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:

China is mulling stricter taxation policies for environmental and resource protection, including a tax on carbon emissions.

— Xinhua News Agency (@XHNews) February 19, 2013 [2]

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 [3]. 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 [4] 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 [5] 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 [6] 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 [7] 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 [8], 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.