Chinese finance official advocates for carbon tax

A senior official in China’s Ministry of Finance recently wrote an article advocating for a tax on carbon to be implemented as a way to cut emissions.

Deborah Seligsohn, a researcher at the University of California at San Diego and a former State Department official in Beijing, says the ministry has previously had people in support of a carbon tax, and is always looking to revive the country’s economy.

“The (ministry) would like to see a reduction in energy intensity, an increase in economic efficiency, a shift from heavy industrial services,” she said. “A carbon tax, which essentially puts an extra cost on inefficiency and high energy use, and generally capital intensive industry, would be a way to advance a number of their goals.”

A carbon tax would help reduce the use of carbon-intensive fuels by increasing their cost. And the carbon tax’s amount will depend on the reduced use of these fuels, Seligsohn said.

“There has been a certain amount of economic modeling done on what kinds of carbon taxes would have on what kind of impact, and there’s a lot of indication that putting a fairly modest tax on would have an impact,” she said.

If a modest tax was put in place and increased over time, Seligoshn says, it would have a sizable impact, because industry would change its behavior to avoid future tax hikes. 

China has made a commitment to reduce carbon emissions and is in the process of implementing a pilot cap and trade program in a number of cities. But within the Chinese government there are two different views on how to to reduce carbon emissions, Seligoshn said.

“The National Development Reform Commission is more in favor of a cap and trade, which they would run. The Ministry of Finance is more in favor of a carbon tax, which it would run,” she said.

It will come down to, Seligoshn says, the government coming up with a way to combine the two.

“There’s a lot of policy innovation going on using market mechanisms to control carbon. Now what we know about carbon dioxide is certain atmospheric greenhouse gases are the ultimate public goods problem,” she said. “Once you emit them in the world, you affect everyone in the world equally.”

China has looked at these issues, but they say in order to reduce CO2, the U.S. will need to do more, Seligoshn said.

“The Chinese are quite skeptical that the U.S. is going to move. What they’ve seen over and over again is they’ve done quite a few things in the last five to 10 years, and over that period the U.S. has mostly debated,” she said.