20 February 2013

China Moves Toward Carbon Tax

It looks like the Chinese have learned a lesson from their recent near lethal smog incidents in Beijing:
China’s Ministry of Finance has announced that the country will levy a tax on carbon emissions, reports Xinhua. Policy experts in the United States and Europe have long argued that a carbon tax is the most effective way to reduce emissions of carbon dioxide and other greenhouse gasses, but implementing one in most large industrialized countries has always seemed politically infeasible.

In the same announcement, China’s Ministry of Finance said that direct taxes on resources, including coal and water, will also be forthcoming.

Details on the carbon tax are scant, but previous reports indicated that it would come into force by 2015 and might start at 10 yuan ($1.60) per tonne of carbon, rising to 50 yuan ($8) per tonne by 2020. Notably, the tax would be collected by local tax authorities, and not municipal environmental protection bureaus.
BTW, I did some quick back of the envelope calculations.

If you look at the weight of carbon in a gallon of gasoline (4.2 lbs of carbon per gallon based on a chemical formula of C8H18), 10 yuan per gallon is a bit less than ⅓ of a penny a gallon, and 50 yuan, about 1⅔ cents a gallon.

It's not a whole bunch of money, though it's probably about twice that per BTU for coal, but it's a start, which puts it ahead of the United States.

Also I approve of a carbon tax, because, unlike cap and trade, it does not prevent Wall Street from using "financial innovation" to rip the rest of society off.


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