China’s government is trying to decide whether to raise taxes on polluters or on energy users, but experts say it will have to do both to improve the environment.
Pollution is now a primary concern for the country’s government and public, particularly with the approach this year of the Summer Olympic Games in Beijing.
In November, Ministry of Finance researchers proposed three alternatives for environmental taxes, according to a Jan. 6 report by China’s official Xinhua news agency, citing Beijing’s Caijing magazine.
The first plan would tax manufacturers in proportion to their earnings from energy use or emissions. The second would base taxes on the volume of pollutants discharged, including air contaminants, sewage, and solid waste.
A third plan would tax the users of polluting products such as fuels and other materials like fertilizer and pesticides, Xinhua said.
The report failed to say how taxes would be calculated or when they would be paid.
In an interview with Radio Free Asia, William Chandler—an energy expert and senior associate at the Carnegie Endowment for International Peace in Washington—said that taxes should be raised on wasteful manufacturers under what is called the “polluter pays” principle.
But he added that it will be difficult to reduce pollution without also assigning a tax penalty for energy waste. “China may need to do both,” Chandler said.
“And I say that because the amount of incentives on the consumer side for being efficient in energy use is just not very high.”
Chandler said that China’s government is concerned about the social pressures that may result from raising taxes, especially on the country’s poor, who cannot afford higher fuel costs.
But he argued that this burden could be eased by a “tax shift” that reduces taxes in other consumer areas while placing higher assessments on energy to promote more efficient use.
“If you tax pollution, if you tax production, and those taxes are passed on [to] or borne by the consumer, you can reduce taxes that the consumer sees elsewhere. You can reduce taxes on profits. You can reduce taxes on [the production of] key consumer items like clothing and food,” Chandler said.
Chandler said that the government can also encourage efficiency by shifting the tax burden onto higher-polluting uses of energy and away from technology, products, and services that improve the environment.
Daniella Salaverry, co-director of the China program at Pacific Environment, a San Francisco-based nongovernmental organization, agreed that “there needs to be both control at the source [of pollution] and then some sort of consumer disincentive in terms of consuming high-polluting materials.”
Even if China’s central government does impose taxes, Salaverry said, their effect will depend on how they are assessed and collected. Like many of Beijing’s other initiatives, environmental policies must be carried out by local governments.
“If they’re not getting implemented at the local level, I think that these types of taxes will also be criticized much like many other environmental policies that China has.”
It is too soon to tell whether these proposals are more than just talk, though, Salaverry said.
“I think it’s a lot of rhetoric. But at the same time China is recognizing that they can’t continue to move forward on their path of growth without incorporating major environmental overhauls in terms of their development. So it is encouraging to know that they are talking about these things.”
Original reporting by Michael Lelyveld. Edited for the Web by Richard Finney.