China’s environment Taxing times ahead

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http://www.economist.com/node/21534830

GIVEN that China is the world’s biggest carbon emitter, it is fair to be sceptical of its claims to greenery. Yet the emerging giant is already the world’s biggest manufacturer of such green technologies as compact-fluorescent bulbs and solar panels. And it aspires to become an environmental-policy leader too.

The most recent five-year plan emphasised improvements in energy efficiency and laid out a vision for cleaning the air. Now the powerful State Council has formally announced that it will use tools favoured by market-minded economists: emissions-trading systems, perhaps including one for carbon dioxide, and green taxes. The details are not yet public, but this sounds important. It follows various regional experiments with emissions-trading and a resources tax (which affects petroleum but not solar power). If enforced with vigour—a big “if” in such a decentralised and corrupt place—these new policies could signal a shift towards a more efficient, lower-carbon economy.

Why might China’s leaders impose green rules that many rich countries have balked at? There are several theories. It may be because they feel insecure importing so much fuel, and so wish to make China’s energy-inefficient cement, steel and other heavy industries less wasteful.

Tougher environmental standards might also force such firms to become clean enough to compete abroad, where standards are higher than in China. To that end, recent reports suggest, China will introduce energy-consumption quotas, either by region or by industry, that would rely on a cap-and-trade mechanism.