The Environmental Tax Scheme in China’s Large-Scale Pig Farming: Balancing Economic Burden and Responsibility

Abstract

China has implemented an environmental protection tax for large-scale agricultural farming to address environmental pollution caused by livestock and poultry breeding. Studying the environmental management of large-scale pig farming is crucial for controlling agricultural pollution. However, the economic impact and effectiveness of the current tax design, including responsibility sharing, tax rates, and taxpayers, are unclear. This study aims to address these gaps. Firstly, two types of taxation principles, production-based and consumption-based, are established, and their effects on pollution emissions distribution between pig production and marketing areas are comparatively analyzed. Secondly, the economic impact of consumption-based environmental taxes is estimated from inter-provincial and rural–urban perspectives under the current tax mechanism. Thirdly, a new alternative tax rate aligned with inter-provincial pig consumption levels is proposed based on the consumption principle. By comparing alternative tax systems, the potential impact of the current environmental tax on the regional economic burden is analyzed. The results highlighted that a production-based tax system resulted in 83% of regions experiencing varying degrees of implicit emission transfers, and a consumption-based tax system helped coordinate the environmental economic burden between pig production and marketing regions. Additionally, a linear relationship between tax rates and pork consumption expenditure not only alleviated the overall economic burden, leading to tax savings in 30% of regions, but also increased the national environmental revenue from the pig farming industry, resulting in a remarkable 147% rise in overall environmental tax revenue. These findings provide theoretical support for adjusting responsibility and economic burden through environmental tax modifications, facilitating the establishment of a compensation mechanism for the benefits between pig production and marketing areas.

1. Introduction

With economic growth and social structural changes, meat has become an increasingly significant source of protein. In order to meet the rising demand, the global meat supply is projected to expand, reaching 377 million tons by 2031. This growth will be accompanied by an increase in livestock inventories [1]. As the proportion of large-scale livestock farming continues to rise, livestock farming emissions have increased the carrying pressure on ecosystems, posing potential risks to the ecological environment [2]. Freshwater systems are interconnected and the impact of agricultural pollution, such as livestock production, on freshwater systems is complex [3]. Agricultural water pollution has become a focal point of concern for policymakers in most OECD countries [4]. While these increased outputs have helped meet the demand for food, they have also given rise to significant environmental threats. In many countries, agriculture is now the primary source of water pollution, surpassing cities and industries; it is worth noting that water pollution caused by organic matter from livestock farming is currently more widespread than organic pollution originating from urban areas [5].

Pig farming is a crucial sector within the livestock industry. Due to the large volume and high density of pig manure accumulation, large-scale pig farming easily leads to environmental pollution [6]. China stands as the world’s largest producer and consumer of swine, consuming nearly 50% of global pork production [7]. However, China is currently facing serious environmental pollution problems stemming from pig farming, with pig manure alone exceeding 600 million tons, accounting for approximately one-third of the total amount of animal manure. In such circumstances, the introduction of environmental taxes has become an inevitable choice, leading to long-term transformations in the agricultural sector [8].

In order to address environmental challenges, the implementation of environmental taxes has been recognized as a significant policy tool [9,10]. Over the past few decades, many countries have introduced environmental tax reforms to tackle these issues but the majority of environmental tax policies in most countries have primarily focused on industrial sectors such as fossil fuel consumption [11,12,13,14]. However, China’s environmental protection tax targets not only industrial activities but also large-scale livestock farming, which provides a new research perspective for the reform of environmental tax policies. Compared to industrial pollution with concentrated point-source emissions, agricultural pollution involves dispersed non-point-source emissions, making pollution control more challenging. Thus, research on environmental taxes in the agricultural sector holds significant importance for controlling ecological pollution. The effectiveness of environmental tax reform depends on the rational design of the tax system. This study took China’s large-scale pig farming industry as an example and conducted a theoretical exploration of the operational mechanism of environmental taxes under different tax principles, and then analyzed the economic impact of environmental taxes on pollution control in the production and sales areas of pig farming. Moreover, this paper examined the fairness and effectiveness of the existing environmental tax system, considering aspects such as tax rates and tax subjects. The findings provided theoretical support for a progressive reform of environmental taxes and offered new insight for policymakers to adopt agriculture-specific environmental tax policies that are incentive-driven and yield positive environmental benefits.

