China CO2 tax to be delayed for at least a year

China’s tax authorities will wait at least another year to introduce a tax on carbon, deferring to concern that economic growth might suffer, according to a Ministry of Finance (MoF) official.

Planning for a carbon tax has been underway since China’s 12^th Five-year Plan was announced two years ago. At the beginning of last year MoF experts suggested levying a carbon tax in 2012 at 10 yuan (USD1.6) per tonne of CO2, increasing to 50 yuan (USD8) per tonne by 2020. Just last month Jia Chen, head of the Ministry of Finance’s Tax Policy Division, revealed a new set of taxation policies, including a tax on CO2 emissions, designed to preserve the environment.

However Jia Kang, the MoF’s head of research, has told Bloomberg that the carbon tax is “still in internal discussions,” as there is “obvious opposition,” without identifying the opponents. He said it can be expected that the carbon levy will eventually be introduced at a level of 5-to-10 yuan (80 US cent to USD1.61) per tonne of CO2

Back in 2009 researchers at the Chinese Academy for Environmental Planning and the Energy Research Institute of the National Development and Reform Commission published a paper saying a carbon tax starting at 20 yuan was the minimum needed to help reduce emissions.

China is, however, still moving ahead with the establishment of seven pilot carbon trading programs in Beijing, Shanghai, Shenzhen, Guangdong, Tianjin, Chongqing and Hubei. By 2015 it is envisaged these markets will regulate 800 million to 1 billion tonnes of emissions, making it the world’s biggest cap-and-trade program after the one in Europe, according to Bloomberg New Energy Finance.

News of the carbon tax postponement comes just as the Chinese government has tightened the screws on compulsory energy efficiency.

On Monday the National Development and Reform Commission announced that carbon intensity fell 5 percent, and energy use per unit of GDP slid 3.6 percent last year, beating targets of 3.5 percent. As a result it has upped the 2013 target for reductions in both carbon and energy intensity to 3.7 percent.