Tag Archives: Environment

More on China's environment tax: a response and a repost

A few notes of follow-up on my first experiment in translation: the People’s Daily Online interview looking at the prospects for an environmental tax being included in the next Chinese 5-year plan.

  1. My friend and former classmate Ella Chou offered much more context on this discussion than I could have given off the top of my head. At her Harvard Law blog, she noted that anticipation of the eventual arrival of an environmental taxation regime are nothing new. Moreover, she pointed out that existing taxes include some environment-related elements. Finally, she gives us two important issues to look out for:

    1. Measurement of the pollutants or environmental impact, which would be the basis for the tax, requires not only competent agents of action, be it local environmental bureau or other agencies, but also strong and vibrant citizen participation. As seen from the utilization of the current Environmental Impact Assessment Law, local environmental bureaus are extremely weak (as opposed to the local enterprises), with the exception of Beijing Environmental Bureau, and so far voluntary citizen groups have been the primary agents in provoking this law to protect their living environment. To make the environmental tax system work, China has to give environmental NGOs and private citizens more space to act as a check on the industries.

    2. Revenue-neutral. In the interview Graham translated, Su Ming said the taxation would receive support among local governments because of their revenue increase. Yet it is crucial that the taxation does not increase the already immense inequality. We can all name a dozen reasons why a proposed environmental tax would affect the poor much more than the rich. But in China, because of the type of jobs those heavy industries or coal fire plants offer, it is very likely that those factories and power plants would just shift the extra tax burden onto their uneducated, short-contracted (many even without a contract) workers. So this calls for more rigorous enforcement of Labor Law and Labor Contract Law in addition to a social welfare net to ensure that the cost does not shift to the poor. Many proposals of balancing the environmental tax revenue suggest using the revenue in environmental restoration or reallocating neighborhoods around the heavy-industry factories. Either way, this should be of main concern to the policy makers.

  2. Related post at Change.org: I published a related post at Change.org about the prospects for China to take action on marketizing environmental costs soon, while the U.S. process may continue to lag.
  3. Reposted at World Policy Journal’s blog: The translation also was the first of what I hope will be many contributions to the blog at the World Policy Journal and World Policy Institute website. Thanks to the WPJ staff for their interest and assistance in re-posting, and look out for more contributions over there in the future.

Environment tax likely in China's next 5-year plan (my translation)

[This is a bit of an experiment. I’m laying bare a bit my mediocre Chinese translation skills, but thought I’d provide a translation of an interesting interview. I hope to continue doing this sort of thing and to sharpen my abilities. Any corrections or comments very welcome! For now, here we go:]

Greater Possibility of an Environmental Tax in the 12th Five-Year Plan [ORIGINAL IN CHINESE]

The main reason for the tax is not to increase government revenue; it is aimed at improving the ecosystem and promoting energy savings.

Ping Ya

August 9, 2010, 9:25 a.m., Renmin Wang, People’s Daily Overseas Edition—According to media reports, the issue of an environmental tax in China has reached the stage where the Ministries of Finance and Environmental Protection and the Tax Bureau are asking the State Council for instructions on implementing the tax, possibly reaching the public in 2013.

The so-called enviornment tax is an integrated policy designed to include the social costs of pollution and ecosystem destruction in the manufacture and purchase prices of goods, giving natural resources economic value through market mechanisms. What difficulties come along with proposing an environment tax? What trades and industries might such a tax affect? And why do local governments especially support an environmental tax? Su Ming, associate director of the Research Institute for Fiscal Science of the Chinese Ministry of Finance answers questions.

Environmental taxation relatively behind, overall

Q: There are a lot of rumors recently about the introduction of an environmental tax. We’ve heard several government bodies have reached an agreement. What’s the probability of the tax being introduced in 2013?

Su Ming: I think the environment tax is very important. First, in the development of the taxation system, the environmental taxation regime is so far lacking. Such a regime is important to the development of a comprehensive taxation system. Second, implementing an environmental tax will assist in ecosystem and environmental improvements and natural resource preservation goals. The central government is also very interested in an environmental tax, and has repeatedly proposed its study. I personally think it’s relatively likely the environmental tax will be included in the 12th Five Year Plan.

Q: We know an environmental tax is a system of taxes rather than an individual tax, so it’s possible levying such a tax could result in repeat taxation. For example, a carbon tax has also drawn interest. If an environmental tax were implemented, would there still be a carbon tax?

Su Ming: The environmental tax system would include the carbon tax, so the scope of “environmental tax” is larger than “carbon tax.” However, the individual taxes of the environmental tax would be introduced one step at a time rather than all at once, beginning with the most crutial. It’s important to understand with the carbon and environment tax issues that they come together.

