China's National Development and Reform Commission (NDRC) announced on Friday that the consumption tax on a range of oil products will be raised in a move seen to promote conservation, boost the attractiveness of alternative energy usage and propel the nation toward a greener path of economy.
According to the announcement, effective Saturday, the consumption tax on gasoline will rise from 1 yuan ($0.16 dollar) to 1.12 yuan per liter, while that on diesel from 0.8 yuan to 0.94 yuan per liter.
China's Ministry of Finance (MOF) and the State Administration of Taxation said that the cost of gasoline, lubricants and naphtha will be increasing by 0.12 yuan (two cents) per liter, while that of diesel, jet fuel and fuel oil by 0.14 yuan per liter beginning Saturday.
The NDRC said that it will maintain retail fuel prices at the current level, reversing market expectations for the ninth price cut since July. Fuel for small-displacement motorcycle, tire and ethyl alcohol were exempted from the new tax increase, it added, to reduce burdens on the low and middle-income group.
The new round of tax increases will help the government in its campaign to curb oil consumption. Under the recent accord on climate change between China and the U.S., the Beijing government said that it expects carbon emissions to decline around 2030. By that year, it has pledged to make non-fossil fuels comprise about 20 percent of the country's total energy mix.
A statement from the Chinese finance ministry said that the tax increases will also "guide consumption in the right direction, promote efficient use of oil resources and help promote development of production in the new energy sector." It maintained that "a great number of our cities have been troubled by relatively large scale, long-lasting and serious smog, affecting the worklife and health of the people."
The resulting increase in government revenue from the tax hike will reportedly be used in pollution control and in the battle against climate change, as well as in providing incentives for the purchase of new energy-efficient vehicles to promote more overall energy saving.
Back in 1994, China imposed a consumption tax on consumer goods with a high energy cost and high pollution in order to guide production and consumption toward being environmentally friendly and to promote a sustainable economic growth model, according to Xinhua.