China proposes introducing a carbon tax

The developing world takes the lead in fighting climate change.

There have been growing murmurs from China that the country may be getting serious about tackling climate change, and yesterday Xinhua News Agency announced that:

 

 

The news follows on from the Chinese government's promise earlier this month to do "whatever it takes" to cap coal use in the country. The official — albeit non-binding — target is now for coal consumption to peak at 4 billion tonnes in 2015.

The full Xinhua report on the carbon tax is thin on details, but points to an earlier report from the Ministry of Finance which suggested "levying a carbon tax in 2012 at 10 yuan [£1.05] per tonne of carbon dioxide, as well as recommended increasing the tax to 50 yuan [£5.27] per tonne by 2020."

The New York Times' Vikas Bajaj notes that:

China’s plan will not make a serious dent in global warming, though the tax may still have some beneficial impact within the country, where air pollution is a serious problem. A paper from the Chinese Academy for Environmental Planning suggests that a small tax could still raise revenue and provide an incentive to reduce emissions, bolstering China’s renewable energy industry.

As much as many in the West have used the inaction of China as an excuse not to do anything about climate change ourselves, that logic has a corollary. China is such a massive nation that it is starting to be in its own interest to break the collective action problem which has plagued environmental causes forever. Its problems are compounded by the fact that not only is it heavily reliant on fossil fuels, but it uses those fuels in the most polluting manner possible. A glance at recent stories about smog in Beijing should reveal why the government is so concerned about reducing pollution.

The real choice the nation is faced with is whether to do that by following the Western path, of replacing polluting fossil fuels with cleaner ones, or skip that stage altogether and move straight to renewables. That move would be reminiscent of the way that many developing nations, particularly in Africa, have skipped wired communications infrastructure entirely and moved straight to mobile phones. It has its disadvantages, of course — primarily speed and cost — but also offers a huge prize at the end of the transition: if China can become a genuine world leader in renewable technology, it would likely have the 21st century sewn-up for good.

If that is the aim, this carbon tax will only be a stepping-stone on the journey. For it to truly offset the cost of pollution (and be an externality tax, rather than just a minor penalty for emitting carbon), it would have to be set in the order of £50-£100 a tonne. But if China starts to lead the way in fighting climate change, it will make it significantly harder for the developed world to carry on abdicating its responsibility.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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George Osborne's surplus target is under threat without greater austerity

The IFS exposes the Chancellor's lack of breathing space.

At the end of the last year, I noted how George Osborne's stock, which rose dramatically after the general election, had begun to plummet. His ratings among Tory members and the electorate fell after the tax credits imbroglio and he was booed at the Star Wars premiere (a moment which recalled his past humbling at the Paralympics opening ceremony). 

Matters have improved little since. The Chancellor was isolated by No.10 and cabinet colleagues after describing the Google tax deal, under which the company paid £130m, as a "major success". Today, he is returning from the Super Bowl to a grim prognosis from the IFS. In its Green Budget, the economic oracle warns that Osborne's defining ambition of a budget surplus by 2019-20 may be unachievable without further spending cuts and tax rises. 

Though the OBR's most recent forecast gave him a £10.1bn cushion, reduced earnings growth and lower equity prices could eat up most of that. In addition, the government has pledged to make £8bn of currently unfunded tax cuts by raising the personal allowance and the 40p rate threshold. The problem for Osborne, as his tax credits defeat demonstrated, is that there are few easy cuts left to make. 

Having committed to achieving a surplus by the fixed date of 2019-20, the Chancellor's new fiscal mandate gives him less flexibility than in the past. Indeed, it has been enshrined in law. Osborne's hope is that the UK will achieve its first surplus since 2000-01 just at the moment that he is set to succeed (or has succeeded) David Cameron as prime minister: his political fortunes are aligned with those of the economy. 

There is just one get-out clause. Should GDP growth fall below 1 per cent, the target is suspended. An anaemic economy would hardly be welcome for the Chancellor but it would at least provide him with an alibi for continued borrowing. Osborne may be forced to once more recite his own version of Keynes's maxim: "When the facts change, I change my mind. What do you do, sir?" 

George Eaton is political editor of the New Statesman.