After decades of filthy growth, China has come up with a new law to tax heavy industry for its pollution. The National People's Congress (NPC) Standing Committee, which is the decision-making unit of the Chinese parliament, said the new Environment Protection Tax would become effective on Jan. 1, 2018, giving local industries and provincial governments time to adjust.
Analysts say China wants to wait long enough to see whether U.S. President-elect Donald Trump will scrap the Paris climate deal, one of his campaign promises, and then examine the affects of such a move. If the Trump administration were to disrupt the climate agreement, China would be under no obligation to concede to the agreement, they said.
Wang Jianfan, director of the Ministry of Finance's tax policy department in Beijing, told journalists that the new law would replace the existing "pollutant discharge fee,” which was being misused by provincial governments to exempt industries in their local area from paying a high duty.
"The new law will reduce interference from government," Wang said. It will improve environmental awareness and force companies to upgrade technology and shift to cleaner production, he added. Tan Yunming, professor at the Central University of Finance and Economics, echoed the government's views, saying, "The upcoming law is expected to raise polluters' operational costs and, thus, force them to upgrade technology and shift to cleaner production."
Yuan Ying, assistant manager at Greenpeace East Asia’s office in Beijing, told the South China Morning Post that, although the penalties might not go far enough, the law constituted “significant progress in tackling pollution problems though taxation.”
Further, China is working on a new water pollution law that will force chemical producers, industrial and mining zones, tailing ponds, chemical disposal sites and landfills to prevent leakages and dig wells to monitor the quality of groundwater. Government officials noted that, long before the new "green tax" is implemented, a 3,000-strong force of anti-pollution inspectors will work with provincial governments to conduct investigations.
But many doubt if the new tax will persuade polluters to invest in equipment for reducing emissions, disposal of solid waste and discharge of polluted water. The tax rates have been kept so low that companies could see benefits from delaying or avoiding investment in clean technologies.
"Why should anyone invest heavily on new equipment if he can get away with low taxes?" a local environment official asked, requesting anonymity. "The new tax may add a burden of less than 1% for many industries.”
Under the new law, the tax on one ton of hazardous waste is 1,000 RMB, or $144—not much of a burden for companies that produce 20 to 100 times the amount of goods compared to the waste they release. Coal mines and users could pay as little as 72 cents per ton of waste. While the charge for emitting nearly one kilogram of sulfur dioxide is 17 cents, the charge for releasing one kg of chemical oxygen demand (COD) is 20 cents.
Since the existing pollution discharge duty is so small, industries have felt no pressure to invest in cleaning equipment. The government in 2015 collected $2.5 billion from 280,000 companies, which works out to an average of $8,929 for one unit in a year. This amount is minuscule, given that most of these industries produce goods worth millions of dollars and, in many cases, hundreds of millions of dollars. The government's statistics bureau said it expects industrial companies to make net profits exceeding $100 billion in 2016.
Analysts note that, since China imports a substantial portion of clean technologies, the new law may discourage companies from buying new equipment.
China is watching U.S. reaction to its new program. Trump recently named a harsh China critic, Peter Navarro, as the head of a national trade council, based in the White House. Previously, Navarro accused China of using emissions as an unfair trade practice, saying China encourages its exporting industries to cut costs by investing less in clean technologies.
The Chinese government last week issued a red alert, the highest level of alert, when the country experienced five days of heavy smog. The PM 2.5 level, which represents the minutest particle capable of entering the lungs, often crossed 500, which is nearly 30 times the permissible limit prescribed by the World Health Organization. Even on normal days, the PM 2.5 level is above 250 in China.