China consumes energy more efficiently as its share of global demand continues to grow.

© Scott Greene for China Digital Times (CDT), 2012. | Permalink | No comment | Add to del.icio.us
Post tags: carbon tax, government subsidy, greenhouse gas emissions, renewable energy
Download Tools to Circumvent the Great Firewall

The investment bank’s report says China, India and other developing economies have expanded so massively they have surpassed the established industrialized world in belching out carbon dioxide pollution blamed for climate change.

Many in the West assumed that since industrialized nations were primarily responsible for the historical build-up of greenhouse gases in the world, they should bear the brunt of efforts to cut back, a view that underpinned the Kyoto Protocol in 1997, which exempted developing countries.

But the CIBCWM economists see a shift in sentiment.

“As the OECD countries begin to impose greater economic sacrifices on their own economies as part of decarbonization efforts, tolerance for the carbon practices of its trading partners, or more precisely the lack thereof, will diminish dramatically,” they write.

As several articles on the report note, reducing carbon admissions would not be the only motivating factor behind a carbon tax on China. The potential recovery of jobs lost to Chinese factories, a huge political plus for leaders in North America, appears to be at least as important in pushing through the idea.

© Zhaohua Li for China Digital Times (CDT), 2008. | Permalink | No comment | Add to del.icio.us
Post tags: Canada, carbon tax, exports, U.S. relations
Download Tools to Circumvent the Great Firewall

China would gain in several ways from implementing a substantial carbon tax. By reducing its fossil fuel consumption, China would prevent the deaths of hundreds of thousands of citizens because of the short- and long-term consequences of air pollution from burning coal. Investments in energy-efficient durable goods, encouraged by a carbon tax, would generate energy savings over the lengthy life of these investments. The demands of China’s rapid economic growth are outstripping the country’s ability to provide the infrastructure necessary for continued growth; a carbon tax would slow short-term growth and allow infrastructure investments to catch up. Ultimately, this would lead to greater long-term growth. If China fears a drag on its economy from the carbon tax, it could make such a tax partially or fully revenue neutral by reducing other taxes. [Full text]

© Sophie Beach for China Digital Times (CDT), 2007. | Permalink | No comment | Add to del.icio.us
Post tags: air pollution, carbon tax, environmental policy, sustainable development
Download Tools to Circumvent the Great Firewall