China not to introduce carbon tax soon

Carbon tax was not involved in the draft of China’s new environmental protection tax law submitted to the State Council for approval at the beginning of November, because the regulation overlapped with the current pilot emission trading schemes (ETS), market sources said.

The draft drew market attention as carbon tax was included in the preliminary version.

The proposed environmental protection law aimed to replace the current pollutant discharging fee, which generally covers waste water and gas, solid water and noise pollution, except greenhouse gases.

There are multiple problems in imposing carbon tax, although it might be more efficient in protecting the environment in the short term.

The fairness of carbon tax is the first concern as the petrochemical and energy industries have different responsibilities while the standard tax rate is hard to define. Secondly, the industrial entities in China are highly sensitive to tax burden at the moment.

In addition, carbon tax and emission quota trading are two main mechanisms to mitigate greenhouse gases emissions whilst they are not compatible with each other, according to an expert close to the group to examine the environmental protection tax.

A new carbon tax mechanism will cause a clear overlap with the existing pilot ETS in China, so it is not likely to be applied soon, the expert stated. Kun Yang