China will begin piloting an environmental protection tax on volatile organic compounds (VOCs) starting Jan 1, 2027, as part of efforts to strengthen air pollution control and expand its use of green taxation, the Ministry of Finance, the State Taxation Administration, and the Ministry of Ecology and Environment announced on Friday in a joint notice.
Under the pilot program, which will be rolled out in eight major industrial sectors, all VOCs will be brought into the scope of environmental protection taxation. The eight sectors are printing; petroleum, coal and other fuel processing; chemical raw materials and chemical products manufacturing; pharmaceutical manufacturing; iron and steel smelting; general equipment manufacturing; special equipment manufacturing; and automobile manufacturing. Together, these sectors account for more than 70 percent of total VOC emissions from industrial sources.
VOCs are a key contributor to the formation of PM2.5 and ozone pollution. More than 300 types of VOCs are currently detectable. When the environmental protection tax law was enacted in 2016, China had already imposed taxes on 18 toxic or malodorous VOCs including benzene, toluene and formaldehyde. The new pilot expands the tax to cover VOCs as a whole category.
China to pilot environmental protection tax on VOCs starting 2027
