Using Economic Instruments to Promote Environmentally Sustainable Transportation in the People's Republic of China

The People’s Republic of China (PRC) is the world’s fastest growing oil consumer and is the second largest energy consumer in the world. As of 2005, its carbon dioxide (CO2) emissions level ranked second globally.

To address these urgent, intertwining issues, the Asian Development Bank supported a research in the PRC which focused on sustainable transport. The study looked into vehicle and fuel technology, and changes in transport activity and management. It revealed that policies which prioritize energy efficiency and the environment should be formulated and implemented for transport at all levels.

The study recommended the use of economic instruments such as a fuel tax system, and strategic incentives and tax levies to help reduce energy consumption and promote sustainable transport. It also pushed for a national transportation fund which can back up sustainable transport projects such as urban public transportation, and construction of roads, sidewalks and bicycle paths.

Taxes, according to the study, can discourage use of vehicles. Incentives, on the other hand, can be used to stimulate the development of various modes of sustainable transport systems. These two complementary actions can reduce energy consumption in the PRC. Supplemented by a national transportation fund, these economic instruments can pave the way for the development of more sustainable transportation in more cities in the PRC.