Tamar Hallerman
GHG Monitor
2/22/13
The Chinese government will soon introduce a carbon fee as part of a suite of new environmental tax policies, state media reported this week. Citing Ministry of Finance tax policy official Jia Chen, the Xinhua News Agency said Feb. 19 that the government will also raise resource taxes on coal and water, but did not include details. Xinhua said the government would alter the way it collects taxes on coal production, taxing the resource based on price instead of sales volume in a move it said would help “conserve natural resources.” The organization also reported that local authorities, not the Ministry of Environmental Protection, would collect the new taxes.
While the report provided little in terms of details related to potential carbon prices or when the changes would be implemented, it pointed to a plan pitched by the country’s Finance Ministry in 2010. That blueprint called for a 10 yuan ($1.60) tax per ton of CO2 beginning in 2012, increasing steadily to 50 yuan ($8) per ton by the end of the decade.
Meanwhile, a Feb. 20 statement on the Ministry of Environmental Protection’s website said that the government will begin enforcing new emissions standards on six highly-polluting industries in the country’s 47 largest cities in the coming weeks. The new limits would notably affect the coal sector, as well as the oil, metal, petrochemical, steel and cement industries, as soon as March 1. The government said the effort is meant to improve urban air quality. The announcements come weeks after notably heavy smog in cities like Beijing garnered headlines around the world and reportedly embarrassed the Chinese government.
Policies Could Cut Emissions
Both policy shifts could have a sizable effect on a booming Chinese economy that has relied heavily on coal in recent decades. China consumes nearly as much coal as the rest of the world combined, according to U.S. Energy Information Administration data released last month, and is subsequently the world’s largest CO2 emitter. China is expected to drive global demand for coal for decades to come, even as the fuel source’s use declines in industrialized countries like the United States in favor of natural gas.
But despite its reliance on coal, China has begun moving forward on cleaning up some of its emissions in recent years. The government recently set a larger goal of reducing carbon intensity 40 to 45 percent below 2005 levels by 2020 and began gradually rolling out several cap-and-trade pilot programs in seven major cities and provinces at the beginning of the year. State media reports then said the government’s eventual goal is to implement a nationwide emissions trading program in 2016, but little data has been made publically available. Bloomberg New Energy Finance previously estimated that the regional cap-and-trade pilots would cumulatively cover 800 million to 1 billion tonnes of emissions in China by 2015, making the market second to only the European Union’s.
Could Action Prompt U.S. Policy Shift?
If China does, in fact, roll out a carbon tax, it could help silence some U.S. policymakers who have long put off making binding emissions reduction pledges internationally because large developing nations were not making similar pledges. During recent United Nations-sponsored climate summits, the U.S. has maintained that it will not act in a major way unless China, specifically, makes similar reductions. The moves could also silence some conservative members of Congress who have previously expressed concerns about emissions leakage and industry outsourcing if the U.S. acts on dramatic emissions reductions without China.
China’s actions could also provide more of an incentive for Congress to seriously consider the idea of a carbon tax. The issue gripped many in Washington policy circles late last year as Congress looked for additional revenue sources in anticipation of the so-called “fiscal cliff,” but the White House and members of both parties on Capitol Hill backed away from the proposal following the November election. However, the idea of a price on carbon emissions could have some leverage after President Obama called on Congress to find a “bipartisan, market-based solution” to climate change in his State of the Union address last week. A pair of senators introduced legislation last week that would introduce a $20 price on carbon for the country’s 2,900 largest emitters.
