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“China must tax carbon”

Chinese officials are reportedly preparing to introduce a levy on greenhouse-gas emissions. Energy finance expert Jiang Kejun tells Meng Si it cannot come soon enough.

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China ranks second in the Forbes 2009 Tax Misery & Reform Index, coming only behind France. But Jiang Kejun, senior researcher at the National Development Reform and Commission’s Energy Research Institute, tells chinadialogue that a carbon tax in China would be a blessing – it would not increase the overall tax burden, and would even boost GDP growth.

From 2008 to 2009, Jiang and colleagues focused their research on carbon taxes, in order to provide reference material for policymakers.

Meng Si: There is a view that China’s overall tax burden is already very high and that adding a carbon tax would meet public opposition.

Jiang Kejun: The overall tax burden is very high, but a carbon tax could be revenue-neutral. This means increases are offset by reductions elsewhere, so that total revenue doesn’t change. If we collect 100 billion yuan (US$15 billion) in carbon taxes, we cut 100 billion of other taxes – that’s easily done.

We have put forward a number of proposals, such as reducing value-added tax or business tax. We initially thought about cutting income tax, but found that, as the poorest people do not earn enough to pay taxes, we would instead need to raise subsidies for that group. So if a carbon tax is implemented, it would be in tandem with cuts in other types of tax, keeping revenue unchanged.

MS: Would a carbon tax increase the burden on consumers?

JK: The overall amount of tax collected by the state would not change – it’s just a change to the structure of taxation. If you want to scrutinise the way in which that tax income is then used [i.e. whether or not it benefits the consumer], that’s an issue for the treasury. How best to use tax revenue is a question arising from development, and will take time to solve.

MS: Once collected, how will the tax be used?

JK: Most likely at the moment is that it would be fed directly into the treasury and spent along with other tax income. This tells us something about the importance the government places on climate change. There are ring-fenced funds for poverty and earthquake relief, with dedicated offices within the Ministry of Finance to spend those – but not for climate change. So climate change is not being given the same status as poverty or disaster relief.

MS: On paper, revenue-neutrality is easy to achieve. But how about when it comes to actual implementation?

JK: A carbon tax is effectively an energy tax. Coal is the main worry, as oil and natural-gas use are easily and carefully measured, but there’s the possibility of tax evasion with coal – it’s hard to determine quantities produced, and some mines may under-report. But if you’re going to collect an energy tax, this sort of thing is inevitable, so you need to look at the overall system of tax enforcement. And things should improve as coal-mining companies merge and mines expand.

MS: You argue that a carbon tax would have minimal impact on GDP, or even a positive effect, and that reasonable tax collection and a good taxation system could cause prices overall to fall. But what do “reasonable” and “good” mean here?

JK: We think a carbon tax would have a positive impact on GDP. Existing calculations show a very small drop in GDP, but there’s a failing in the model – it doesn’t allow for the inevitable acceleration in the pace of technological advances that a carbon tax would bring about.

The State Administration of Taxation has already set out a roadmap for taxation reform, with a “green taxation system” as part of this. I think this would be a good system.

At the moment, there is little sign of any increase in government spending, while income is increasing too fast. As with the Beijing municipal government, they’ve got more money than they know how to spend. Treasuries should run at a deficit, yet China has a surplus. That’s not good, and so there is a lot of pressure on the government there.

Another possible direction for tax reform is reducing the burden – for example by cutting value-added tax and individual income tax. But if these aren’t reduced, then the tax income should be spent on sustainable development and the low-carbon economy. Beijing’s government is doing that already, for example with subsidies for public transport. Taxation reform and new taxes must move in tandem if we are to relieve public worries about how taxes are used.

MS: Many officials say a carbon tax would create an image of China as a country fulfilling its responsibility to humanity and would give us the upper hand in negotiations. Has China’s consideration of a carbon tax been influenced by international climate negotiations?

JK: I think that’s not at all important. China shouldn’t pay too much attention to the international talks as it responds to climate change. By 2030, China is going to be the leader of the world, whether it wants to be or not. By that point, China is sure to be ahead in technology as well as other areas. We need to make China a competitive nation and a carbon tax – or taxes that are targeted at adjusting the economic structure – are an effective route to doing that. We should implement them as soon as possible.