Our contribution can be summarized in three aspects. Firstly, we examined the mechanism design and economic impacts of environmental taxes in the large-scale pig farming industry, addressing the existing institutional research gap in the agricultural sector concerning environmental taxes. Secondly, from the perspective of compensating interests between production and consumption regions, we employed a framework that considers the process of tax collection and allocation in these regions. We demonstrated the theoretical operation mechanism of environmental taxes under different taxation principles and, by incorporating “pre-measures” of differential tax rates and “post-measures” of transfer payments, we proposed a novel alternative taxation scheme. Thirdly, our work facilitates the establishment of a compensatory mechanism for production and consumption regions by providing a fresh perspective. We discovered that the proposed alternative taxation scheme not only helps in harmonizing the environmental and economic burdens between pig production and consumption regions, but also achieves a better balance in environmental governance responsibilities between these regions. Policymakers can promote the development of the compensatory mechanism from an environmental protection tax perspective.

2. Background

2.1. The Evolution of Environmental Tax in China

With the increasing adoption of carbon taxes globally, China has also begun utilizing environmental policies to combat pollution issues. In 2003, China implemented pollution discharge fees, requiring all industrial enterprises that directly discharge pollutants into the environment to pay fees. In order to further enhance pollution control measures, China enacted the “Environmental Protection Tax Law of the People’s Republic of China” in 2018, marking a significant legislative reform in the field of ecological environment and representing China’s first independent green tax specifically targeting environmental protection. According to China’s Environmental Protection Tax Law, the producers directly emitting taxable pollutants into the environment are considered taxpayers for environmental protection tax. The tax is primarily calculated and levied based on the number of pollutant emissions, pollutant equivalent values, pollutant equivalent numbers, and tax rate standards. In the agricultural sector, China’s environmental protection tax is only applicable to large-scale livestock and poultry farms with a stock size exceeding 50 head of cattle, 500 head of pigs, 5000 birds chickens or ducks. The taxation mainly targets water pollutants in the livestock and poultry farming industry. The specific applicable tax rates are determined and adjusted by the provincial, autonomous regional, and municipal governments in consideration of the local environmental carrying capacity. The range of tax rates varies from CNY 1.4 to CNY 14 per pollutant equivalent.

2.2. The Theoretical Analysis of Environmental Taxation Based on Large-Scale Pig Farming

China experiences significant inter-provincial economic inequality, highlighting the need to consider not only the revenue generated from environmental taxes but also the potential impact on regional economies when implementing measures to address environmental pollution. In line with China’s environmental tax law, pig farming operations with a size exceeding 500 heads are required to pay the environmental protection tax [15]. In China, due to the imbalanced production and sales of pigs across different regions, it is common to divide major production areas and major consumption areas. In order to meet the demand for swine supply in various provinces, the major production areas not only cater to local consumption but also employ measures such as “pig redistribution” to transport pigs from major production areas to major consumption areas, thus addressing the issue of uneven distribution of pig resources. Based on the pig production layout, the current specific taxation methods are depicted in Figure 1. Figure 1 illustrates the current environmental tax mechanism. In Figure 1, Region A represents the area of pig production. Pigs produced in Region A can be divided into two components: one component is sold locally, consisting of M heads, which generates R_M’ environmental tax; the other component is sold in other regions, consisting of N heads. As per the existing tax system, all emissions throughout the production chain are attributed to the province of origin. Consequently, the polluter in Region A is responsible for bearing the environmental tax of R_M + R_N, which is retained by Region A and utilized for environmental governance purposes in due course.

