Will China Initiate a Carbon Tax?

china_energy.jpg China’s Ministry of Finance and Ministry of Environmental Protection have requested research from a regional think-tank to develop preliminary proposals for a national carbon tax. The proposals, which are due for publication within the month, may one day become a part of the Chinese government’s strategy to reduce greenhouse gas emissions.
International governments have pressed Beijing to implement legislation to curtail their carbon dioxide emissions and the Chinese response has typically been a call for rich countries to lead by example in the development of CO2 regulation schemes. With the possibility of a US cap-and-trade regime being approved later this year, the Chinese government’s request for research on carbon tax policies may indicate that China will head off in it’s own direction.

Devising an agreement on an appropriate taxation cost for carbon is complex, as it is affected by a number of uncontrollable variables. Preliminary research by the World Bank, the Dutch and British governments has come up with a range of $70 to $280 per ton of CO2. Certainly, further research is necessary to refine the range of taxation and more importantly, to devise one that is appropriate to the practices and scale of a country as large as China.
Revenue from a carbon tax in China represents a significant financial stream when you consider that China is the world’s largest source of CO2 with roughly 80% of its electricity being generated by coal-fired power plants. China has a population of 1.3 billion people and the country produces roughly four metric tons of GHG emissions per person. Although China’s total emission count now exceeds that of the US, the US averages about 20 metric tons of GHG emissions per person.
The question remains, what is driving Chinese interest in pursuing the possibility of a carbon tax policy when for years, they have adamantly declared that developed nations who have caused the climate crisis should lead the way in mitigating climate change? It seems apparent that developed nations are now heading in the direction of a cap-and-trade regime versus a carbon tax. Perhaps, the Chinese government views a cap-and – trade system as being overly laborious on the regulation side. Or, perhaps China is making preparations in advance of the December climate talks in Copenhagen.
However, the more likely motivation is that China strives to become a leading nation in the reduction of carbon emissions.

David received his undergraduate degree in Geographic Information Sciences from James Madison University and completed an M.A. in International Development at Clark University. With over 10 years of experience in the field of environmental sustainability, David has worked for organizations such as Environmental Defense Fund, USDA, USGS and the Smithsonian Institute.Currently, David is a NetImpact member and an MBA candidate at the Presidio School of Management where his research focus is on developing market incentives for investment in environmental sustainability.

2 responses

  1. David.
    I think it is important to point out that there is a big difference between studying and developing models, and implementing.
    There are some who have found this announcement odd, but it is actually in line overall with China’s trajectory.
    That being said, there is little chance that this will be passed any time soon given the fact that (1) they have trip to pass this before (2) China’s industrial manufacturers have been effective in fighting green taxes and (3) many of these firms have been hammered by Beijing’s previous tax and subsidy changes and – to the point many believed they were made uncompetitive in the global market place and (4) Beijing’s #1 concern right now is jobs, and increasing the costs of business is not in line with that goal
    So, while I would say that this tax would be a nice addition to an existing portfolio of steps that have recently been take, I would expect we see more announcements about investment in clean energy before we see a green tax.
    One caveat – Should Beijing listen to several recent studies showing that between 30-50% of emissions are tied to exported products, the research could get very interesting should they pursue a tax targeted towards exporters.

  2. While not perfect, this is the sort of move governments should be making to reverse climate-change. I entered this competition last year and while I didn’t win, the ones who did made some great work:
    It was all about motivating young people to send scripts or videos on water efficiency or flooding from global warming. Worthy causes for sure. Check them out! If you like them, spread the word cause these kids deserve to have their work seen.

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