The nearly one-fifth increase in tax revenue is just one of the double-digit growth figures China will proudly announce in the coming weeks. Amid surging economic growth, the country's tax revenue hit a new high of 3.76 trillion yuan ($480 billion) in 2006.

While this figure indicates the robustness of the Chinese economy, more importantly, it means that the country can now introduce bigger tax incentives to boost its pursuit of energy-saving and environmentally friendly sustainable development.

Last year was the first in China's 11th Five-Year-Plan (2006-10). While the economy performed better than expected in terms of almost all major growth indicators, policymakers had to admit the great difficulty in achieving the annual goal of cutting energy consumption per unit of gross domestic product by 4 percent. The latter was crucial to realizing the country's ambition to cut energy intensity by 20 percent and major pollutants by 10 percent during this five-year period.

A key reason why the country has so far made little progress in raising energy efficiency and enhancing environmental protection is that, in comparison with its strong growth momentum, it still lacks the means to facilitate a change in its growth pattern.

But this does not mean that China's policymakers have failed to work hard on this issue. Last year, the central government not only set out detailed aims for each provincial-level region in terms of cutting energy intensity, but also came up with a host of industrial policies to curb energy-hungry and highly polluting production. These administrative measures will surely help encourage local officials and enterprises to strive towards greater energy efficiency and higher environmental standards. But such measures alone are not enough.

Bigger tax incentives to encourage both energy-saving consumption and environmentally friendly production are badly needed because they suit a market economy.

If enterprises regard energy-saving and environmental protection largely as a burden the government imposes on them, they will be reluctant to shift away from extensive growth. But if they recognize that these environment- and energy-related tax incentives can substantially affect their bottom lines, they will try their best to save as much energy as possible and minimize pollutant discharge.

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