A Chinese carbon tax? Isramart carbon news

Isra-mart Carbon broker news

China has received lots of flak from a variety of people and organizations for not contributing enough to the fight against climate change. Much of this is justified. As the largest emitter of greenhouse gas emissions, it hasn't done nearly enough to both curb domestic emissions and support international climate change negotiations.

The much touted son of Kyoto and its associated summit in Copenhagen this December provides China with an opportunity to demonstrate that it's willing to do more. One of the last things the Chinese Government wants is to be seen as the barrier to progress - as the US was under the presidency of George W. Bush.

So, what are the Chinese likely to do before or during Copenhagen to demonstrate progress? There is the usual list of things that most China watchers have identified, for example, that the Government will decide to shift from an energy intensity target to a carbon intensity target. The current five year plan (2006-2010) aims to reduce energy intensity (the amount of energy used per unit of GDP) by 20%. For the next five year plan (2011-2015) this would be replaced by a target for the reduction of greenhouse gas emissions per unit of GDP.

There are other things the Chinese could announce before Copenhagen, such as supporting the creation of new low carbon zones. One other option, unexpected though it would be, stands out: the introduction of a carbon tax in China. Not yet considered likely, though some have noticed a bounce in radio chatter from sources involved with and in China. It would be a very sensible option.

For a start, there's the prospect of China turning up at Copenhagen in December with a carbon price higher than anywhere else in the world. It wouldn't have to be a very high tax to achieve this accolade – the EU Emissions Trading Scheme permit price is falling and is generally anticipated to fall even further before Copenhagen. It would also disarm the trade argument – that Chinese companies have an unfair advantage because they don't have to pay for the carbon they emit.

Imagine, after all the lecturing from the Europeans and (belatedly) Americans about climate change, the Chinese could turn around and say they're doing much more. This would put both EU and US climate negotiators on the back foot. This is not, however, the only reason why a Chinese carbon tax would be a good idea.

The introduction of a Chinese carbon tax would, amongst other things, create a policy driver behind the shift to a carbon intensity target, send credible long term signals to business about the cost of carbon, place a price on carbon throughout the economy, and might (if applied properly) save billions of tonnes of CO2.

At the start it wouldn't necessarily be a difficult or expensive thing to introduce either. The Chinese are accomplished at introducing exemptions to various laws, taxes and regulations. Just take China's environmental laws – they have recently become some of the most stringent in the world – but are rarely applied and totally ignored in the less developed western and central provinces and municipalities.

As an option for the Chinese Government a carbon tax is a pretty good one. In advance of Copenhagen it would disarm claims that China isn't stepping up the plate on climate change, neutralize looming trade related arguments over unfair competition, initially cost very little and, if we're lucky, actually help in the fight against climate change.