Central govt emphasizes economic instruments to improve air quality

The central government will introduce a series of policies to implement a landmark anti-pollution action plan that aims to reduce airborne particles.

In its biggest move to improve poor air quality since the release of the Airborne Pollution Prevention and Control Action Plan five months ago, China will leverage pricing, taxation and investment, a senior environmental official said.

In addition, China — the world's largest coal consumer — will use more coal-based substitute natural gas and clean coal, under a half-dozen pending policies to accelerate adjustment of its energy structure, said Zhai Qing, vice-minister of environmental protection.

Under the action plan, the government will seek to cut the density of inhalable particulate matter by at least 10 percent in major cities by 2017.

PM2.5, a key indicator of air pollution, should drop 25 percent from 2012 levels in the Chinese capital and its vicinity. PM2.5 refers to particulate matter up to 2.5 micrometers in diameter.

"For a document (action plan) to be carried through, it must be followed with detailed and conscientious measures," Zhai said. "We have worked with some other ministries and hammered out 22 policies that have to be carried out in the near future."

The State Council will examine the 22 policies, of which 10 are economic and another six related to management, in the days to come, Zhai said.

"After their approval, we'll go all out to carry them out," he said at a Tuesday news conference at the State Council Information Office in Beijing.

Although details of the policy package were not immediately available, analysts said the plan boils down to cleaning up the air by slashing coal use, phasing out polluters and promoting cleaner production, echoing the theme of the action plan.

Already, Beijing, which reported a total of nearly two months of serious pollution last year, will cut coal use by 2.6 million metric tons and upgrade 300 polluting firms this year to reduce their emissions, Mayor Wang Anshun said last month.

Neighboring Hebei province, home to seven of the country's most polluted cities, pledged to cut steel and cement production capacities by 60 million tons each by 2017, according to local newspaper reports.

The estimated growth of the country's natural gas production in 2013 is about 9 percent, compared with the growth of coal production, which is estimated at only 1 percent, said Wu Xinxiong, head of the National Energy Administration.

This year's goal is to raise the proportion of natural gas consumption to 6.5 percent and to cut the proportion of coal consumption to less than 65 percent, Wu told a national energy conference in mid-January.

Xia Guang, head of the Policy Research Center for Environment and Economy, which is affiliated with Zhai's ministry, said the number of economy-related measures among the 22 policies showed that the government is emphasizing the use of economic instruments to promote environmental protection, a trend that coincides with market-oriented reform nationwide.

Some good results are expected from the shift, he said.

"For example, by allowing companies to voluntarily choose environmentally friendly ways of development, the social cost to cure the environment can be reduced. And by adjusting the prices of natural resources to show their scarcity, people's attitude toward resources will change, which can save the effort of preaching," Xia said.

He said that in addition to economic steps relating to pricing, taxation and investment, the 22 measures will also target the financial sector.

With the introduction of the "green finance" concept, banks, for example, will be forbidden from lending money to polluting enterprises.

To better the effect of economic measures on tackling environmental issues, two aspects should be ensured, Xia said.

"One is to ensure the precondition of being environmentally friendly, with zero tolerance for situations such as paying more money for the right to pollute," Xia said.

Another is to strengthen supervision. He said environmental and economic experts have long been talking about introducing a tax on fuel, but considering the possible consequence of smuggling due to lack of supervision, this motion may still not be included in the coming 22 policies.

"By and large, though, economic means such as a fuel tax and traffic congestion fee are likely to be adopted in the future," Xia said.