Clear The Air News Blog Rotating Header Image

August 14th, 2008:

China Makes Gas Guzzlers A Taxing Prospect

Vivian Wai-yin Kwok, 08.14.08, 4:24 AM ET – Forbes


In an effort to clean up China’s dirty air, Beijing plans to discourage car purchasers who buy big vehicles, with engines above a three-liter capacity, by raising the consumption tax rate to as much as 40%.

Fans of large vehicles in China will need to write bigger checks for them because the Ministry of Finance announced Wednesday evening that, effective September 1, the consumption tax rate for passenger vehicles including cars, multipurpose vehicles and SUVs with engine sizes between three and four liters will be increased to 25%, from 15%. The tax rate for passenger vehicles with engine displacement exceeding four liters will be doubled, to 40%.

Further encouraging people to buy energy-efficient cars, the tax on small cars, with engine sizes at or below one liter, will be reduced to 1%, from 3%. The tax rate for cars with engine capacity between one and three liters will remain unchanged.

The new policy is consistent with China’s objectives of reducing energy usage and pollution.

China is one of the biggest and fastest-growing auto markets, with 4.1 million passenger cars sold in the first seven months in 2008, up 15% from the equivalent period last year, according to the China Association of Automobile Manufacturers. The central government has pledged to lower energy consumption per unit of GDP by 20% and to cut emissions of major pollutants by 10% during the 11th five-year plan (2006-10).

Previous efforts to cut emissions notwithstanding, China failed to meet its annual target of a 4% reduction, falling short by 0.34 percentage points. The tax measures announced Wednesday are also expected to have a minimal effect. “We expect limited impact on overall passenger vehicles and car sales growth in China given the relatively low market share of the affected engine sizes,” Gerwin Ho, an analyst with Citigroup, said.

According to Citigroup’s statistics, jumbo passenger vehicles with engines exceeding four liters accounted for only about 0.1% of total car sales in the first half of 2008. Passenger vehicles with engines displacing three to four liters contributed just 0.4% of total sales in the same period. “In addition we estimate the tax saving associated with lower consumption tax rate for passenger vehicles with engines at or below 1.0 liter to be minimal given their low selling price. We estimate, for example, that the tax saving for Chery’s QQ 0.8L to be about 2% of its retail price of 30,800 yuan [$4,489.7],” said Citigroup.

Heavy Taxes On Cars With Large Engines

Finance ministry unveils heavy taxes on cars with large engines

Kandy Wong – SCMP – Updated on Aug 14, 2008

The Ministry of Finance in a surprise move yesterday said it was sharply increasing consumption taxes on larger vehicles in a bid to fight pollution.

However, many observers said only a fuel consumption tax could encourage the purchase of low-emission cars and some analysts thought the new policy was at least partly aimed foreign carmakers whose larger vehicles are selling briskly.

According to a statement on the ministry’s website, vehicles with 4.1-litre or more engines will be taxed at a rate of 40 per cent of the retail price, up from 20 per cent. Vehicles with 3 to 4-litre engines will be taxed at 25 per cent, up from 15 per cent. Meanwhile, the tax on small cars with 1-litre engines or smaller will be lowered to 1 per cent from 3 per cent.

The ministry said that “a higher consumption tax can reduce the reliance on oil and ensure the development of lower-emission vehicles”.

The new tax – an unexpected policy move during the Olympics – will be effective from September 1. It is the second time the consumption tax on vehicles has been adjusted since early 2006.

The policy came about after a State Council meeting, chaired by Premier Wen Jiabao last month. The council confirmed it “encouraged fuel-efficient vehicles and the implementation of higher consumption taxes for large-engined vehicles”.

“The adjustment of the consumption tax this time will not impact the automobile industry heavily,” said analyst Li Chunbo at Citic Securities.

Most vehicles sold on the mainland have engines of 1.8 to 2.5 litres, for which the tax policy remains the same.

Analysts said that only a fuel tax could lead to purchases of more fuel-efficient vehicles. However, the central government, which has discussed a fuel tax seven times in the past decade, currently has no plans to resurrect the issue.

Matthew Kong at Fitch Ratings said: “The central government is eager to implement the new consumption tax again because imported large-engined cars recorded high sales growth in the first half and the government wants to stop the trend of buying large-engined vehicles.”

According to figures from the China Association of Automobile Manufacturers, sales of imported vehicles grew 25.81 per cent to 80,700 units in the first six months. Among the total sales of imported vehicles, 3-litre engine cars posted the highest growth at 54.41 per cent from last year, to 32,300 units.

Car Curbs To Go After Games

Al Guo – Updated on Aug 14, 2008 – SCMP

Beijing traffic authorities have no plans to extend vehicle restrictions that have taken half of the city’s cars off the roads, but cheap bus and subway fares are likely to stay after the Olympics, a senior municipal official says.

The statement effectively ended, at least for now, a debate in the media and online chat rooms about whether the odd-even date traffic control scheme should continue after it expired on September 20, shortly after the end of the Paralympics. Under the scheme, private vehicles are allowed on the roads only on alternate days, determined by the last digit of their number plates.

Supporters of the policy argue that fewer cars on the road have cut vehicle exhaust emissions and contributed to better air quality in Beijing. Others say that continuing the measure beyond the Olympics period will infringe on the interests of vehicle owners.

Zhou Zhengyu , deputy head of the Beijing Municipal Committee of Communications, said the response to the temporary traffic control measure from motorists and the public had been positive, especially because of better air quality.

A survey by the Beijing Daily last month showed that more than 90 per cent of respondents supported the traffic restrictions because they would help improve air quality and reduce traffic jams for the Games period. But one key point raised in the survey, as well as many other surveys conducted this year, was that the measure was instituted for the Games, so people – in the interest of national pride – generally did not mind making minor sacrifices.