China has long talked of making changes to its economic structure, but to date things are actually getting worse. Why? The government has long been doing its best, but is finding that its methods are becoming less effective. The 11th Five Year Plan’s emission-reduction targets relied almost exclusively on administrative measures. We really hope to see changes in the 12th Five Year Plan. The government is not an expert on energy saving, yet it is setting all these policies on how to save energy. The best way to turn energy-saving into market behaviour – so that firms themselves decide how to do it – is through taxation.

MS: Some academics say collecting a carbon tax at home would mean that the United States would not enforce carbon tariffs on our exports.

JK: These are two completely different issues. The United States is talking about “border tax adjustments”. I’ve spoken about this with the US State Department. First of all, whether or not they collect that tax depends on what China does – if we aren’t seen to be doing our part, then that tax will be imposed. But another piece of our research shows that China is currently doing more on climate change than the United States or the European Union or anyone else. So there’s no reason to impose that tax on our products.

Second, they also admit that if China is collecting a carbon tax, then they won’t collect the border tariff. China is already imposing export tariffs on 56 types of energy-intensive products, at about 10%. That’s higher than the “border tax adjustment” would be. What we have done is to replace tax rebates for exports with export tariffs – that is effectively a “carbon tax” that China is already collecting.

Also, the United States isn’t talking about imposing a carbon tariff on all our products. And reduced export of some products, such as coke, wouldn’t really have a big impact on China anyway. It’s fine by us if the United States wants to tax our energy-intensive products – but usually the emissions of our products are lower than those of the US.

MS: But aren’t there cases where our products produce more carbon than in the United States?

JK: Definitely. China is doing a huge amount on energy saving and emissions reduction. Our power-generating efficiency is now higher on average than the United States. And concrete and steel manufacturing in the US uses more power than in China.

But if you look at the sources of electricity used to make those products, we can’t compete – they use natural gas, we use coal. This is just a question of the resources we have. If we’re not allowed to use coal, we have to buy natural gas and that forces prices up, and the United States doesn’t want that either. So they won’t put those barriers in place lightly, because they won’t do them any good.

MS: Is there a timetable for a carbon tax?

JK: There are reports that it will start in 2013, but there’s no word on how environmental taxes will be applied and so it’s still too early to tell. As environmental taxes are a new type of tax, the National People’s Congress [China’s highest organ of power] will need to approve them – and carbon taxes are one type of environmental tax. I personally would like to see a carbon tax put in place in 2012.

I think it will happen fairly early. In 2014, we will reach the five-year point after Copenhagen and I think by then we will have seen some major changes globally.

 

Meng Si is managing editor in chinadialogue’s Beijing office. 

Homepage image by um782

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Default thumb avatar
gaidee

“卖炭翁”答姜克隽

借伟大的“碳学”开创者1300年前白居士之诗“卖碳翁”,答姜克隽君。也许我们的天空中还飘着那时的“碳”呢。
卖炭翁,伐薪烧炭南山中。

满面尘灰烟火色,两鬓苍苍十指黑。
卖炭得钱何所营?身上衣裳口中食。
可怜身上衣正单,心忧炭贱愿天寒。
夜来城外一尺雪,晓驾炭车辗冰辙。
牛困人饥日已高,市南门外泥中歇。
翩翩两骑来是谁?黄衣使者白衫儿。
手把文书口称敕,回车叱牛牵向北。
一车炭,千余斤,宫使驱将惜不得。
半匹红绡一丈绫,系向牛头充炭直。

Responding to Jiang Kejun with "The Elderly Charcoal Seller"

To respond to Jiang Kejun, I will borrow from the great initiator of "carbon science," Bai Juyi's poem "The Elderly Charcoal Seller." Perhaps our sky still has the "carbon" from that time floating around.

Cutting wood and burning charcoal in the forests of the Southern Mountain.
His face, stained with dust and ashes, has turned to the color of smoke.
The hair on his temples is streaked with gray: his ten fingers are black.
The money he gets by selling charcoal, how far does it go?
It is just enough to clothe his limbs and put food in his mouth.
Although, alas, the coat on his back is a coat without lining,
He hopes for the coming of cold weather, to send up the price of charcoal!
Last night, outside the city, a whole foot of snow;
At dawn he drives the charcoal wagon along the frozen ruts.
Ox was weary; man was hungry; the sun was already high;
Outside the Gate, to the south of the Market, at last they stop in the mud.
Suddenly, a pair of prancing horsemen. Who can be coming?
A public official in a yellow coat and a boy in a white shirt.
In their hands they hold a written warrant: on their tongues, the words of an order;
They turn back the wagon and curse the ox, leading them off to the north.
A whole wagon of charcoal,
More than a thousand catties!
If officials choose to take it away, the charcoal seller may not complain.
Half a piece of red silk and a single yard of damask,
The Courtiers have passed over the ox’s head, as the price of a wagon of charcoal!