No Resistance From Local Govermnents

Q: The idea of an environment tax was proposed many years ago, but it hasn’t yet been implimented. Where does the difficulty lie?

Su Ming: It’s easy to talk about implementing a tax, but actually doing it is difficult. Because the implementation of a tax and its collection policies involves many interests including the government, private enterprise, consumers, and individuals, the design process is multi-faceted. These interests and their relationships present the hardest challenge. Moreover, an environmental tax involves the development of some industries to the extent that it involves economic development levels, employment, macroeconomic and microeconomic conditions, and business and individual actors all affected to different degrees. Therefore, taxation policy objectively faces certain challenges.

Q: You just mentioned interest group input. In April, the Jiangxi Province government applied to have the environmental tax launch in their province. They must already have the conditions ready for an environmental tax and want to be the first experiment. How big an influence does the environmental tax have on local income?

Su Ming: The primary goal of implementing an environmental tax is not to increase government revenues. It is aimed at improving ecosystems and the environment and conserving resources. These are the original intentions of the national environment tax plan. I think increasing revenues is a secondary concern. The second way of looking at it, whether it’s an environmental tax or a carbon tax, such taxes can improve financial regulation and increase revenues. From the perspective of local governments, then, there is no reason to resit the policy. That’s my understanding.

Large Impact on High-Pollution Business

Q: If an environment tax is introduced, what industries and business will see the largest impact?

Su Ming: Simply put, the environmental tax would most effect high-emission, high-energy-consumption, or relatively large industries, for example steel, chemicals, oil, cement. But the impact is big and it isn’t. The core question is how to set up the tax rate. High and low rates have different influences, so from a feasibility perspective, I take a scholarly perspective and examine how best to start out the tax rate low, and then perfect and adjust the policy one step at a time, whether it’s an environment tax or a carbon tax.

Moreover, there are many kinds of environmental taxes. For example, in the past we haven’t called it a tax, but that doesn’t mean there was no fee leveled on any pollutant emissions. In the past we have fees to collect, so to some degree the regulation of pollutants is already in the process of changing from a fee system to a tax system. Thus in setting tax rates, we look at past fee levels. Fees and taxes thus have a certain relationship.

Will Kyoto's Successor Count 'Outsourced Pollution'?

If a product is consumed in one country, and it is manufactured in another, which country is responsible for the carbon emissions from manufacture? And if one country outsources manufacturing to a country with more lax environmental regulation, who’s responsible for the extra carbon? These will be part of the discussion in Bali when representatives of the world’s countries gather next month to negotiate a successor to the Kyoto Protocol.

In 2006, the idea that outsourcing industry meant outsourcing pollution was already well developed. A think tank report at the time suggested that “when trade between China and its partners exerts an environmental impact, the responsibility should be borne by all parties, including manufacturers, traders and consumers in the product chain,” according to the China Daily.

In The Wall Street Journal, Jane Spencer reports that this concept is back, and may play a role in Bali.

Past accords like Kyoto have looked at emissions on a country-by-country basis, requiring participating nations to reduce greenhouse gases released within their borders. In other words, the manufacturing nation pays for the pollution. But in a twist that could put more pressure on industrialized nations like the U.S., academics, environmentalists and some policy makers argue the next global climate treaty should take into account a nation’s emissions “consumption.” They argue the emissions are embedded in goods that move around the world through trade — so if the U.S. imports iPods from China, Americans should share some responsibility for the pollution produced in making them.

“As China’s emissions rise, everyone is pointing the finger of blame at China,” says Andrew Simms, policy director of the New Economics Foundation, a think tank and environmental-advocacy organization based in London. “The real responsibility for rising emissions should lie with the final consumers in Europe, North America and the rest of the world.”

The article notes that some in the U.S. dispute this idea, but I find it pretty persuasive. If U.S. or other consumers didn’t buy products, they wouldn’t be made. The essential cause of emissions is the consumer. It doesn’t make sense to blame the venue of the proximate cause: coal burning in China.

This shouldn’t let China off the hook, though. China’s manufacturing is indispensible in the world economy, but we could do without the inefficient energy practices. The rub is that, without proper government intervention and assistance, more efficient practices could make products more expensive in the short term.

In the United States, the government has used a variety of means to encourage efficiency. Once efficient practices are mandated, manufacture actually gets cheaper: Factories buy less energy. But the innovation costs money at first. That’s why governments develop rebate programs to offset higher consumer prices or other incentives to offset higher costs of manufacture.

What this question raises, in my view, is whether it’s the exclusive responsibility of the Chinese government to back efficiency in China. If foreigners consume the products, shouldn’t they pay to reform the industries? Imagine China charged a carbon tax on all products and put the money into efficiency programs. Would the WTO allow China to charge a carbon export tax? Maybe Bali will help solve all this.