China’s Carbon Tax: a Step Forward?

When it emerged earlier this week that China may implement a carbon tax optimists dared to ask whether this would mark the beginning of effective, global action in combatting climate change. 

Some western commentators suggest that even if the proposed tax becomes law it will be both very small (around $1.60 per tonne/CO2) and subject to a number of loopholes. These critics also point out that previous environmental initiatives proposed by Beijing have been thwarted by the Chinese provinces, each determined to maintain local growth.

 

In reality a tax will only come into force if it has clear benefits for the Chinese economy. The resulting tax burden would likely be passed from China’s manufacturing industries onto its main export markets in Europe and the United States. Studies from independent think tanks support this assertion and suggest that a carbon export tax as high as $32 per tonne/CO2, unrealistically high at the moment, would still be beneficial to China’s economic growth provided the revenue was suitably redistributed.

Regardless, the news is a clear sign that greater regulation of carbon emissions is here to stay. Indeed, such regulation has been gradually advancing around the world with some form of regulation in the following countries or regions:  European Union, United Kingdom, California and New England in the United States, Australia, South Korea, Ontario and BC in Canada, Norway, Costa Rica, New Zealand, Switzerland, South Africa, and now proposed in China.

Arguments rage as to whether it is the consumer or producer that is ultimately responsible for carbon emissions embodied in the world’s goods. However, it’s clear all sides will want a greater understanding of our incredibly complex and international supply chains. This is a massive undertaking and will require collaboration from the largest to the smallest business, as well as strong regulatory action from government.

The UK is at the forefront of such change with its Carbon Reduction Commitment Energy Efficiency Scheme (CRC), a mandatory scheme aimed at improving energy efficiency and cutting emissions in the UK’s largest public and private sector organisations. As these efforts move forward we are likely to see more countries advance regulation. Experts are already suggesting that Canada will follow China’s lead and debates have resurfaced around carbon taxation at the federal level in the United States.

The trend we are seeing is an advance of regulation at the state or sub-state regional level. Though it will take time, it’s advances at this level indicate progress is being made toward tackling climate change and integrating markets on a global scale. 

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