Default thumb avatar
yangfy

碳税和碳贸易并行

碳税和碳贸易都应该受到重视,但在碳贸易不可能近期实施的情况下,启动碳税,应该是可行的。但问题关键是,如何使用好碳税。碳税是应该为气候变化服务的。如果征收了碳税,税收是需要切实用到气候变化领域的。

Carbon tax and carbon trading

Carbon tax and carbon trading should be taken seriously, but under the circumstance that carbon trading cannot be implemented in the short-term, initiating carbon tax should be feasible. However, the key problem is how to issue carbon tax in a good way. Carbon tax should be there to help climate change. If carbon tax is imposed, the tax needs to be used effectively in the area of climate change.

Default thumb avatar Reply arrow
gaidee

碳税和碳贸易

实质区别何在?盼复。

Carbon tax and carbon trade

Where's the difference in essence? Awaiting a response....

Default thumb avatar Reply arrow
yangfy

碳税和碳贸易

碳税是财政政策,而碳贸易是利用市场机制。两者不完全相同。

Carbon tax and carbon trading

Carbon tax is a fiscal policy, but carbon trading is used in market mechanisms. The two are not entirely the same.

Thumb original dscf0479 1
scullymeng

中国特色的税收更受争议

征碳税的合理性甚至税收中性的实现,在技术上都行得通,但对于实际中的税收制度,很多公众是不信任的,问题的关键不是碳税还是什么别的税的问题,而是一个“税”字本身就引起公众的很多不满。税收的制定、听证存在太多不透明,必须先有税制的全面改革和成果的产生,否则民意将很难接纳新的税种。

Tax with Chinese characteristics is more controversial

The legitimacy of levying a carbon tax and even the achievement of tax neutrality is technically feasible, but many people do not trust the tax system in practice. The crux of the problem is not about carbon tax or any other tax, but the word "tax" itself arouses the public's discontent. With the establishment of taxes and the numerous non-transparencies that exist at hearings, there first needs to be a complete reform of the tax system while producing results, otherwise it will be difficult for the public to accept new kinds of taxes.

Default thumb avatar Reply arrow
smart

征税何用?

前不久,采访姜老师的一个同事,他说,我们已经征了那么税了,哪些税用来计划解决的问题,根本没有解决。国家又不缺钱,缺的只是正确花钱的方式,因此反对征收碳税。一说到征税,大家就兴奋。

这是当时未曾发表的一段文字

我们必须考虑,为什么要征,征来做什么?现在我们连这个问题都没考虑清楚。因为资源税、环境税、碳税问题很复杂,好多媒体只是研究一点问题就大做文章。其实每个国家的税制是不同的。比如燃油税,好多人把它作为资源税的一种,其实不全面。比如美国的燃油税很低,但是国家不负责公共交通,公共交通设施很落后,家庭轿车很普及。欧盟、日本的燃油税很高,国家花了大把的钱扶持公共交通,在欧盟大多数国家和日本,公共交通很便利,私人汽车的使用量就少一些,其实国外的尤其是欧盟高额的燃油税大部分是花在高速公路、铁路、城铁等公共交通建设了。而不仅仅是为了节能减排。我们也要好好讨论这个问题。比如开征的资源税可不可以用在改善公共交通设施上,比如城铁建设、地铁建设。其实这些也是节能减排的措施。
财政部门一提起征税就兴奋,征税的问题必须慎重。环境税和碳税难以成为节能减排的手段,像征了燃油税,人们少开车了么?没有完善的公共交通设施,燃油税再高,也很难改变私人轿车增长的趋势。因此征税要和一些环境的改善措施相配套才能真正发挥作用。

How to use taxes?