However, the tax mechanism imposed on large-scale pig farming may potentially contribute to economic inequality among the main pig producers and purchasers, while the effectiveness of pollution mitigation remains uncertain. Firstly, in 2016, China issued a guideline on pig production development; the primary pig-producing regions are concentrated in the central and western areas, with major purchasers predominantly located in eastern areas. This production distribution in pig farming leads to an unequal consumption of environmental resources among regions. Moreover, within the context of regional uneven development, imposing an environmental tax on the main producing areas tends to burden less developed provinces with excessive pollutant emissions and pollution tax payments. Meanwhile, the main pig-consuming provinces tend to be net importers of pig products at a significantly lower cost, as depicted in Figure 2. In Figure 2, Region A represents the pig production region, while Region B represents the pig consumption region. Under the current pig production layout, Region B tends to externalize pollution to Region A, thereby increasing the intensity of pollution control measures and tax burdens on Region A, ultimately constraining its development prospects.

Secondly, under the environmental tax system, despite the local ownership of tax revenue, the central and western provinces often face a disparity in the valuation of environmental resources compared to the eastern region, resulting in lower tax revenue that is inadequate to cover the higher costs associated with environmental governance [16]. Lastly, the current tax mechanism frequently encounters challenges related to high implementation costs, including the need for extensive information monitoring and the prevalence of local government protectionism. These factors often contribute to inefficiencies in the law enforcement process [17].

Although the primary objective of the environmental tax is to address environmental issues, the design of the tax mechanism, at the very least, should not exacerbate income inequality [18]. In recent years, there has been an increasing scholarly discourse on China’s environmental tax. Many researchers argue that the current tax system largely inherits the structure of pollution discharge fees, and the underlying asymmetry between the benefits and costs for polluting entities remains a fundamental issue in environmental problems [19]. It is important to acknowledge that, under different realistic constraints, the polluter-pays principle may not always be the optimal choice. Lu et al. [20] advocate for a perspective of shared environmental responsibility, suggesting that consuming provinces should also bear the relevant emission responsibility. In comparison with a single-polluter-pays principle, a series of studies reveal that tax deviations among regions and the distribution of tax benefits should be thoroughly considered, with the introduction of a consumer-pays principle for taxation [17].

Inter-provincial tax differences serve as a significant means to achieve inter-regional compensation [20]. The current environmental tax system on pig farming employs differential tax rates as ex-ante measures to mitigate potential adverse distributional effects. However, challenges remain regarding the unreasonable distribution of regional tax burdens. Building upon ex-ante measures, a novel alternative tax mechanism has been proposed, which incorporated insights from the transfer payment approach discussed by Liang and Wei [21], Alton et al. [22], and Wang et al. [23] to propose a novel alternative tax mechanism, as depicted in Figure 3. In Figure 3, Region A represents the province of pig production, while Region B represents the province of pig consumption. The key distinction lies in the allocation of emissions to the final consumption area rather than the place of origin. In this scenario, the environmental tax R_M generated from locally sold pigs is paid by the consumer in Region A and utilized for environmental governance within the same region. Simultaneously, the consumer in Region B bears the environmental tax R_N resulting from the consumption of M-head pigs as environmental management fees, which are subsequently transferred to Region A through financial transfer payments.

Under this proposed alternative tax system, the challenges associated with the current tax mechanism can be addressed. Firstly, the alternative tax takes into account the issue of conflicting interests between pig production and marketing regions. By altering the taxation principles, the unfair tax burden between production and marketing in pig farming has been rectified, as illustrated in Figure 4. In this graph, when compared to Figure 1, Region B not only consumes pigs but also assumes responsibility for the emissions resulting from the production process. This adjustment significantly reduces the costs and pressures faced by pig production areas.

