The Unassuming Economist

“A carbon or coal tax can effectively address domestic China’s environmental challenges,” according to an IMF report. “Given that sectors most dependent on coal and energy are heavy industries associated with the ‘old growth’ model, these taxes will support China’s effort to rebalance its economy towards high value-added services and consumption-led growth. Moreover, by contributing to coordinated efforts from the international community to slow global warming, these taxes will also reduce the negative impacts climate change will have in China, such as higher occurrence of natural disasters to which coastal areas are particularly vulnerable. Although the government is committed to introducing an Emissions Trading System in 2017, this should not preclude the simultaneous introduction of an upstream carbon or coal tax. This could be facilitated by providing some tax rebates for firms required to obtain emissions allowances to ensure all emitters pay the same unit price of carbon. Given the very large domestic benefits from these policies, China can move ahead unilaterally on its pledges for Paris and make itself better off, without waiting for others to act.”