Assessing China's discriminative tax on Clean Development Mechanism projects. Does China's tax have so many functions?
In the practice of the Kyoto Protocol's Clean Development Mechanism (CDM), many CDM host countries heavily rely on high Global Warming Potential (GWP) Greenhouse Gas (GHG) projects. Among them, China might be unique in that it imposes a discriminative tax on projects dealing with high
GWP GHGs. The Chinese government takes 65% of the carbon credits from HFC-23 (trifluoromethane) projects, 30% from N2O (nitrous oxide) projects, but only 2% from other types of projects. Previous studies have expected that this tax has multiple effects: rent-seeking effect, a deterrent
effect on the HFC-23 and N2O projects, a channelling effect that switches the investment from HFC-23 and N2O projects to other types of projects, and a market distortion effect. However, with the positive analysis and empirical evidence, the present study shows that this
tax only has rent-seeking effect, thus China's discriminative tax has been over read.
Keywords: China; Clean Development Mechanism (CDM); carbon tax; discriminative tax; windfall tax
Document Type: Research Article
Affiliations: IEL – International Programme in Institutions, Economics and Law, Via Real Collegio 30, 10024 Moncalieri (Torino); Law School, Cornell University, 14850 Ithaca, USA, Italy
Publication date: 01 March 2014
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