Secondly, in comparison to the mid-west production areas, the eastern consumption regions demonstrate a preference for paying higher prices to access favorable environmental resources, resulting in a higher expected environmental tax revenue. Through the transfer of payments, the eastern region can allocate tax revenue to the governments of the central-western regions. This approach aids in augmenting the funding sources for environmental governance and alleviating the environmental governance pressures faced by the production areas. Lastly, transitioning the burden of environmental tax on pigs from producers to consumers will contribute to reducing the costs associated with environmental tax regulation while enhancing the efficiency of tax collection. Additionally, the increased funding can facilitate the diversification of environmental investments, thereby improving pollution control efficiency in the production areas. To enhance the efficiency of combating environmental pollution, it is essential to establish a compensation mechanism between production areas and marketing areas. This mechanism should guide the existing environmental tax system towards a framework that embodies both fairness and efficiency simultaneously.

Currently, the tax principles solely target behaviors that directly discharge pollutants into the environment, without considering the emissions resulting from pig consumption, as well as the implicit emissions and tax transfers that occur during the consumption process [17]. To address this gap, this paper aimed to assess the potential impact of environmental taxes on pollutant emissions from large-scale pig farming in mainland China. Our analysis focused on the year 2020, utilizing available data, and specifically examined the distortion in environmental tax burdens between pig production and marketing regions. Moreover, this paper compared the distributional effects of tax principles based on the polluter-pays and consumer-pays approaches. These comparisons offer valuable insights and novel perspectives for the establishment of an environmental compensation mechanism between pig production and marketing areas within the existing tax system. The structure of the remaining sections in our paper is outlined as follows. In Section 2, we provide a comprehensive literature review on environmental taxes implemented under different principles. In Section 3, we elucidate our methodological approach, including the strategy and data utilized for our analysis. The results obtained from various scenarios are presented in Section 4. Finally, in Section 5, we summarize the research findings, draw conclusions, and discuss the policy implications derived from our study.

3. Literature Review

The calculation and allocation of emissions among stakeholders play a crucial role in the implementation of environmental taxes. Two widely adopted methods are production-based and consumption-based environmental taxes [24]. Production-based environmental taxes have gained popularity in many countries due to their simplicity in tax procedures [25]. However, such taxes can result in emission leakage effects, with pollutants flowing into regions with less stringent emission regulations [26]. On the other hand, consumption-based environmental taxes may undermine emitters’ incentives to reduce emissions, potentially limiting the effectiveness of emission reductions [25]. Scholars have compared the effects of these two tax schemes in various scenarios. Ren et al. [24] discovered that, under a production-based emission tax, higher demand uncertainty may incentivize manufacturers to invest more in emissions reduction. However, increasing the emission tax under both tax principles could potentially reduce manufacturers’ investments in emission reductions. Schmutzler and Goulder [27] argued that a production-based tax is reasonable if monitoring is comprehensive and costs are sufficiently low. However, in cases of high monitoring costs, limited emission reduction options, and close output substitutes, the introduction of a consumption-based environmental tax is preferable. While the production-based principle is likely to remain dominant, the consumption-based principle offers valuable insights for climate mitigation policies [28]. Edjabou and Smed [29] observed that the agricultural sector meets the requirements for implementing consumption-based environmental taxes; they conducted scenario simulations and discovered that using consumption-based taxes to promote climate-friendly diets could be a cost-effective policy tool for reducing agricultural emissions. Existing studies have demonstrated the incentivizing role of environmental tax policies in achieving sustainable development goals for growth and development [30]. Research on agricultural output taxes also indicates that environmental tax policies are equally applicable in the context of agricultural emission reduction.

On the one hand, establishing public support for ensuring effective and sustainable environmental taxes is of paramount importance [31]. Imposing taxes on agricultural output implies taxing consumption. Smed [32] and Säll [33] have studied the impact of environmental taxation policies on social welfare and consumption burden from various aspects, including social costs, consumer surplus, and changes in dietary patterns. Smed [32] discussed the anticipated effects of Denmark’s taxation on saturated fats in food based on pre-tax data and the estimated price elasticity of consumer response to the market. It was found that this tax would lead to a reduction of approximately 8% in saturated fat consumption. Meanwhile, Säll [33] employed a consumer welfare approach to investigate the distributional impact of Sweden’s environmental tax on meat. The results indicated that, following the introduction of the tax, in order to maintain the utility level of consumption, the middle-income group would require compensation equal to 0.81% of total expenditure, the lowest-income group would need compensation equivalent to 0.99% of income, and the highest-income group would require 0.51% of compensation.

