Take Huawei Technologies, for example, the Shenzhen-based telecommunications firm that brought in around $35 billion in revenue in 2012 and is seeking to make inroads into the U.S. market.
In 2011, carbon dioxide emissions from the company's research centers and production facilities amounted to a total of 690,065 tons, according to the company. With a carbon tax of $1.60 per ton, that would amount to just over $1.1 million in carbon taxes, or a little over 1 percent of what the company earns in revenue every single day.
Even if the tax were increased to the higher 2020 figure of $8 per ton, Huawei would still only pay a little more than $5.5 million, a paltry figure in comparison to the company's total revenue.
Still, the introduction of a carbon tax sets China, a country whose environmental challenges have received much commentary, ahead of several other advanced economies.
"In the U.S. or most of the EU other than Norway and Ireland, there is still no carbon tax," Thomas Kerr, the World Economic Forum's head of climate change initiatives, told GreenBiz in an email. "So if the Chinese government were starting small — using this very small amount to send a signal — and then planned to ratchet up the tax over time, that would be a very important move."
Barron, the senatorial candidate, echoed Kerr's sentiment. "China will play a critical role in whether we are able to limit catastrophic climate change," he said. "Although they are suggesting a modest price on carbon, it is a step in the right direction."
Several details still need to be clarified before the carbon tax will take effect. Hau L. Lee, a professor at Stanford University who specializes in supply chain management, put this concern in stark relief in an email to GreenBiz.
"If a company is a manufacturing one like Foxconn, say, then there would of course be clear carbon emissions coming out of the factories in the manufacturing process," he wrote. But what about the less obvious emissions:
Should we include the emissions of the materials used in production? If I buy materials from a neighboring factory, should that factory be responsible for the carbon tax of the materials, or should I be? Would that lead to my sourcing the materials from another country which does not have carbon tax? What about the transportation of the materials, which would also have carbon emission implications? How about the packaging materials used in finishing the products? Also, am I responsible for the carbon emission of the distribution of the product, or would that be charged to someone else? …There still needs to be a lot of clarification.
Lee also expressed concern over how companies will calculate their emission levels, and who will audit and monitor companies' emissions disclosures. The manner in which China answers these questions will in large part determine whether the tax will actually encourage companies to cut carbon emissions.
"The government will have to do a whole lot more work to be clear on the above issues," said Lee. "Otherwise, it has some PR effect that the Chinese government is doing something, but there would not be much of an impact."
Chinese flag photo by feiyuezhangjie on Shutterstock.