After smog reached untenable heights in Beijing and other Chinese cities last month, China is moving forward on new rules to clean up the environment.
It is implementing a Carbon Tax and mandating that certain industries buy insurance to make sure funds are available to pay for damages and to incentivize them to clean up their act.
China is in the midst of an extensive pilot on cap-and-trade and is now preparing to also begin taxing carbon, pushing up its plan to do so in 2015.
The Ministry of Finance announced that it will levy a tax on carbon emissions and that an “environmental protection tax” will replace pollutant discharge fees. Coal taxes will be raised and a tax will be levied on water consumption.
It is also considering a separate tax on the production of energy-intensive products like batteries and luxury goods such as personal aircraft.
Insurance to Protect the Environment
Some of the most polluting industries must now buy insurance – mining, smelting, chemical factories and manufacturers of lead batteries and leather goods. Companies that make hazardous chemicals and petrochemicals will be “encouraged” to participate.
Those that pay for the insurance will have access to set aside environmental protection funds and will be favored by banks when they need loans. On the other hand, companies that don’t comply may get their credit downgraded and receive negative environmental impact assessments, reports Reuters.
A pilot program has already been tested that covers 2,000 companies, underwriting $3.21 billion in risk.
“Using the tool of insurance … is conducive towards pushing companies to raise their environmental risk management and reduce incidents of polluting accidents,” the government says.
“Pollution has become a core concern for the stability-obsessed ruling Communist Party because of the public anger and protests it generates and because the issue cannot easily be hidden from view,” notes Reuters.
In January, the government said it would close 66 highly polluting companies this year and 1200 over the next five years, mostly foundries, chemical plants and furniture factories. It also plans to introduce environmental inspections in key industries to make sure emissions are reduced.
And Hong Kong announced it would give $1.3 billion in subsidies to retire old diesel vehicles such as buses and trucks that lead to over 3,000 premature deaths a year from smog. In his first policy speech since taking over, Chief Executive Leung Chun-ying promised to cut soot emissions 80%.
All that soot is also called black carbon, a leading climate change forcer.