China may impose an import tax on light-cycle oil as environmental regulators increase scrutiny of high-emission fuels to meet government’s 2060 carbon neutrality target
- Chinese regulators are considering a tax on imports of so-called light-cycle oil (LCO), and have asked for feedback on a draft plan
- The levy could take effect as soon as the first half of 2021 if approved, according to people familiar with the plan
Chinese regulators are considering a new tax on imports of so-called light-cycle oil (LCO), and have asked energy companies and government agencies to provide feedback on a draft plan, people with knowledge of the matter said. The levy could take effect as soon as the first half of 2021 if approved, the people said.
Taxing LCO imports would upend the economics of a market that ballooned to US$7 billion last year from almost nothing in 2014. Demand has soared in part because LCO’s exemption from China’s fuel consumption tax means it can be used to make diesel and fuel oil at cheaper prices than those charged by state-owned Chinese refiners including Sinopec and PetroChina.
LCO imports – mostly from South Korean suppliers like SK Innovation and GS Caltex – hit a record in 2020 as China ramped up construction and industrial production to revive its Covid-battered economy, stoking demand for diesel and other fuels.
LCO is currently exempt from fuel consumption tax because it’s considered a petrochemical feedstock, not a finished fuel.
