BEIJING - To address the urgent need for energy conservation, China's government bodies and research institutes are working on a taxation system to curb soaring energy consumption. 

"We are currently doing research work for the taxation with the pertinent government departments and research institutes, and a proposal is expected to be reached within a couple of years," Yang Fuqiang, vice-president of the Energy Foundation Beijing Office told China Daily in a telephone interview on Tuesday. Yang's energy foundation renders financial support to researchers. 

But the final say over when to implement the taxation system remains in the hands of the country's top policymakers, including the Taxation Administration and the National Development and Reform Commission (NDRC), say industry experts. NDRC sources said they have not participated in the environment tax preparations, but are working on various incentive-based policies to promote energy conservation, which include several tax measures. "We are studying a host of measures to encourage the use of renewable energy sources in the industrial sectors and transportation, and the preparatory work is to be completed by the end of the year," said Yu Cong, director of the Energy Efficiency Center under the NDRC's energy research institute. 

The tax structure that Yang's foundation is working on will cover all sectors involved with energy use, from energy exploitation to daily energy consumption, according to researchers who are participating in the tax drafting process. Details of the taxation rates are not available, as research has not yet progressed far enough, according to Yang. "The rates are adjustable, depending on the country's GDP growth and the other economic indicators, such as the consuming pricing index." 

The tax levy will start with sectors that make less efforts to implement relevant policies, according to an insider. "It is easier to impose environment and energy consumption taxes on products that have little impact on the nation's economy, say, refrigerators and motors," said Yang. 

But referring to the carbon tax which is to be slapped on sectors such as power and petrochemicals that emit carbon dioxide, which would have a far-reaching effect on China's economic development drive, Yang said research and coordination work will take much longer, and will be much more complicated. "It will take at least five years for the carbon tax to take effect." 

The tax measures are believed by insiders to be able to effectively enable the world's fastest-expanding economy to restrict its massive consumption of energy. "Taxation is the most powerful tool available in a market economy in directing a consumer's buying habits, [superior to] government rules or orders," said Wang Fengchun, deputy-director-general of the research department under the National People's Congress Environmental Protection & Resources Conservation Committee. But finalizing a complete environmental taxation system, especially in China's energy sectors, will take a long time, Wang added. 

He attributed the setbacks to the country's large population and huge economy, which mean balancing the interests of different groups of people and various industrial sectors is very difficult. 

The world's second-largest energy consumer after the United States vows to save energy equivalent to as much as 400 million tons of coal by 2010, and aims to reduce energy use by 2.2% annually during the period, according to the medium and long-term energy conservation plan hammered out by NDRC at the beginning of 2005.

Source: china5e.com