On the other hand, the rationality of the environmental tax system design is equally important. The tax system design often involves a trade-off between efficiency and fairness [23]. Currently, economic research on environmental tax system design is primarily focused on industrial sectors [17,25,34] and not the agricultural sector, which is of significant importance for evaluating the potential implementation effects of environmental tax policies in agriculture. Wang et al. [17] analyzed the distributional impacts of consumption-based environmental taxes based on multi-regional input–output (MRIO) tables and a unified tax calculation method. They found that, while industrial and corporate entities are the taxed subjects, the economic burden of taxation is passed on to consumers through price shifts, resulting in regional inequalities. Thus, attention must be given to potential economic implications when designing environmental taxes. Xue et al. [25] developed a tax model based on production and consumption and argued that effective environmental policies should ensure equal marginal abatement costs for each economic entity’s final unit of emissions, and they suggested incorporating consumption-based environmental responsibilities into the tax model framework. Nielsen et al. [34], through constructing a fixed-effects model, conducted a comparative analysis of different environmental tax systems and found that differentiating tax rates based on the products’ environmental harm and substantially raising product prices help to address deficiencies in tax design. These studies contribute valuable insights to the progressive reform of environmental tax systems in the agricultural sector.

The agricultural sector holds significant potential for providing substantial short-term ecological relief at relatively low costs, ranking as the second-largest contributor to this potential for mitigation [35]. The environmental policy effects of this sector are crucial for ensuring stable agricultural production and supply, as well as promoting regional sustainability. Compared to the previous research, our study focused on the intensive-scale pig farming within the agricultural sector and constructed an appropriate environmental taxation model. By taking into account the unique production layout of pig farming in China, we examined the regional distributional effects of environmental taxes on pig farming from the perspective of compensating the interests of production and consumption regions. Additionally, we simulated the implementation effects under different taxation scenarios, offering valuable theoretical insights for the progressive reform of environmental taxation.

4. Materials and Methods

The analysis in this study consisted of the following steps. First, we collected production and consumption data for large-scale pig farming in mainland China. By applying the appropriate accounting method and emission coefficients, we obtained both production-based and consumption-based emission data for large-scale pig farming. Next, we calculated the net transfer of pollutant emissions across regions based on the distribution of pig farming emissions. Using the consumption-based emission data and the environmental tax rates specific to each region, we calculated the revenue generated from the consumption-based environmental tax for large-scale pig farming. Finally, we proposed two alternative tax mechanisms and compared them to the original tax mechanism, then analyzed the differences between the alternative and original tax mechanisms, and assessed their respective impacts on regional economic inequality. Additionally, due to data limitations, we did not include the Tibet Autonomous Region in the analysis.

4.1. Calculation of Production-Based Environmental Tax on Large-Scale Pig Farming

We primarily referred to the “Manual of Production and Emission Accounting Methods and Coefficients for Statistical Surveys of Emission Sources” and the “Agricultural Pollution Source Production and Discharge Factor Manual” (available at https://www.mee.gov.cn/xxgk2018/xxgk/xxgk01/202106/t20210618_839512.html (accessed on 11 June 2021)) published by the Ministry of Ecology and Environment of the People’s Republic of China in 2021. The environmental tax on pig farming was applicable only to water pollutant emissions from farms with a stock size exceeding 500. We utilized the emission coefficients provided for large-scale pig farming as reference data. According to the “Agricultural Pollution Source Production and Discharge Factor Manual”, water pollutants from livestock farming mainly include chemical oxygen demand (COD), ammonia nitrogen (NH3-N), total nitrogen (TN), and total phosphorus (TP). However, total nitrogen (TN) is not considered a taxable water pollutant under China’s environmental tax law. Therefore, we focused on the three primary water pollutants: chemical oxygen demand (COD), ammonia nitrogen (NH3-N), and total phosphorus (TP). The specific emission coefficients can be found in

Table A1. Emission coefficients for large-scale pig farming.

	COD	NH3-N	TP
Beijing	4.3178	0.1094	0.0677
Tianjin	10.5351	0.1707	0.1572
Hebei	6.2497	0.1276	0.0951
Shanxi	9.7331	0.1615	0.1452
Nei Mongol	5.2113	0.1049	0.0801
Liaoning	7.6073	0.1081	0.1177
Jilin	9.4502	0.13	0.1458
Heilongjiang	6.6873	0.0913	0.1039
Shanghai	2.0527	0.0556	0.0356
Jiangsu	8.8285	0.2761	0.1764
Zhejiang	1.0047	0.0498	0.0227
Anhui	10.2912	0.2673	0.2016
Fujian	5.7742	0.1736	0.1163
Jiangxi	8.43	0.2388	0.1671
Shandong	6.7607	0.2539	0.1376
Henan	8.0811	0.1076	0.1432
Hubei	12.7263	0.145	0.2234
Hunan	11.6476	0.1428	0.2051
Guangdong	12.9476	0.1512	0.2271
Guangxi	7.1333	0.1027	0.1276
Hainan	6.7538	0.0892	0.1207
Chongqing	9.6497	0.1467	0.143
Sichuan	5.9272	0.1034	0.0887
Guizhou	12.7358	0.1691	0.1871
Yunnan	4.1215	0.0795	0.0627
Shaanxi	2.6206	0.0296	0.0533
Gansu	7.5284	0.0536	0.1505
Qinghai	3.8713	0.0385	0.0932
Ningxia	3.718	0.0324	0.076
Xinjiang	2.5414	0.0283	0.0562

. To estimate the production of large-scale pig farming, we multiplied the proportion of farms with over 500 pigs slaughtered per year, as announced by the Ministry of Agriculture and Rural Affairs, with the pig production of each region. The calculation formula for water pollutant emissions from large-scale pig farms is as follows:

$$Q_j=\left(q\times e_j\right)\times {10}^{-3}$$

(1)

$$\mathrm{Q}=\sum _j^n{Q}_j$$

(2)

where $\mathrm{Q}$ represents the total water pollutant emissions from large-scale pig farming in the region, $Q_j$ denotes the emissions of the j-th pollutant from large-scale pig farming in the region (unit: tons), q represents the number of pigs slaughtered in large-scale pig farming exceeding 500 (unit: heads), and $e_j$ represents the emission coefficient of the j-th pollutant in large-scale pig farming in the region (unit: kg/head).

To calculate the environmental tax revenue on large-scale pig farming based on production emissions, we incorporated the pollutant equivalent values and the tax rate table for taxable water pollutants (

Table A2. Pollution equivalent values of taxable water pollutants.

	Contamination Equivalent Value
COD	1
NH3-N	0.8
TP	0.25

and

Table A3. Equivalent tax amount of water pollution discharge by region.

	COD	NH3-N	TP
Beijing	14.0	14.0	14.0
Tianjin	7.5	7.5	1.4
Hebei	7	7	5.6
Shanxi	2.1	2.1	2.1
Nei Mongol	2.1	2.1	2.1
Liaoning	1.4	1.4	1.4
Jilin	1.4	1.4	1.4
Heilongjiang	2.1	2.1	2.1
Shanghai	5	4.8	1.4
Jiangsu	5.6	5.6	5.6
Zhejiang	1.4	1.4	1.4
Anhui	1.4	1.4	1.4
Fujian	1.5	1.5	1.4
Jiangxi	1.4	1.4	1.4
Shandong	3	3	1.4
Henan	5.6	5.6	5.6
Hubei	2.8	2.8	1.4
Hunan	3.5	3.5	3.5
Guangdong	2.8	2.8	2.8
Guangxi	2.8	2.8	2.8
Hainan	2.8	2.8	2.8
Chongqing	3	3	3
Sichuan	2.8	2.8	2.8
Guizhou	2.8	2.8	2.8
Yunnan	3.5	3.5	3.5
Shaanxi	1.4	1.4	1.4
Gansu	1.4	1.4	1.4
Qinghai	1.4	1.4	1.4
Ningxia	1.4	1.4	1.4
Xinjiang	1.4	1.4	1.4

