FocusChina tinkers with carbon tax for clean energy commitments

30 June 2009 07:48  [Source: ICIS news]

By Fanny Zhang

GUANGZHOU (ICIS news)--China has been carefully mulling the introduction of carbon tax as part of its efforts to conserve energy and cut its greenhouse gas emissions on its road to full industrialization.

As it graduates from the status of a developing nation a few years from now, the country may have to commit to rigid clean energy measures that would be detrimental to its industries in the short run, analysts said.

The Ministry of Finance, Ministry of Environmental Protection( MEP) and the State Administration of Taxation (SAT) are expected to come up with a proposal sometime next month after reviewing the feasibility of imposing carbon tax for more than a year, they said.

China, which toppled the US as the biggest emitter of carbon dioxide globally in 2007, could be preparing for the discussions that will take place in Copenhagen, Denmark in December to develop a new climate pact in anticipation of the expiry of the Kyoto Protocol in 2012, analysts said.

Under the Kyoto Protocol, industrialized countries have specific targets to reduce their emissions of greenhouse gases such as carbon dioxide and methane that must be met.

“If China is forced to sign up to targets on greenhouse gas caps in the negotiations, it may have to come up with an environmental control mechanism like carbon tax within its own turf,” said Bean Li, sustainable development coordinator at Bayer Technology and Engineering (Shanghai).  

The Chinese government has been toying with the idea of carbon tax for years and the measure is deemed essential to build the country’s image that it is pursuing development while being mindful of its environmental responsibilities in the battle against global warming, said Yang Fuqiang, Beijing-based director of Global Climate Change Solutions at World Wildlife Fund (WWF)

The actual implementation of carbon tax, however, may have to wait until the world’s third biggest economy get its bearings back after a grueling financial and economic crisis, analysts said.

“China would not be willing to impose carbon tax as that will hurt [the] economy severely,” said Li of Bayer Technology.

“Under the background of global financial crisis, China may hardly realize its GDP [growth] target of 8% this year. So, a carbon tax is not likely getting imposed soon,” said Yan Gang, a researcher from the Chinese Academy for Environmental Planning.

The energy sectors like coal and oil industries will be hit hard as business costs would spike, analysts said.

“We’ve done a study (on the impact on economy) and found that the impact would be negative in the initial one or two years but would turn positive thereafter,” said Yang.

The tax could potentially dampen demand for oil products, said a source from a major Chinese refinery.

Based on a recent study spearheaded by the MEP, 2012 is the ideal time for China launching carbon tax to commit to the Bali Road Map, which requires developing countries to take measurable, reportable and verifiable actions on reducing greenhouse gas emissions.

The study, which was published in January, established that a low carbon tax rate of yuan (CNY)20-40/tonne ($2.93-5.86/tonne) would effectively cut China's carbon emissions and improve its effort at conserving energy with minimal adverse impact on its economy.

But the task of turning the world's biggest greenhouse gas emitter into a green economy would be difficult and would require hefty technology funding from wealthy countries, according to a recent study from Britain's Tyndall Center for Climate Change Research.

The Chinese government has its own targets of reducing its energy consumption by 20% and its pollutant emmissions by 10% between 2006-2010.

“China needs to be prepared for long term," said WWF's Yang.

So far, he said the country has so far been shielded from commitments to greenhouse gas emmission reductions but by 2025-2030 "China will definitely become an industrialized country".

($1 = CNY6.83)

To discuss issues facing the chemical industry go to ICIS connect

By: Fanny Zhang
+65 6780 4359

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly