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EASTERN ACADEMIC FORUM
The Necessity and Policy Options of Finance in the Development of
Low-carbon Economy in China
GONG Yingchun
School of Economics and Management, Jiaozuo University, Jiaozuo, Henan, P.R.China, 454003
[email protected]
Abstract: After agricultural society, industrial society and knowledge economy society, low-carbon
economy is a new span of human society, which is a fundamental change of the concept of human
survival and development. Developing the low-carbon economy is in need of transitions in production
and lifestyle of enterprises and residents, while the state finance plays an essential role in the
transitions. Therefore, the fiscal and tax revenue policy system which restricts the high-energy emission
behavior of market players, the fiscal and tax support policy system which stimulates the low energy
emissions behavior, and the fiscal expenditure policy system which promotes the development of
low-carbon economy---should be established and perfected.
Keywords: Finance, Low-carbon economy, Government receipts, Fiscal expenditure
1 The Connotation of Low-Carbon Economy And The Significance For Social
Sound Development
As the rapid growth of the global population and economy, environmental pollution problem that caused
by energy use is getting much more attention. As an economic development initiative, the call of
“low-carbon economy,” first appeared in the 2003 UK Energy White Paper “The future of our energy:
Creating a Low-carbon Economy”. Then a systemic introduction of low-carbon economy should be
trace back to “United Nations Framework Convention on Climate Change” in 1992 and “Kyoto
Protocol” in 1997. In this context, a series of concepts and policy, such as low-carbon technologies,
low-carbon development, low-carbon economy, low-carbon lifestyle, low-carbon society, low-carbon
city, low-carbon world, have appeared [1]. In 2007, President Hu Jintao proposed to develop a low carbon
economy actively at the APEC Conference and the World Environment Day fix the theme on “To
change the traditional concept, and to implement low-carbon economy.” Domestic scholars have their
own definitions of low-carbon economy, but in a summary of view, it refers to a new economic
development model and economic pattern, which is consistent with the demand of sustainable
development, ecological civilization, energy saving and circular economy. The essence is, by adjusting
the economic structure and system innovation, to develop energy-saving technologies, renewable energy
technologies and greenhouse-gas reduction technologies, to promote low-carbon product, to maintain
global ecological balance, and ultimately to achieve sustainable development of society. The
development of low-carbon economy will help the world economy step on a sustainable development
path, which is an important way and direction to achieve national economic development by leaps and
bounds and will promote the world economy into a new cycle of growth. Because it has a triple-effect of
promoting employment, stimulating economic growth, and achieving energy saving as well as the
sustainable economic development growth, low-carbon economy is of great significance for society,
nation, enterprises, and individual residents.
Low-carbon economic development model and economic patterns will help to ease the pressure of the
greenhouse-gas emissions and the protection of resources and environment in the current.
Low-carbon economy will help China to ensure the late-mover advantage and improve international
competitiveness and development potential in the future society, and will be conducive to achieve
sustainable development strategic objectives in the context of climate change.
The enterprises and residents is an important driving force for economic and social development, but
also a major player in the development of low-carbon economy as well as the beneficiaries.
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2 The Necessity of Finance In The Development of Low-Carbon Economy In
China
After agricultural society, industrial society and knowledge economy, Low-carbon economy is a new
span of human society, which is a fundamental change of the concept of human survival and
development. The development of low-carbon economy will lay a solid foundation towards an
ecological civilization for human society, which sets a low-carbon production technology and
low-carbon life philosophy in one. The research of low-carbon production technology and the
establishment of low-carbon life philosophy, both require investment and guidance, government
finances in which play an indispensable role.
2.1 As a socially useful philosophy of production and life for sustainable development, low-carbon
should be spread within the whole society, which requires the government financial support.
2.2 Low-carbon production technology research and development often requires significant capital
investment, and economic benefits will not be immediate. Thus single enterprise lack investment power,
ability, and motivation. All of these require government financial support.
2.3 Low-carbon economy has strong positive externalities, which demand state financial subsidies to
make private gains close to the social benefits. The positive externality of low-carbon economy refers to
that enterprises and residents have got less private gains than the social benefits from their low-carbon
activities in the short term. Therefore, it requires state, the national public affairs manager, to give
financial subsidies to production and living patterns of low-carbon enterprises and residents on order to
make private gains close to social benefits.
2.4 Financial means are required to rectify private cost of economic parties, enterprises and residents,
whose behavior are contrary to low-carbon development model. Since 2001, China’s energy
consumption increased substantially. From 2003 to 2005, the rate of energy consumption growth
exceeds the rate of GDP growth, the average growth rate reached 13.9%, and economic growth
performance is of the high cost of resource consumption [2]. Joint efforts of both enterprises and
residents are called to reverse the current high energy consumption and carbon emissions in the
consumption patterns. Although at this stage the majority of enterprises are starting to turn green eyes, it
is still difficult to rely on market mechanisms to achieve the best use of resources, which need fiscal
policy intervention.
