Why we risk overinterpreting China's carbon tax statements
- 22 Feb 2013, 13:00
- Ros Donald
China may be developing plans to tax carbon
emissions, according to a senior official in the Ministry of
Finance. The announcement has caused some excitement, but how
realistic is the prospect of effective carbon regulation in China
any time soon?
China plans to include a carbon tax as part of a
suite of environmental protection taxes including water, the
Xinhua news agency reported this week.
It quotes Jia Chen, head of the Ministry of Finance (MoF) tax
department, who made the announcement on Tuesday.
There's no mention of when the plans would be
implemented, but Chen says local government tax authorities would
be in charge of the new levy.
The possibility of a carbon tax has been on the books
for some time. In 2010, the ministry suggested introducing a tax of
10 yuan (around £1) per tonne of carbon dioxide, increasing to 50
yuan (£5) per tonne by 2020.
This would make the tax fairly modest - for
comparison, the current price of carbon on the struggling EU
emissions trading scheme carbon market is around €4, or £3.46 - a level that means carbon permits are so
cheap that the market is flooded.
Bloomberg notes that the announcement may mark a change
in government policy. Last year, it says, the Economic Information
Daily reported that the government planned not to include carbon in
its environmental tax package.
But it might be unwise to overstate the significance
of the announcement. Terry Townshend, deputy secretary general of
policy development at the
Global Legislators' Organisation (Globe
International) says he is unaware of any official announcement,
although discussions about the possibility of a carbon tax have
been going on for several years. He says:
"The ministry has simply stated it
needs to reform reform the tax system to promote better
environmental protection (among other things) and has suggested the
possibility of including carbon emissions into a broader
For those who want to promote action against carbon
emissions nationally and internationally, the news is potentially
an important sign that the Chinese government is following through
on its avowed plan to reduce carbon intensity by 40 to 45 per cent
by 2020, in comparison to 2005 levels.
China has become a symbolic figure in the debate over
climate change policy. The country last year caught up with the US
as the biggest emitter of greenhouse gases per capita and it's been
blamed - fairly or unfairly - for hampering international agreement
on global carbon emissions targets. Opponents of international
action have cited China's growth path as a reason not to impose
So does the carbon regulation discussion in China
throw up a challenge to this view?
BusinessGreen says the prospect of a
tax "could help neutralise some of the criticism aimed at
proposed carbon taxes in the US and more ambitious climate action
in the EU, which has argued against such measures on the grounds
China is not taking similar steps."
And environmental blog
Grist also suggests the discussion over
carbon taxing in China is a "blow" to Republican rhetoric on carbon
But although the announcement may cheer those in
favour of international action on carbon emissions, it's clear
China's policy is no great shakes yet.
According to the
New York Times, China's carbon tax
would have to increase dramatically to 500 yuan per tonne to reach
the level at which experts say it's possible to stabilise climate
Wall Street Journal has already claimed
the proposal is little more than "political theatre" designed to
give it "wiggle room" in international negotiations while it
continues on its high carbon growth trajectory.
China is under pressure to change its emissions
profile, however, and not just because of carbon dioxide. Beijing
has been experiencing cripplingly
poor air quality due in part to the
country's reliance on coal, hampering normal life and leading to
health problems for thousands.
Cap and trade
Carbon taxing isn't the only carbon-cutting measure
China is entertaining. The country has also seen several local
trials of a cap and trade system to help reduce the country's
emissions. Carbon trading was listed as a key policy initiative in
the country's 12th five-year economic plan, which covers
According to an article the journal
Nature, six regional pilot schemes are
expected to be rolled out in 2013. The article points out that a
carbon market isn't the natural choice for such a
tightly-controlled economy. But it notes:
"China's political system could let a
carbon market grow faster than anywhere else. Once Chinese leaders
have accepted a concept, opposition is steamrollered and changes
are implemented much more quickly and broadly than is possible in
societies in which policy-making is based on a balance of the
interests from different stakeholders."
Unlike the carbon tax, which comes under the MoF's
purview, China's National Development and Reform Committee
(NDRC) - the body dedicated to restructuring the country's economy
- is overseeing the rollout of carbon trading schemes.
What's going on?
It's worth pointing out that it's pretty much
impossible to know what discussions on climate policies are
happening in Chinese government - so while different sides of the
debate may seize on announcements by officials, they may not really
represent the tenor of policy formation. Says Townshend:
"As with most things in China, the
debate is pretty opaque and played out largely behind closed doors,
so it's not always easy to know exactly what's going on."
The emergence of two possible carbon regulation
schemes may also represent some competition between the MoF and
NDRC over who would control the revenue from a carbon tax or cap
and trade. Townshend says it's likely that the government would run
a pilot tax scheme, just as it is currently for carbon trading,
before making a decision about a national tax.
Photo: Shubert Ciencia