Should China levy environmental tax on exports? Before offering my thoughts on that question, I’d like to share some news first.
China has announced spending 4 trillion yuan ($601 billion) over the next decade in water projects, mainly to tackle over-exploitation, usage efficiency, and pollution. The country plans to cap water consumption at 670 billion cubic meters, and according to this other recent report, China is now short about 40 billion cubic meters annually.
China’s Ministry of Water Resources also reported severe droughts this year, especially in Shandong, Hebei, Henan, Anhui, Shanxi and Jiangsu provinces. It said that in Hebei Province alone, 370,000 residents are having difficulty getting drinking water due to abnormal rainfall (80% less than normal).
The ongoing efforts in diverting water from the water-rich south to the arid north are causing 330,000 people in Hubei and Henan Provinces to relocate. Water projects and people relocating have become the Chinese DNA! Since ancient times, China has gone through many such projects. Two of the most prominent ones, The Dujiangyan Irrigation System and the Ling Canal, were constructed around the 3rd century B.C.. Various dynasties have tried to tame floods and droughts.
Everyone knows about the Three Gorges Dam. It is a modern marvel. Controversy aside, one cannot deny the significant contributions the Three Gorges Dam has made:
According to the National Development and Reform Commission of China, 366 grams of coal would produce 1 kWh of electricity during 2006. At full power, Three Gorges reduces coal consumption by 31 million tonnes per year, avoiding 100 million tonnes of greenhouse gas emissions, millions of tonnes of dust, one million tonnes of sulfur dioxide, 370,000 tonnes of nitric oxide, 10,000 tonnes of carbon monoxide, and a significant amount of mercury. Hydropower saves the energy needed to mine, wash, and transport the coal from northern China.
From 2003 to 2007, power production equaled that of 84 million tonnes of standard coal, reducing carbon dioxide by 190 million tons, sulfur dioxide by 2.29 million tonnes, and nitrogen oxides by 980,000 tonnes.
The dam increased the Yangtze’s barge capacity sixfold, reducing carbon dioxide emission by 630,000 tonnes. From 2004 to 2007 a total of 198 million tonnes of goods passed through the ship locks. Compared to using trucking, barges reduced carbon dioxide emission by ten million tonnes and lowered costs 25%. (Wikipedia)
It is encouraging to see China increasingly becoming aware of her environment and conservation. Many local NGO’s have emerged. She is also receptive of foreign NGO’s. For example, China is embracing Project WET’s educational materials. Below are students from an elementary school in Shanghai using Project WET’s materials. They hosted a visit by U.S. Senator Max Baucus of Montana during one of their lessons.
The life-cycle of water is intricate, affected by many things, including vegetation, land, and obviously pollution. Refer to the diagram below.
It is critical that China restore this intricate system back to balance. Thus, I am happy to see a growing conscious effort in China towards this balance. This four trillion yuan over the next decade is crucial.
This brings me to the question I raised at the beginning of this post. Should China levy environmental tax on exports?
One of the highest users of water is industry. One of the worst polluters of water is also industry. They can easily throw that intricate life-cycle out of balance. Since China manufactures goods for the developed world, China’s environment, including her precious water resources are heavily burdened for the benefit of the world. That being the case, shouldn’t China tax the producers of such goods and use the funds to sustain her environment?
Some may argue the factories would simply relocate to other countries where pollution is more tolerated. That is true if WTO rules remain unchanged. For that reason, China should work through WTO to create a “pollution tax” mechanism. This way, regardless of where goods are made, such taxes are always required. If done right, environmentalists from the world over should support this effort.
Maybe I am too naive. What do you think?
This sounds like an interesting idea — even though I agree that this is one of the many ideas that will be very difficult to realize on a unilateral basis.
Your post reminded me of some articles I had read about ‘virtual water’; see e.g. http://virtualwater.eu/ or Wikipedia.
There should not be another tax on export. If they do, what is the next tax? It would make the entire tax system too complicated. We need less tax and regulation to promote business.
What is the update on diversion of water from south to north?
Thus I think it would have to go through a body like the WTO in order for something like this to work, no unilaterally on China’s part, otherwise, as I said, factories would simply relocate.
In the U.S., I think we are already accustomed to paying a 5 cents tax on aluminum cans and bottles for beverages we purchase. I generally agree with you, the less complication the better.
On a more abstract level, would you say there has to be some kind “cost” born by those who consume our planets precious resources? The more you consume (or squander), the more responsibility you should take in ensuring health of the planet?
Project WET says
Thank you for highlighting China’s work with the Project WET Foundation. We are thrilled to be in China and look forward to bringing our water resources education to more schools.
We look forward to you building awareness around the world on this important issue, and congratulations for how far your materials have reached.
Interesting thoughts about tax on clean water – and how that might be applied globally via export taxes levied through WTO agreements.
While I agree that internalizing the externalities of pollution on the environment is in general a good thing (it’s a good thing because prices will more accurately reflect the true costs of goods and services, so we can rely on price signals to guide us to do what is right (i.e. individuals pursuing private profits can be guided to do good) instead of regulations), imposing a water tax through the WTO also can impinge on national sovereignty. Nations now may have different regulations on water becuase citiznes in each place different values on clean water. A WTO tax may force nations to subscribe to one standard – as the tax must be uniformly applied.
Besides water, we can think of other things that are regulated, valued differently. Consider labor standards, health care costs, etc. Many in America have argued that trading with developing nations is fundamentally unfair because the nations have such different standards of labor and healthcare. The “true costs” of manufacturing in developing nations are not internationlized to the manufacturers, but are bore by the workers. There should be a tax on exports from those countries to ensure that those labor/health costs are properly accounted for in the cost of products and services produced in those countries. Americans must not be forced to compete in a race to the bottom. There should be a tax on all goods and services from developing world to make up for the low cost of labor and healthcare (or lack of) there.
This has always been one of the throniest part of WTO. Trade can happen only if there is a sense of “fairness.” But if one nation’s sense of fairness is pushed too far, they can impinge too much on sovereignty of other nations (many have claimed Intellectual Property already impinge too much on the right of developing nations to develop!), and global trade as we know it will break down…
Anyways, just some things to think about…
LED lighting panels says
Imagine how much money is being spent just for water conservation. That is how water is very important.
My suggestion on environmental protection tax may come true:
“China considers environmental tax to promote protection”