US – China Researchers Favor Market Mechanisms for Enforcement of a China Coal Cap by 2020

China Coal Consumption Cap Plan and Policy Project

[Project Update] …Implementation of a total coal consumption cap calls for market mechanisms and supporting tools, such as ecological compensation mechanisms, environmental tax, carbon tax, cap and trade markets, and green finance.  The current resource tax (tax rate of 2-10%) should be explicitly used to compensate resource damage, increase coal’s rate of recovery, and fill the resources gap between regions. To address the ecological damage caused by coal mining, ecological compensation mechanisms should give provinces/cities with coal bases opportunities to recuperate, incentives to rationalize capacity planning, and drivers to deepen reform. At the same time, pollution charges and a carbon tax should be implemented to internalize environmental, health, and climate change externalities caused by coal consumption, in order to minimize external damage. A carbon tax should be on the government’s agenda before 2020. Moreover, coal consumption control should actively use financial leverage—such as green credit policies to adjust coal production, consumption, and substitution—and implement it in the regulatory framework. The government should limit backward capacity in the coal industry, establish a green credit evaluation system with ecological, environmental, and climate change standards for coal-consuming industry end-users, select the best technologies for clean coal use, and support renewable energy to replace coal.

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