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BEIJING, Oct. 24 (Xinhua) -- The introduction of a comprehensive environmental tax policy has been under discussion for years in China. The policy may soon come to light, as China's cabinet recently said that the country will look into the possibility of imposing such a policy.

In a guideline issued last week regarding China's environmental protection efforts, the State Council said the country will "actively promote reforms in environment-related taxes" and "conduct research regarding the collection of an environmental tax."

The move suggests that the debut of a "green tax" is now officially on the government's agenda and that reforms will make substantial progress during the country's 12th Five-Year Plan period (2011-2015), analysts said.

A STEP FORWARD

Environmental taxes are broadly defined as a series of tax policies created for the purpose of promoting environmental protection. The taxes are typically designed to include the social costs of any negative impact on the environment in the production and purchase costs of goods.

In Western countries, environmental taxes mainly target sulfur dioxide emissions, water pollution, noise pollution, solid waste and garbage.

"There is not yet a specific environmental tax in China. However, if all environment-related taxes are counted under that category, we do have some items, such as the resource tax and consumption tax," said Zhang Peisen, a researcher with the State Administration of Taxation.

Zhang said the creation of a new environmental tax will be rather complicated, as it will have to take into account the relationships that already exist between the country's existing taxes.

Calls for the debut of an environmental tax have grown considerably in recent years, as China's breakneck development has taken a heavy toll on its resources and environment.

"The stress on environmental tax reforms in the guideline comes as China faces a grim situation in meeting its emission control target," said Bai Jingming, an official from the Ministry of Finance (MOF).

In a blueprint of China's energy-saving programs, China says it aims to cut energy consumption per 10,000 yuan (about 1,570 U.S. dollars) of gross domestic product (GDP) by 16 percent by 2015, saving 670 million metric tons of coal equivalent by that time.

Statistics from the Ministry of Environmental Protection have shown disappointing performance for the first half of this year. Emissions of nitric oxide, a major pollutant, rose 6.17 percent year-on-year.

Experts said the creation of an environmental tax will be a step forward in regulating the use of resources and energy, which will be conducive to the country's efforts to protect the environment.

MORE FUNDING NEEDED

In the recently unveiled guideline, the State Council said China will include environmental protection in the government's annual budget and gradually increase investment in the sector.

It also noted that China will speed up the establishment of a special funding mechanism to expand the scope of ecological compensation.

Bai said the implementation of the new policies will require huge financial support. Although China's expenditures on environmental protection have been increasing every year, the sector still requires more funding, he said.

Bai said more funds will be needed during the 2011-2015 period to fuel the country's energy-saving drive, adding that a new environmental tax will help ease financial pressure.

"The biggest difference between the environmental tax and environment-related taxes is that the former has a wider tax base. If implemented, it will provide another channel to raise funds for environmental protection and help foster a long-term and steady fund-raising mechanism," Bai said.

NOT JUST ANOTHER TAX

Resource-hungry industries such as steel, oil and cement will be hit hardest by the environmental tax once it is in place. Some companies are already paying resource taxes; the addition of a new tax item will squeeze profits and have a subsequent effect on prices.

But Liu Shangxi, another official from the MOF, said most companies will not experience a significant change right away.

"The environmental tax is mostly a replacement of the previous pollution discharge fees, so producers will not feel much of a difference," he said, adding that the tax is likely to expand in the long-run, which may eventually affect these companies.

He reiterated that the creation of an environmental tax is not simply an addition of a new tax item, noting that China will first clear up the relationships between the new item and the existing environment-related taxes.

"We still have to work out the details," he said.