VII. Economic Policy and Investment Concerning the Environment

The last decade has seen the largest increase ever in China's investment in its environmental protection. A pluralistic financing system based on government support has taken initial shape after years of efforts.
-- Increasing government input into environmental protection. During the Tenth Five-Year Plan period, 111.9 billion yuan was earmarked from the central budget for environmental protection, of which 108.3 billion yuan from the treasury bonds was used mainly to control the duststorm sources threatening the Beijing-Tianjin area, to protect natural forests, to turn cultivated farmland back into forests or pastures, to control pollution around the Yangtze River's Three Gorges Dam area and its upstream, as well as pollution on the Huaihe, Liaohe and Haihe rivers, Taihu, Dianchi and Chaohu lakes, to industrialize the reuse and recycling of sewage and garbage, and to reclaim waste water. Since 1998, the State has focused treasury bond investment on environmental infrastructure construction, bringing along a large amount of social investment. Between 1996 and 2004, China's investment into environmental pollution control reached 952.27 billion yuan, amounting to one percent of that period's GDP. In 2006, expenditure on environmental protection has been formally itemized in the State's financial budget.
-- Improving policies concerning environment-related fee collection. The management and collection of discharge fees have been strengthened by strict separation of their collection and use, and channeling the fees exclusively into the prevention and control of environmental pollution. The collection of sulfur dioxide discharge fees has been expanded to include all related enterprises, public institutions and private businesses, and the rate of such fees per kg has been raised from 0.2 to 0.63 yuan. The treatment of urban sewage, garbage and hazardous wastes is also charged, so as to channel social capital in a variety of ways into the environmental protection infrastructure construction and operation, and to promote the marketization and industrialization of pollution control. A concession operation system has been established and implemented for the operation of urban sewage and garbage treatment. In some places, the operation of sewage treatment plants and garbage treatment establishments set up by the government has been transferred to enterprises through public bidding/tendering and contracting. In this way, the government has strengthened its role of supervision while the economic returns of the investment in environmental protection have also been augmented.

-- Formulating price and tax policies favorable to environmental protection. A mechanism to share fees for renewable energy resources has been established. The part of the price of grid electricity generated by renewable energy higher than that of the electricity generated by local desulfurized coal-burning generators, the difference between the expenses for maintaining the independent power system using renewable energy subsidized or funded by the government and the average power price of local provincial power grids, as well as the expenses involved in renewable-energy-generated electricity to be incorporated in power grids, will be resolved by collecting extra fees from electricity consumers. The tax rebate policies for exported products, including iron and steel, electrolytic aluminum and iron alloy, have been annulled or reduced in group form. Taxation policy has been formulated in favor of auto industry upgrading and auto pollution alleviation. The consumption tax will be reduced by 30 percent for auto producers if they reach the low-pollution emission standard ahead of schedule. Tax reduction or exemption are extended to enterprises engaged in reclaiming renewable resources, making comprehensive use of resources and producing equipment for environmental protection, as well as enterprises using waste water, gas and residues as the main materials of production. The policy of collecting tax on the occupation of cultivated land is observed strictly, so as to promote the rational use of land resources, strengthen land management and protect arable land. The standards of tax collected on the production of coal, crude oil, and natural gas will be raised in steps in the future in order to protect mineral resources and promote the rational development and utilization of resources.