"Sustainable development" refers to the development model based on harmony between humanity's economic activities and nature. It also means that development today should not be achieved at the cost of later generations. This means harmony between the interests of people today and those of people in the future.
One of the most important attributes of sustainable development, therefore, is the cyclic use of resources and the benign cycles in which the environment functions.
Taxation, among other things, is an important means indispensable to sustainable development. This is because environmental pollution, which drags most heavily at sustainable development, makes society pay much more dearly than individual polluting enterprises whose waste discharges contaminate the ecological system.
There are two options to redress the situation. First, the government imposes stricter control on the polluters. Second, taxation measures are applied to make polluting enterprises pay more for the contamination they cause.
To impose restraining rules and regulations on polluters, however, is highly expensive because relevant government departments have to get comprehensive knowledge on details of production means and technologies in polluting enterprises, which are distributed widely across various sectors, before they can work out the pollution-restraining rules.
Taxation, however, is a market-oriented leverage, which encourages or discourages economic entities to do something or not to do something and therefore constitutes the most effective means.
Taxation levers can increase polluters' production costs. In pursuit of the largest possible profits, enterprises, in the face of possible levies on pollution, have to adopt advanced technologies to reduce energy consumption and install waste-treatment equipment.
On the one hand, taxation works to raise productivity and bring about more efficient use of resources while reducing pollution. On the other hand, income acquired from taxes levied on polluters can be channelled into environmental-protection undertakings. In addition, preferential tax treatment can be extended to those enterprises engaged in production that facilitates sustainable development. |
Development experience shows that free-of-charge use of the ecological system has to be reined in when economic growth reaches a certain height. In this scenario, the growth model has to be transformed to better handle the relationship between man and nature and between economic development and environmental protection.
Although some tax policies that favour the development of a cyclic economy have already been put in place in China, many deficiencies exist.
To begin with, the existing preferential taxes in this regard are focused on "lower-stream" pollution treatment rather than "upper-stream" prevention. In addition, the "reuse" principle is largely side-tracked.
Second, the taxes involving a cyclic economy are not evenly enforced across various manufacturing sectors. In some cases, enforcement of these tax policies is lax or worse, not carried out at all. All this is detrimental to saving resources and protecting the environment.
Third, the number of taxes involving environmental protection is very limited and specialized taxes oriented to protecting the environment are lacking. As a result, taxation's role in exercising restraints on pollution is weakened.
Fourth, provisions on environmental protection in the existing environmental pollution-oriented taxes leave many situations and factors uncovered.
Fifth, preferential treatment offered by taxes is of the one-for-all type, lacking flexibility and clear aims in dealing with different situations.
Sixth, the taxes levied on polluters are rather low and are based on information that is now outdated. In addition, the standards of levies vary from one pollutant to another, creating chaotic situations.
All these contribute to the fact that high resource consumption and worsening pollution are not effectively redressed.
Many enterprises see high investment returns because they sell their products for high prices, buy resources at low prices and use the ecological system free of charge, among other factors such as low labour costs. Or, put in a different way, their profits are acquired at the expense of the interests of the State and the public.
Have a look at the most profitable players the majority are either heavy polluters or monopolizing entities.
Bringing down consumption of resources and energy, therefore, becomes extremely difficult.
Figures released by the National Bureau of Statistics show that energy consumption in the petrochemical sector rose 8.7 per cent in the first half of this year; in the coal mining |
industry it increased 5.5 per cent; consumption was up 0.8 per cent in the power generation sector; and it rose 0.4 per cent in the non-ferrous metals industry.
In the same period, energy consumption dropped 1.2 per cent in the steel and iron industry, 4.5 per cent in the building materials sector, 5 per cent in the chemical industry and 5.5 per cent in the textile sector.
We can see from the figures that energy consumption went up in the industries that are either monopolizing by nature, or that see weak competition.
By contrast, energy consumption went down in those sectors where fierce competition is taking place.
When energy consumption goes a little bit higher, it has a very insignificant impact on the rising profits of the monopolizing industries like the petrochemical sector for example. By contrast, efforts to bring down energy consumption need a great deal of money and involve technical risks.
Under such circumstances, individual players opt for increasing investment to see good economic results while brushing aside their social responsibilities.
The chemical and textile industries saw the sharpest energy-consumption drop in the first half of this year. Why? Cut-throat competition is going on in these sectors and their profits are rather low.
For them, the prices of their raw materials keep rising as a result of oil price hikes but their finished products go into the market only to run into fierce competition from their peers. In view of this, they can do nothing but cut the products' costs by saving energy and resources. This is the only way out.
By all accounts, the conclusion can be reached that the taxation leverage, which is easily applied, works promptly and offers an efficient way to redress the situation where resource prices are low and the ecological system is used for free.
The author is an economist with the State Information Centre.
(China Daily 11/22/2006 page4) |
