Environmental Costs of Coal are Huge in China, Calling for Reform of Environmental Taxes and Fees for Coal
July 10th, 2014: Today, the Chinese Academy for Environmental Planning (CAEP) and Energy Foundation China (EFC) jointly released a report The Environmental External Costs Of Coal, which points out that China’s environmental costs of coal are huge. Total costs in 2010 reached 555.5 billion yuan, equal to 3.8 times the central government’s environmental protection expenditure in the same year1. The external environmental cost of coal was 204.76 yuan per ton, which is equal to 28% of the coal price in that year2. Public health costs caused by air pollution from coal burning, and health cost of miners during the coal production process, were the largest, reaching 211.7 billion yuan and 93.4 billion yuan respectively, adding up to 55% of the total external cost.
“The price of coal in China does not fully reflect its external environmental costs. The environmental cost of coal has been growing per ton over the past decade, and has resulted in the worsening of environmental problems”, said Chazhong Ge, the project leader of the Chinese Academy for Environmental Planning. “The Polluter Pays Principle is the cornerstone of environmental policies, but current relevant policies in China cannot adequately achieve this goal. Currently, there are some policies on locally collected coal sustainable development funds and nationally levied pollution emission charges, and the internalization of external environmental costs has been partially realized in certain regions, but these are far lower than the environmental external costs of coal. Only less than 30% of environmental external costs was internalized in current policy.”
The research, which was funded by Energy Foundation China, a non-profit organization promoting sustainable energy development in China, considered the environmental impact across the whole life cycle of coal. Research teams estimated monetary loss in different kinds of environmental damage based on different approaches, such as the market value approach, restoration or replacement cost approach, shadow project approach, opportunity cost approach and human capital approach, etc.
According to this Report, there are still many structural problems with China’s current environmental taxes on coal, and national-level regulation and coordination is lacking. For example, the pollution emission fees collected are far below the costs of pollution control. These are not sufficient to encourage enterprises to reverse acts that cause pollution. “The internalization of coal environmental costs could be realized via strict enforcement of existing policies, the amendment or improvement of existing policies, or the introduction of new policies. Tax is one of the tools to internalize environmental costs, and the introduction or implementation of different environmental taxes aimed at a variety of objectives, would create a compensation system and ultimately reduce environmental pollution.” Chazhong Ge said.
“China’s government is in the process of reforming coal related environmental and resources taxes and fees”, said Zhao Lijian, Director of the China Environment Management Program of the Energy Foundation China, “An immediate opportunity is the resources tax reform for coal. The environmental tax system is also under discussion. Meanwhile, some local government such as Beijing and Tianjin have taken proactive steps to increase pollution discharge fees, Tianjin, for example, has increased pollution discharge fees by 9.5 times starting July 2014. These actions are very encouraging and could help China make great progress to control environmental pollution.”
1 Ministry of Finance: Report on Implementation of 2010 Central and Local Budget and Draft of 2011 Central and Local Budget , http://www.mof.gov.cn/zhengwuxinxi/caizhengxinwen/201103/t20110317_505087.html
2 Refer to 2010 Qinghuadao annual average value of steam coal price, 731 yuan/ton