). The conversion formula was as follows:

$$TAX=\sum _j^n{\mathrm{T}\mathrm{A}\mathrm{X}}_j=\sum _j^n{AP}_j·R=\sum _j^n\frac{Q_j}{W_j}·R$$

(3)

where ${\mathrm{T}\mathrm{A}\mathrm{X}}_j$ represents the tax revenue generated from the j-th water pollutant, ${AP}_j$ denotes the equivalent value of the j-th water pollutant, $Q_j$ represents the emissions of the j-th water pollutant, $W_j$ signifies the pollution equivalent value of the j-th water pollutant, and $R$ represents the tax rate ranging from CNY 1.4 to CNY 14 per pollution equivalent in the respective region.

4.2. Calculation of Consumption-Based Environmental Tax on Large-Scale Pig Farming

Based on the methodologies employed by Wang et al. [17] and Xue et al. [25], we assumed that environmental taxes would eventually be transferred to consumers through tax transfer mechanisms, resulting in consumers bearing the tax burden based on the producer’s tax rate. To estimate pig consumption in each region, we utilized data on per capita pig consumption (measured in kilograms per person) and population size (measured in ten thousand people) obtained from the China Statistical Yearbook. By multiplying the proportion of pigs slaughtered in farms with over 500 heads and the total pig consumption, we estimated the consumption volume of large-scale pig farming in each region. It should be noted that not all pig consumption is sourced from farms with a scale of over 500 heads within each region. The “Agricultural Cost and Benefit Yearbook” distinguishes medium-scale pig farms as those with 100–1000 pigs and large-scale pig farms as those with over 1000 pigs. Since the average weight of pigs is influenced by the number of farrowings, in order to accurately estimate the weight of pigs on farms with over 500 heads (in kilograms per pig), we calculated the ratio of the number of farms with 500–1000 pigs slaughtered to the number of farms with more than 500 pigs slaughtered, and the ratio of farms with over 1000 pigs to the number of farms with more than 500 pigs slaughtered. These ratios were used as the weights for medium-scale and large-scale pig farms, respectively. The pig weight on farms with over 500 heads can then be estimated by taking the weighted average. Finally, to estimate the number of pigs consumed from all large-scale pig farming in each region (in ten thousand heads), we divided each region’s pig consumption by the pig weight on farms with over 500 heads. The calculation formula was as follows:

$$Q^s=\frac{consume\times {per}_{More than 500}}{{scale}_1\times {per}_{500~1000}+{scale}_2\times {per}_{More than 1000}}$$

(4)

where $Q^s$ represents the consumption of pigs from large-scale farms with over 500 heads in each region (unit: 10,000 heads), consume denotes the total consumption of pigs in each region (unit: 10,000 tons), ${per}_{More than 500}$ indicates the proportion of large-scale farms with over 500 heads among all pig farms in terms of annual output, ${scale}_1$ denotes the average pig production of medium-scale farms (unit: kg/head), ${per}_{500~1000}$ represents the ratio of pig farms with 500 to 1000 heads to all pig farms with over 500 heads, ${scale}_2$ represents the average pig production of large-scale farms (unit: kg/head), and ${per}_{More than 1000}$ is the ratio of pig farms with over 1000 heads to all pig farms with over 500 heads. Based on the above, the formula for calculating the water pollutant emissions from pig consumption is as follows:

