Climate change

Beijing mulls industry carbon tax for 2015

PUBLISHED : Friday, 06 January, 2012, 12:00am
UPDATED : Friday, 06 January, 2012, 12:00am

Beijing is considering imposing an emissions tax by 2015, which will hit the biggest industries that burn fossil fuel and encourage them to invest in carbon-cutting technologies.

The Economic Information Daily, run by Xinhua, quoted Su Ming, deputy head of the Ministry of Finance's research institute for fiscal science, as saying that the body had submitted a new carbon tax proposal to the ministry.

It suggested the tax be rolled out sometime between next year and 2015, targeting the largest fossil-fuel burners that emit greenhouse gases. The tax rate will take into account industries' emission volumes and profitability.

The institute's director, Jia Kang, was quoted as saying that to relieve the extra burden on firms, Beijing could consider cutting profit tax. This would encourage polluters to upgrade their technology since the carbon tax would be levied based on emissions volumes.

There are technologies to capture and store carbon gases underground, but they are still in the experimental stage. They are hindered from mass-market production by high costs and the lack of government incentives.

The institute proposed an initially charge of 10 yuan (HK$12) per tonne of carbon gas, while the Ministry of Environmental Protection favoured 20 yuan a tonne, the Economic Information Daily said.

Power producers, which rely on coal to generate 82 per cent of its output, are expected to be among the largest targets of the tax. The industry accounts for around half the nation's coal consumption. Heavy petroleum fuel users such as airlines, vessels and motor vehicle owners will also be affected.

Power companies are particularly vulnerable, having suffered massive losses in the past few years due to rising coal prices and the implementation of power price controls to fight inflation.

They already have to pay pollution charges on emissions of sulphur gases. In addition, Beijing's expected shift from volume-based resource tax to price-based tax is also expected to raise power producers' costs on coal. Such tax reforms have already taken place for crude oil and natural gas.

'It is highly likely the carbon tax will be rolled out before the end of 2015,' said Lin Boqiang, head of Xiamen University's centre for energy economics research. 'While the power sector will be in a poor position to absorb the tax, Beijing can start with a lighter tax load.'

China has pledged to cut carbon emissions per unit of economic output by 40 to 45 per cent by 2020 from the 2005 level. It has also agreed to negotiate with developed nations on a deal to cut absolute emissions from 2020, in exchange for the continuation of subsidies from them.