From the Guardian:
China's decision on Friday to link domestic fuel prices to the international price of crude oil, but increase consumption taxes on gasoline and diesel sharply to spur more efficient use of energy in the medium term, raises the question whether the incoming Obama administration might be tempted to do the same.
China is taking advantage of a cyclical pull back in energy to push through a permanent structural increase in taxes and prices. The aim is to combine a short-term boost to the economy with longer-term and more consistent incentives for improving energy efficiency.
By consolidating a series of tolls and administrative charges into a single, easy to collect consumption tax, the government is simplifying the tax system, creating a new source of revenue, and ensuring the change will have no impact on the politically sensitive inflation rate.
More importantly, it creates a fairly simple mechanism for raising energy costs further in future to spur additional efficiency gains, irrespective of cyclical changes in the crude oil price.
Once short-term economic weakness is past, the government can easily raise the consumption tax progressively over the next few years.
