The National Development and Reform Commission (NDRC) and the Ministry of Finance (MOF) have jointly developed a report called “China’s Carbon Tax System Framework Design”.
http://www.ccchina.gov.cn/cn/NewsInfo.asp?NewsId=23889
Key findings:
- the carbon tax could be introduced as early as 2012, under the framework of the 12th 5-year plan
- carbon tax revenue will be used to subsidize the energy efficiency and environmental protection sector and companies
- the tax will be imposed on fossil fuels: coal, natural gas and oil
- tax rate starts at a low 10-20 RMB per ton of CO2 and will see a gradual increase to 40-50 RMB by 2020
- key industries can be exempted from the tax
- tax revenue will be shared 7/3 between central government and provinces to encourage enforcement
With support from both NDRC and MOF, looks like the carbon tax is really happening, replacing the “environmental tax” on natural resources – a rebranding if you want. Increasing tax rates set an important signal, although with such low tax rates, it’s mostly symbolic in the beginning.
Impact on CDM projects
With current coal prices, that roughly translates to a 3% tax. It certainly has a slight impact on the additionality of EE projects, but not a dramatic one. For renewables, there is no direct impact, as benchmarks will not be adjusted downwards. The biggest impact will probably be perception in Annex-I countries.