In light of unprecedented pollution levels in Beijing, the Chinese government announced plans last week to introduce a carbon tax with the goal of curbing emissions. The Xinhua news agency also reported the government will implement an environmental protection tax.
While the country is one of the largest contributors to global pollution, the introduction of the new tax policies puts China on the leading edge of environmental policy to address climate change.
What stands to be seen, however, is how these abatement costs will compare to the cost of inaction in both the short and long term. Presumably, the tax will incentivize research and development in cleaner energy sources and lead to a more diversified energy portfolio.
Here’s the link to Xinhua’s story – China to introduce carbon tax: official
Can the tax man tread where the local politician fears to go? Perhaps. Direct regulation is a failure (even in the US it doesn’t work very well). So we’ll see whether a price-based mechanism works better.
I wonder if it is even possible for China to reduce its carbon output by 40-45% by the year 2020, as the article says is the Chinese government’s long term goal. A massive overhaul of China’s energy sector would likely have to take place in order to meet this reduction. And even if it is possible to reduce carbon emissions by 40-45%, what impact would this have on China’s economy, as a whole? It seems unlikely that China would be able to accomplish this feat in the next 7 years without incurring major growing pains. I am interested to see how this plays out.