Report: China to Introduce Environmental Protection Tax, Carbon Tax

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Mar. 15 – According to a recent report presented by Jia Chen, head of the Tax Division at China’s Ministry of Finance (MOF), China will proactively introduce a set of new taxation policies designed to preserve the environment.

“The Chinese government will collect the environmental protection tax instead of pollutant discharge fees, as well as levy a tax on carbon dioxide emissions, and the local authorities will be responsible for the tax collection,” Jia said in the report.

This announcement came unexpectedly and its significance is huge, as China is far and away the world’s largest emitter of greenhouse gases, and burns nearly as much coal as the rest of the world combined. Therefore, even a small carbon tax imposed by the Chinese government would mean a significant step forward for the planet.

“In the U.S. or most of the EU, other than Norway and Ireland, there is still no carbon tax, so if the Chinese government were starting small — using this very small amount to send a signal — and then planned to ratchet up the tax over time, that would be a very important move,” commented Thomas Kerr, the World Economic Forum’s Head of Climate Change Initiatives.

However, the report doesn’t specify a date for when the new measures would be implemented and the introduction of a carbon tax was actually already put forward three years ago. In 2010, China’s MOF suggested levying a carbon tax of RMB10 per ton in 2012, and then to rise to RMB50 per ton in 2020. To date, no such tax has come into effect.

The Chinese government is currently under significant pressure to address the heavy layers of smog affecting many of its cities, including Beijing, Tianjin, Ji’nan and Xi’an. Starting from January this year, air pollution levels have reached particularly worrying levels on a consistent basis, and a growing number of Chinese citizens are calling for the introduction of effective measures from the government. In response, the central government has taken the following actions:

  • Introducing emission trading schemes, which will soon provide a carbon pricing mechanism for Chinese firms when piloted in Beijing, Shanghai, Shenzhen, Guangdong, Tianjin, Chongqing and Hubei.
  • From March 1, 2013, six of the most heavily-polluting industries in 47 major cities have been required to follow the new air quality standards designed to tackle the country’s escalating smog crisis.
  • The country’s first plan to safeguard the environment against dangerous chemicals,  namely the “12th Five-Year Plan for Prevention and Control of Chemical Risks to the Environment,” has been issued on February 21, 2013, which labels 58 chemicals as key chemicals to be controlled and prevented from exposure to the environment.
  • The “12th Five-Year Plan for the Development of a State Environmental Protection Standard” has been issued on February 22, 2013, which plans to enact and revise 600 types of environmental standards and release 300 more by 2015.

Furthermore, the government is considering a new coal tax calculated on the price of coal rather than the amount sold. Energy-intensive products such as batteries and luxury goods such as private jets may also face new taxes.

China vows to cut its carbon-dioxide emissions per unit of gross domestic product by 40 percent to 45 percent by 2020 when compared to 2005 levels.

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