Tuesday, February 26, 2013

China's Carbon Tax: What does it mean for Kyoto Protocol's Emissions Trading System?

According latest newsreports and blogs, China is considering imposing a carbon tax. A Washington Post blog provides an overview of the tax and its implications here. If China succeeds in imposing the carbon tax, it will be an important first step to achieve emissions reduction in one of the world's largest emitting nations. The question is what the implication of this action will be for the successor treaty to the Kyoto Protocol?

President Obama in his State of the Union address appeared to lean towards a cap and trade regime, given his reference to the McCain-Lieberman Bill. This preference means that the United States government may pursue a cap and trade option over a carbon tax. Whether one is better than the other is an ongoing debate.

The critical issue is how, if at all, the difference in the choice pursued by these countries will affect a future international climate treaty. On a positive note, steps taken by the two major emitters and economic powers could lead to much needed consensus on international action. However, it could also mean that the two major emitters may differ on the future of the Kyoto Protocol emissions trading system.

On the one hand, a change to the central architecture of the Kyoto Protocol could spell further disagreement and probably the disintergration of the Kyoto Protocol. On the other hand, it could usher a welcome change to the architecture of the Kyoto Protocol, which has presented several challenges since its inception. It may perhaps help begin a dialogue for an alternative and much more flexible framework for achieving emissions reduction.



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