China has announced it will establish a carbon tax by adding CO2 to the scope of existing environmental levies.
A statement published on the Ministry of Finance’s website detailed a series of tax reforms in the country. These included the proposals to bolster existing efforts “to continue to improve and implement tax policy to support energy conservation, environmental protection and comprehensive utilization of resources”. Discussions on a Chinese carbon tax have been on-going for years but the latest statement now provides a glimpse of how this might be structured.
The document, written by Jia Chen, secretary of the tax administration pledges “to actively promote environmental tax reform, existing sewage charges to the environmental protection tax, and carbon dioxide emissions into the scope of the collection, and collecting authorities be changed by the environmental protection department of the local tax authorities.”
China is already trialling cap and trade schemes to reduce the emissions from heavy industry and electricity generators.
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.
“For example by moving away from coal or by using capture technology across multiple pollutants.” China has been more vocal on its air pollution challenges in recent years as public outrage has increased. Improving air quality as a result of climate mitigation actions would prove extremely popular. The US senate was presented with proposals for a carbon tax of $20 a tonne last week. Former White House economist Adele Morris told RTCC that cap and trade legislation had tried and failed in Washington and that a carbon tax that used revenues to reduce the deficit would stand abetter chance of finding support.