But extending the policy would undoubtedly anger many motorists, who thought the restriction would be a short-term measure.

“They’d better have a perfect explanation [to extend the policy on restrictions] because nobody told me my car could run only a couple of months a year when I bought it,” said Wei Minghui .

The capital has become clogged with traffic in recent years, as rapid income growth has allowed many people to afford cars. The city government has reduced fares on public transport to try to persuade people to use their vehicles less.

Many speculated the government’s low-fare policy was in place just for the Olympics, but Mr Zhou said the low fares would remain.

“We want to improve the percentage of people taking public transport to 45 [per cent] in the near future from 35 per cent now.”

Beijing’s air quality has improved steadily in the past few weeks since the odd-even restrictions went into effect on July 20. The Air Pollution Index stood at 60 yesterday, higher than the previous two days but in the “moderate” category.

Legal Activist Missing

Legal activist missing since checking on protest permit, group says

Peter Simpson – Updated on Aug 14, 2008 – SCMP

A Fujian legal activist who applied to stage a protest in one of three government-approved Olympic protest zones is missing after going to police to check on his application, a human rights watchdog said yesterday.

The claim followed pleas from international journalists to the director of the Beijing Games’ Security Department, Liu Shaowu , to release details on the applications received by the authorities in the five days since the areas opened.

“I do not have the number of applicants and other details. I will get them for you,” he said after being repeatedly asked during a joint International Olympic Committee and Beijing Organising Committee for the Olympic Games press conference.

US-based Human Rights Watch said on its website that Ji Sizun, a grass-roots legal activist, applied to the Deshengmenwai police station in Beijing’s Xicheng district last Thursday to stage a rally during the Games.

The 58-year-old, who calls for more public participation in politics and denounces rampant official corruption and abuses of power, was detained while checking on his application on Monday, the group said.

A duty police officer denied having detained Mr Ji, telling reporters the station had “not received Ji’s case because the station does not take protest applications”.

Mr Ji called his family to say he “had problems” and has since been unreachable on his mobile phone, said Human Rights Watch.

The zones have remained empty and are being used for leisure. Public protests are rare on the mainland as they can bring unwanted scrutiny.

Both Bocog and the IOC have come under pressure from foreign journalists who have gathered in Beijing to cover the Games and are reporting on issues ranging from human rights to pollution.

Don’t Delay Cleanup

Updated on Aug 14, 2008 – SCMP

Guangdong and Hong Kong must start to plan how they will improve air quality in time for the East Asian Games and the Asian Games in November 2009 and 2010, respectively. Despite valiant efforts, it has not been easy to clear the smog in Beijing in time for the Olympic Games. Indeed, Beijing’s experience provides an important lesson for every place trying to clean up. Shutting down factories and building sites in the final stretch may not be enough because, not only are there geography and meteorology to contend with, there are also physics and chemistry.

Just consider what Beijing has done already. Planning for the “blue sky project” actually goes back to 1998 and has, so far, cost more than 140 billion yuan (HK$160 billion). The Capital Iron and Steel Group, or Shougang, was relocated from Beijing to a new site in Tangshan as one of the government’s key efforts to reduce air pollution for the Games. The capital has also modernised many factories, imposed tougher emissions controls and taken many other steps to upgrade surrounding industries.

News reports indicate major polluters – including electroplating, cement and paper plants – were shut down or suspended as early as last year. Government subsidies were also provided to many enterprises for remediation work and personnel upgrades. Moreover, the city issued an air-pollution control notice in April requiring polluting industries to stop work from July 20 for three months. Power plants were asked to use higher-quality fuels to help reduce polluting emissions. While sulphur dioxide emissions have been reduced, suspended fine particulate levels remain extremely high. Lung-affecting ozone, particularly in its secondary form – that is, formed by the chemical interaction of various pollutants – remains a big headache. Just before the Games, the city introduced an odd-and-even licence plate system whereby only half its vehicles were allowed on the road each day. It is now widely recognised what a massive effort that was, because it affected more than 3 million vehicles.

Du Shaozhong , deputy director of the Beijing Environmental Protection Bureau, counted some 200 air-pollution control measures undertaken in connection with the Olympics. Most significantly, some will continue afterwards. This is good news because, in the short term, even aggressive measures are not enough. To improve the public health of the people, sustained efforts are essential. The Olympics has made top officials aware that shutting things down is, in fact, a desperation measure that has only limited impact. While green groups have criticised the “blue sky efforts” as short term, they acknowledged that the Games has opened a door for long-term improvements.

The coming decade will be critical for China. It needs to tighten air-quality standards, for starters. One key discussion point in Beijing is just how good or bad pollution is on a day-to-day basis. The problem arises because of the difference in air-quality standards; China’s are lower than those used in developed countries. Setting lower standards does not help; it simply excuses high pollution levels. Without telling people and industries the harm that pollution causes, through proper standards, how can there be the constant pressure necessary to clean up?

In our nation’s case, it is officially acknowledged that the efforts in Beijing for the Olympics will help upgrade industry, which will have a positive long-term economic impact. The most precious of resources – natural and human – will benefit. Heavy pollution makes the planet, as well as people, sick. The monetary gain from “business as usual” industrial growth is not balanced or sustainable.

For us, there is an immediate need to study pollution data and emissions sources to understand them within the context of the region’s geography and meteorology. Trying out model control measures can help to see which may be the most effective. Hong Kong and Guangdong need to get on with devising plans to clean up now.

Christine Loh Kung-wai is chief executive of the think-tank Civic Exchange.