Diversified emissions standard needed before carbon tax
June 18, 2010 | BY
clpstaff &clp articles &Counsel believe certain emissions-related policies must be introduced before China can levy carbon, environmental and resources taxes as it reportedly…
Counsel believe certain emissions-related policies must be introduced before China can levy carbon, environmental and resources taxes as it reportedly may do as part of its next five-year plan.
A senior researcher of The National Development and Reform Commission was quoted by the China Daily recently saying that the government would levy such taxes only if they are helpful to the mitigation of carbon emissions.
Before any new tax measures can be introduced, “the government needs to set up a set of reasonably diversified standards of emissions tax to cater for different locality situations,” said Windson Li, a senior consultant in Beijing at DLA Piper. “A flat and rigid standard may be harmful to some underdeveloped regions.”
The possible carbon and resources taxes will mostly impact the mining, oil, energy and carbon industries, and probably the electronic and steel sectors, which consume a lot of non-renewable resources.
“It is more likely that the carbon tax will be on top of the resources taxes to be levied, which will add to the cost for those industries that are heavily reliant on the consumption of traditional energies such as coal and gas,” said Li.
He additionally added that enterprises may seek to pass part of the additional cost downstream or to consumers. This will squeeze their profit and cash flow to a certain extent.
China's present tax structure on resources consumers, for example an oil tax, already includes a tax on the processes of exploitation and manufacturing. “A levy on the carbon-related industry will bring about a tax burden onto the market which means that the price of resources is likely to rise. It might lower the demand on resources,” noted Li. “But only for the short term.”
Under China's current regime, implementing a tax policy is not easy. “Tax authorities have to strike a balance across different industry sectors and their interests,” said Li.
“Especially because China does not have a consistent system on emissions measurement yet.”
This premium content is reserved for
China Law & Practice Subscribers.
A Premium Subscription Provides:
- A database of over 3,000 essential documents including key PRC legislation translated into English
- A choice of newsletters to alert you to changes affecting your business including sector specific updates
- Premium access to the mobile optimized site for timely analysis that guides you through China's ever-changing business environment
Already a subscriber? Log In Now