China Mulls Tax on High-Emission Autos

By Patrick Goodenough | July 7, 2008 | 8:16 PM EDT

( - Energy-hungry China, the world's fastest-growing vehicle market, is considering slapping new taxes on large automobiles, linking tax levels with exhaust emissions.

The official China Daily said the government was mulling a proposal from the cabinet's development and research center, which could push taxes to 15-20 percent for autos with a three-liter or larger engine capacity.

"The government will levy no tax if consumers buy lower-level or zero emission vehicles," the paper quoted center representative Feng Fei as saying.

"Those who buy cars with higher emission will be taxed more heavily," he said, adding that the aim was to encourage people to buy vehicles that use less gas and pollute less.

Current vehicle taxes range from three to eight percent.

The center predicted that cars in China would in five years' time consume about 43 percent of the country's projected total oil demand, and that the figure would climb to 57 percent by 2020.

"In the future urban pollution will mainly be generated by automobiles, unless we are able to effectively control exhaust emissions," Feng said.

With a population of 1.3 billion, China has the world's fastest-growing economy and fastest-growing middle class.

According to Automotive Resources Asia, a market strategy company specializing in Asian car markets, more than 474,000 cars were sold in China in April - more than those sold in six other major Asian countries put together. Only Japan came anywhere close in sales (405,036), with India - the world's second-most populous country -- falling just short of 100,000.

Western auto giants including General Motors, Ford and DaimlerChrysler having been selling more cars and parts to China under a Nov. 2003 deal aimed at lowering the U.S. trade deficit with the Asian giant.

They include sports utility vehicles (SUVs) like the Ford Escape, called the Maverick in China.

GM last year reported a 27.2 percent annual growth in sales in mainland China, where its market share rose from 8.5 to 9.3 percent in 2004.

Also in 2004, DaimlerChrysler reported a big increase in demand for Jeeps and license-produced Mitsubishi Outlanders and Pajero Sports in China.

Charging that exhaust emissions are contributing heavily to "global warming," environmentalists campaigning against what they term "gas guzzlers" have long been pressing for higher taxes on SUVs and other larger cars, although with little success.

Last month, Greenpeace activists in Britain briefly shut down an assembly line making Range Rovers, chaining themselves to half-finished vehicles and declaring the factory a "climate crime scene."

The group accused Land Rover's parent company, Ford, of blocking government action to tackle climate change, both in Europe and the U.S.

Greenpeace urged Prime Minister Tony Blair to impose a new tax on SUVs and to "offer incentives for people who choose to drive more fuel-efficient vehicles."

Last year, the French and Italian governments proposed introducing new taxes on heavier cars including SUVs, but other European Union countries complained that the move would constitute unfair protection for French and Italian small car manufacturers.

Meanwhile, green groups in the U.S. are planning a July 4 campaign to "declare independence from oil."

A website is inviting supporters to endorse a "Declaration of Independence from Oil" which organizers said they would deliver to "Vice President Dick Cheney, the architect of America's energy policy, and Bill Ford Jr., CEO of Ford Motor Company, America's biggest gas guzzler."

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Patrick Goodenough
Patrick Goodenough
Spencer Journalism Fellow