Operating Costs of Steel Industry to Increase as China Mulls Environmental Tax

SHANGHAI, Mar. 22 (SMM) -- China's Finance Minister Xie Xuren said recently at the China Development Forum that the 2012 tax reform will focus on improving the tax system, including deepening the reform of environmental tax and fee. China will replace the fee on major pollutants like sulfur dioxide with the tax, and the tax rate should be higher than the existing pollutant discharge fee. Thermal power, steel and other industries may be involved.

Relevant departments became more willing to introduce the environmental tax policy after the tax reform was included in the 12th Five-Year Plan, and heads from the Ministry of Finance and other departments repeatedly said that they would deepen the reform of environmental tax and fee and introduce the environmental tax policy. Meanwhile, they revealed the reform path to a certain extent.

An environmental expert points out that among four major pollutants emission control targets, SO2 and COD emissions were down by 2.2% and 2% in 2011, both exceeding the targets by 0.7 percentage points and 0.5 percentage points, and ammonia nitrogen emissions decreased by 1.52%, also reaching the target, but nitrogen oxide emissions rose by 5.73%, failing to meet the target. The pollution prevention and control task is still arduous since the goal for 2012 is to achieve zero growth of emissions.  

Markets will pay close attention to the effect of environmental tax on relevant industries and enterprises including thermal power and steel industries once the tax is imposed, and operating costs of relevant industries will increase in response. Steelease believes the price rise caused by the speculation of environmental tax will be much higher than the actual cost increase, though enterprises will try their best to attach the tax cost to the price then.