Not long ago, a collegue that interviewed Jiang said, we have been taxed so much, the taxes planned to be used for solving problems have not been solved at all. The country is not lacking in money, just lacking in a proper way to spend it, therefore, I am against the carbon tax. When it comes to taxes, everyone gets excited.

This is text that has not been published

We must think about why these taxes are being imposed and what are they used for? We haven't even thought about these questions thoroughly. Because resource tax, environmental tax and carbon tax issues are complicated, many medias only research a small problem and then write a big article about it. In fact, each country's tax system is different. For example, many people consider fuel tax to be a kind of resource tax, but that is incomplete. For example, fuel tax in the United States is very low, but the country is not responsible for public transportation. The public transportation facilities are outdated while family cars are very common. In the EU and Japan, fuel tax is very high and these countries have spent a lot of money to support public tranportation. Public transportation in most of the countries in the EU and Japan is very convenient and the use of personal cars is fewer. In fact, in foreign countries, especially the EU, the high fuel tax is mostly spent on the construction of highways, railways, city rails, etc. It is not only to save energy and reduce emissions. We need to have a good discussion on this issue. For example, can the resource tax be used on improving public transportation facilities like building city rails, and subways. These are also energy saving emission reducing measures.
A mention of taxes and the finance department gets excited but needs to be cautious about the issue. It will be difficult for environmental tax and carbon tax to become an energy saving, emission reduction measure, like fuel tax, did people drive less? Without good public transportation facilities, even if the fuel tax was higher, it would be very hard to change the increasing trend of buying personal cars. Therefore, for the taxes to really work, it must go along with environmental-improving measures.

Default thumb avatar
gaidee

别忘了“科学发展观”

中国还真离不开“科学发展观”。中国人还真要好好学学。

Don't forget "the concept of scientific development"

China really cannot do without "the concept of scientific development." Chinese people really must learn it well.

Default thumb avatar Reply arrow
gaidee

“科学发展观”

官方英文为Outlook on scientific development。特此,祝好。

Outlook on scientific development

The official English is outlook on scientific development. Best wishes.

Default thumb avatar
gaidee

姜老师和同事

姜老师的同事和姜老师的意见不一致,很正常。不知道smart同学为什么大惊小怪。奇怪的倒是,为什么当时这段文字没有发表,而是现在发表。这个说明姜老师的同事没有姜老师的份量。

Jiang and his colleagues

It is normal for Jiang to have a different opinion from his colleagues. Why has Smart made such a much fuss? What is really strange is, why this text wasn't published until now. This indicates that Jiang's colleagues don't have as much weight as him.

Default thumb avatar
meleze

对法国碳税的失望

你的文章在以下网址已经被译为法文:http://www.meleze-formation.com/index.php?option=com_content&task=view&id=140&Itemid=2
希望你的计划不会被法国碳税的失败而左右。

Disapointement on Carbontax in France

Your article has been translated in French language there http://www.meleze-formation.com/index.php?option=com_content&task=view&id=140&Itemid=2
Let's hope that your plan will not be diverted by the french failure.

Default thumb avatar
smart

回复 gaidee

不知道smart同学为什么大惊小怪。奇怪的倒是,为什么当时这段文字没有发表,而是现在发表。这个说明姜老师的同事没有姜老师的份量。——我没有大惊小怪,现在发表有什么奇怪呢?何以见得,姜老师的更有分量呢?无稽之谈,都不过是一家之言而已。

respond to gaidee

I don't know why friend smart notes much fuss about nothing. the strange thing is why these words are published now instead of before. This shows that the professor Jiang's collegue doesn't have the same power as Jiang.
I don't wanto to make a fuss about this.Why is it strange to publish now? Why Jiang si more powerful? These are nonsense. It's just his own comment.

Default thumb avatar Reply arrow
gaidee

“都是一家人”

你姜老师长,姜老师短的,不就是他有份量嘛。否则,你怎么不把他的那个和他一样“重”的同事的名字也说出来呢?宣传嘛,要全面,你现在马后炮,显示什么呢?你报道的时效性呢?公正性呢?客观性呢?

“We are one family"

You keep saying Prof. Jiang this, Prof. Jiang that, because he has influence. Otherwise, why don't you tell us the name of this colleague that is just as "important" as him? Publicity needs to be thorough, while you are too late. What does this indicate? Where is the timeliness of your reports? The impartiality? The objectivity?