Signal: China's New Anti-Pollution Measures

environment cleantech pollution green-development-index ept-law environmental-protection-tax-law ept environmental-protection-tax anti-pollution
Consul, Innovation
Sari Arho Havrén
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China recently introduced new anti-pollution measures in order to deal with the country's environmental issues. These new measures are the Environmental Protection Tax (EPT) which is based on the new Environmental Protection Tax Law (EPT Law) and the new green development index. This reports will discuss both of these measures and conclude with some insights for Finland.

Environmental protection tax

The environmental protection tax (EPT) or the “green” tax was introduced on the 1st of January 2018 when the Environmental Protection Tax Law (EPT Law) entered into force. The EPT Law was passed by the Standing Committee of the National People’s Congress (NPC) on the 25th of December 2016. The EPT replaced the previous pollutant discharge fee (PDF) that the Chinese government had been collecting since 1979. 

The new tax is a result of the statutory taxation principle or the levy to tax conversion that was put forward at the third plenary session of the 18th Central Committee of the Communist Party of China (CPC). China aims at installing a complete statutory taxation and move away from the current system where some taxes are based on legislation and some taxes are levied through formal or provisional regulations issued by the State Council.

As mentioned above the EPT replaced the previous PDF. In line with this the aim with the new tax is not to increase the tax burden and the taxpayers and tax items are essentially the same as provided in the PDF system. The EPT targets four different categories of pollutants including air pollutants, water pollutants, solid waste and noise pollution. The levying list of air pollutants e.g. consists of 44 different listed items such as sulphur dioxide and nitrogen oxide. Interestingly greenhouse gases including carbon dioxide (CO₂) are not on the list over taxed pollutants. This exemption has stimulated debate and been questioned by industry experts.

The EPT Law outlines varying tax rates for each of the four categories. The Law provides different tax amount ranges for each pollutant and the local governments get to define the local tax rate for each pollutant within this range. All of the EPT revenue will go to local governments in a similar way as most of the revenue (90 %) generated through the gathering of PDF was allocated. This aim is to prompt local governments to an active collection of the tax and to motivate them to charge polluters and thus contribute to the reduction of pollution.

Besides the fact that CO₂ is not included in the list of pollutants the new tax has also faced other criticism. Some of China’s heavy polluting regions have e.g. set their tax rates low due to an unwanted impact on the costs and profitability on their businesses. Another problematic aspect with the tax concerns the measurement of the taxpayers pollution levels. Some of the companies do not have the required texhnology in place for pollution measurement and additional human resources might be needed to conuduct the assessments.                                                              

The green development index

China disclosed its first “green development index” on the 26th of December 2017. The new index ranks Chinese provinces according to how local governments perform on the environment. The index is based on 2016 data from China’s 31 provinces and it measures 55 parameters in six categories. The parameters include e.g. energy consumption efficiency, carbon emission, air quality, per capita disposable income and research and development (R&D) spending. The index demonstrates a shift away from the growth at all cost model and China’s aim to make the fight against pollution one of the country’s main tasks through 2020.

Another aspect of the new index is that the career advancement of local government officials now will be linked to how environmentally friendly the provinces are. This has been faced with some scepticism due to the fact that this might lead to officials altering the provincial data in order to benefit their careers.

When all the aforementioned 55 parameters are weighed in Beijing comes first as the most environmentally friendly local government albeit being infamous for its bad air quality. Other regions topping the results were Fujian, Zhejiang, Shanghai and Chongqing while the western regions Ningxia, Tibet and Xinjiang were ranked in the bottom.

In connection to the publishing of the green development index the Chinese authorities also unveiled the results of a survey on the level of public satisfaction on the environment. The survey results differed highly from the index rankings and showed that Beijing was one of the regions with the lowest satisfaction in the environment as is ranked 30th out of 31 regions. Other regions with the lowest environmental satisfaction were Hebei, Beijing and Tianjin, while the residents of Tibet, Guizhou and Hainan were the were the most content.

Insights for Finland

It is clear that China is taking its environmental issues seriously and the measures discussed above might be followed by other anti-pollution undertakings. Taxpayers subject to the EPT might be interested in measures and technologies that would help them lower their pollution levels. Finnish companies providing pollution control and pollution reduction solutions could possibly find opportunities related to this.