China Mulls Tax for Environmental Protection

China will introduce a tax plan to improve its deteriorating environment, with the heaviest restrictions to be applied to Beijing, the venue for the 2008 Summer Olympics.

A think tank under China’s Finance Ministry came up with three proposals to collect environmental taxes in November last year, according to reports released Sunday. The first is to impose taxes based on the principle of "pay according to profit," by establishing general levies like the income tax. The second is collecting tax according to how much pollution companies discharge. The third is taxes on discharge like sulfur, coal or solid waste and other pollutants. The last is taxing consumers for using polluting products such as fertilizer and batteries.

Regardless of which plan is used, companies operating in China will shoulder yet another financial burden, in the face of rising wages due to a new labor contract law.

○ Steel Maker Shougang Halves Output

In preparation for the Olympics, Beijing will transfer 100 factories that produce large amounts of pollution to other regions. The city will provide the companies with compensation of at least one million yuan (about 129 million won).

The Shougang Group, China’s fourth-largest steel maker and largest polluter, will cut production 50 percent to 4.2 million tons. The reduction is expected to decrease emission of sulfur dioxide by 738 tons and dust by 16 million tons.

Over the long run, Shougang will move to the Caofeidian Industrial Zone in Hebei Province by 2010.

In addition, the Beijing city government will implement measures to improve the environment. They include a shift from coal to natural gas for use in heating, setting car emission standards in line with those of Europe, and planting trees to prevent dust proliferation.

The overall cost of the environmental effort from 1998 until the opening of the Olympics is expected to reach 120 billion yuan (about 15.4 trillion won).

○ Long Road to Clean Environment

Behind these aggressive environmental policies is not only China’s short-term goal to host a successful Olympics, but also a desperate attempt to curb the growing degradation of the country’s environment.

Despite China’s pollution reduction target of 10 percent from 2006 to 2010, emissions of chemical oxygen demand rose 1.2 percent and those of sulfur dioxide 1.8 percent in 2006. Though last year saw emissions decline overall, those of COD dipped only 0.28 percent and those of sulfur dioxide 1.8 percent.

Water quality in China’s seven-largest rivers has also aggravated.

On the Yangtze and Yellow rivers, sub-level five water, where fish cannot live, accounted for 9.9 percent and 29.5 percent, respectively, in 2004, but rose to 20.6 percent and 42.9 percent two years later.

orionha@donga.com