Carbon tax … the Chinese are frightened

Last week’s announcement by China’s Ministry of Finance that the country will introduce a carbon tax

Last week’s announcement by China’s Ministry of Finance that the country will introduce a carbon tax, probably in the next two years, did not dominate the international headlines. It was too vague about the timetable and the rate at which the tax would be levied, and fossil-fuel lobbyists were quick to portray it as meaningless.

But the Chinese are deadly serious about fighting global warming, because they are really scared.

A carbon tax, though deeply unpopular with the fossil-fuel industries, is the easiest way to change the behaviour of the people and firms that burn those fuels: it just makes burning them more costly.

And if the tax is then returned to the consumers of energy through lower taxes, then it has no overall depressive effect on the economy.

The Xinhua news agency did not say how big the tax in China would be, but it pointed to a three-year-old proposal by government experts that would have levied a 10-yuan ($1.60) per ton tax on carbon in 2012 and raised it to 50-yuan ($8) a ton by 2020. That is still far below the $80-per-ton tax that would really shrink China’s greenhouse gas emissions drastically, but at least it would establish the principle that the polluters must pay.

It’s a principle that has little appeal to U.S. President Barack Obama, who has explicitly promised not to propose a carbon tax. He probably knows that it makes sense, but he has no intention of committing political suicide, the likely result of making such a proposal in the United States. But China is not suffering from political gridlock; if the regime wants something to happen, it can usually make it happen.

So why is China getting out in front of the parade with its planned carbon tax? No doubt it gives China some leverage in international climate change negotiations, letting it demand that other countries make the same commitment. But why does it care so much that those negotiations should succeed? Does it know something that the rest of us don’t?

Three or four years ago, while interviewing the head of a think-tank in a major country, I was told something that has shaped my interpretation of Chinese policy ever since. If it is true, it explains why the Chinese regime is so frightened of climate change.

My informant told me that his organization had been given a contract by the World Bank to figure out how much food production his country will lose when the average global temperature has risen by 2 degrees C (3.5 degrees F). (On current trends, that will probably happen around 25 years from now.) Similar contracts had been given to think-tanks in all the other major countries, he said — but the results have never been published.

The main impact of climate change on human welfare in the short and medium term will be on the food supply. The rule of thumb the experts use is that total world food production will drop by ten percent for every degree Celsius of warming, but the percentage losses will vary widely from one country to another.

The director told me the amount of food his own country would lose, which was bad enough — and then mentioned that China, according to the report on that country, would lose a terrifying 38 per cent of its food production at plus-2 degrees C.

The reports were not circulated, but a summary had apparently been posted on the Chinese think-tank’s website for a few hours by a rogue researcher before being taken down.

The World Bank has never published these reports or even admitted their existence, but it is all too plausible that the governments in question insisted that they be kept confidential. They would not have wanted these numbers to be made public. And there are good reasons to suspect that this story is true.

Who would have commissioned these contracts? The likeliest answer is Sir Robert Watson, a British scientist who was the Director of the Environment Department at the World Bank at the same time that he was the Chair of the Intergovernmental Panel on Climate Change.

George Bush’s administration had Watson ousted as chair of the IPCC in 2002, but he stayed at the World Bank, where he is now Chief Scientist and Senior Advisor on Sustainable Development. (He has also been Chief Scientific Adviser to the British Government’s Department for Environment, Food and Rural Affairs for the past six years.)

He would have had both the motive and the opportunity to put those contracts out, but he would not have had the clout to get the reports published.

When I asked him about it a few years ago, he neither confirmed nor denied their existence. But if the report on China actually said that the country will lose 38 per cent of its food production when the average global temperature reaches 2 degrees C higher, it would explain why the regime is so scared.

No country that lost almost two-fifths of its food production could avoid huge social and political upheavals. No regime that was held responsible for such a catastrophe would survive. If the Chinese regime thinks that is what awaits it down the road, no wonder it is thinking of bringing in a carbon tax.

Gwynne Dyer is an independent journalist whose columns are published in 45 countries.

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