In short, the finance for the development of low-carbon economy is essential, and it requires appropriate
and effective fiscal policies to promote low-carbon economy.
3 Fiscal Policy Options of the Low-Carbon Economy Development
Fiscal policy is an important means for government to carry out macro-control and rational allocation of
resources, which plays a vital role in the process of the development of low-carbon economy. To this
end, it is necessary for China to establish a reasonable system of fiscal policy in order to effectively
support, encourage, and promote low-carbon economy. Low-carbon fiscal policy system should include
three components: First, the fiscal and tax revenue policy system which restricts the high-energy
emission behavior of market players, mainly refers to a variety of energy-consumption-related fees, tax
collection measures, such as carbon taxes, energy tax, resource tax. Second, the fiscal and tax support
policy system which stimulates the low energy emissions behavior provides tax relief, tax rebate. Third,
the fiscal expenditure policy system which promotes the development of low-carbon economy, such as
budget investment, financial subsidies, government procurement and interest payments on loans and
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other policy measures.
3.1 Establish and perfect the fiscal and tax revenue policy system which restricts the high-energy
emission behavior of market players. In order to develop low-carbon economy, the implementation of
green tax policy is the primary choice. China needs to accelerate the improvement of the tax system,
adjust the current fiscal and tax policies, research the introduction of carbon tax, environmental tax
which can achieve environmental objectives, and make detailed implementation plans, to ensure
compensation for the use of environmental resources and the effective constraints of high-emission
behavior. The first is to research the feasibility of a carbon tax. The second is to introduce the resource
tax. At present, some developed countries mainly levy 5 kind of environmental tax, such as water
pollution tax, noise tax, garbage tax, solid waste tax, sulfur dioxide tax and so on[3]. Currently, in China,
resource tax contains items of crude oil, natural gas, coal, other non-metallic ores, ferrous ores,
non-ferrous metal ores, and salt and so on. Resource Tax Collection is by means of in the valorem levy
that is, increasing resource tax rate and expanding the scope of resources tax levy. Environmental taxes
possess punitive measures on pollution, which force enterprises to improve resource use efficiency,
stimulate technological improvements, take the initiative to enjoy the environmental tax incentives, and
guide enterprises to improve resource utilization, increase the technological content and added value,
improve profit margins, and ultimately to enhance social welfare purposes. State should take
environmental governance technology and environmental industrial development as the starting point,
and research the possibility and the feasibility of the introduction of environmental taxes and
implementation. Additional consumption tax taxable items can be add to which may pollute the
environment post-consumer. According to the scarcity of resources in different corresponding, unit tax
should increased, non-renewable and lacking resources should be heavily taxed so as to constraint
production and consumption behavior of enterprises and residents, as well as to improve resource
utilization efficiency.
3.2 Establish the fiscal and tax support policy system which stimulates the low energy emissions
behavior. Enterprises plays an important role in low-carbon economic development, while fiscal support
should be gave to those enterprises that have low carbon production, which encourages them to take
low-energy emissions from production, and thus set a model for other enterprises [4]. Firstly, tax
incentive administers on technology import and transfer of low-carbon. Secondly, improving the tax
incentive policy on enterprises who participate in development of low-carbon economy, and
strengthening the role of fiscal policy support. Finally, preferential drawback policies should be
provided to the investment on low-carbon industries to attract more domestic and foreign capital
investment on low-carbon industries. Giving the cost of tax relief to the enterprises, institutions and
urban, who use renewable energy in the production, use and consumption.
3.3 Establish and perfect the fiscal expenditure policy system which promotes the development of
low-carbon economy. The Government should give full play to the exemplary role of financial resources,
extensively guide the whole society’s input, build a system of fiscal expenditure policy framework, form
an effective incentive mechanism, regulate, promote and guide the development of low-carbon economy
and the construction of low-carbon city.
In a word, the development of low-carbon economy has the great significance to the sustainable
development of society, which requires to establish reasonable fiscal policy system by taking the state
financial strength to effectively support and encourage, promote the development of low carbon
economy, and to form financial income policy system with constraints on energy-guzzling emissions
behavior of the market main body, and taxation support policy system aiming to incentive low-power
emissions behavior of the market main body, and fiscal expenditure policy system focusing on
encourage energy conservation and emission reduction behavior of market main body. With the
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improvement and implement of above three kinds of system, the whole country will finally march
towards health, environmental protection and sustainable development path.
Author in brief:
GONG Yingchun (1980~), female, master of economics, School of economics and management, Jiaozuo
University, Henan
References
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(in Chinese)
[3]. The State Council Development Research Center of Climate Change Task Force.. The Current
Focus of the Development of Low-carbon Economy and Policy Recommendations. Observation on
China’s Development, 8(2009) p. 13~15(in Chinese)
[4]. Du Feilun. On the Reflections of a Low-carbon Economy. China Trade Guide, 10 (2009) (in
Chinese)
[5]. Xie Junan, Hao Dongheng, Xie Wen. The Idea and Countermeasures of a Low-carbon Economy in
China(2008). (in Chinese)
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