$${Q_j}^s=\left(Q^s\times e_j\right)\times {10}^{-3}$$

(5)

$${\mathrm{Q}}^{\mathrm{*}}=\sum _j^n{Q_j}^s$$

(6)

where ${\mathrm{Q}}^{\mathrm{*}}$ represents the total water pollutant emissions from pig consumption in each region (in ten thousand tons), ${Q_j}^s$ represents the j-th water pollutant emission from pig consumption based on over 500-head scale pig farming in each region (in ten thousand tons), $Q^s$ is the consumption of pigs from 500 or more-scale pig farming in each region (in ten thousand heads), and $e_j$ represents the emission coefficient of the j-th pollutant from large-scale pig farming in the region (in kilograms per head). We have adopted the approach proposed by Wang et al. [17] and assumed that, regardless of where these pigs are produced, each region applies its current tax rate to all the products it consumes. The formula for calculating the environmental tax based on pig consumption was as follows:

$${TAX}^{\mathrm{*}}=\sum _j^n{{\mathrm{T}\mathrm{A}\mathrm{X}}_j}^s=\sum _j^n{{AP}_j}^s·R=\sum _j^n\frac{{Q_j}^s}{W_j}·R$$

(7)

where ${TAX}^{\mathrm{*}}$ represents the environmental tax revenue based on the consumption of pigs in each region, ${{\mathrm{T}\mathrm{A}\mathrm{X}}_j}^s$ denotes the tax revenue from the j-th water pollutant, ${{AP}_j}^s$ represents the equivalent value of the j-th water pollutant, ${Q_j}^s$ signifies the emission of the j-th water pollutant, $W_j$ represents the pollution equivalent value of the j-th water pollutant, and $R$ represents the original official tax rate ranging from CNY 1.4 to CNY 14 per pollution equivalent.

4.3. Calculation of Alternative Environmental Tax on Large-Scale Pig Farming

In this study, we proposed a new tax approach for pig consumption, which takes into account the pig consumption levels in different regions. The new tax rates in each region were determined based on a linear correlation with pig consumption expenditure. The region with the highest pig consumption expenditure was assigned the highest tax rate of CNY 14 per unit of pollutant, while the region with the lowest pig consumption expenditure was assigned the lowest tax rate of CNY 1.4 per unit of pollutant. The tax rates for intermediate regions were determined through differential interpolation.

$${TAX}^{’}=\sum _j^n{{\mathrm{T}\mathrm{A}\mathrm{X}}_j}^s=\sum _j^n{{AP}_j}^s·R^{’}=\sum _j^n\frac{{Q_j}^s}{W_j}·R^{’}$$

(8)

where ${TAX}^{’}$ represents the environmental tax revenue under the new tax rate and $R^{’}$ represents the updated tax rate determined based on the pig consumption expenditure of each region. The specific values of the new tax rates can be found in

Table A4. Official tax rate and new tax rate values.

	Original Tax Rate	New Tax Rate
Beijing	14.0	1.9
Tianjin	5.5	2.1
Hebei	6.5	4.9
Shanxi	2.1	2.5
Nei Mongol	2.1	2.6
Liaoning	1.4	3.7
Jilin	1.4	2.8
Heilongjiang	2.1	3.3
Shanghai	3.7	3.0
Jiangsu	5.6	6.7
Zhejiang	1.4	5.8
Anhui	1.4	5.8
Fujian	1.5	5.0
Jiangxi	1.4	5.2
Shandong	2.5	6.6
Henan	5.6	4.9
Hubei	2.3	5.2
Hunan	3.0	8.1
Guangdong	2.8	14.0
Guangxi	2.8	5.7
Hainan	2.8	2.2
Chongqing	3.0	5.2
Sichuan	2.8	12.0
Guizhou	2.8	4.4
Yunnan	3.5	5.2
Shaanxi	1.4	2.6
Gansu	1.4	2.3
Qinghai	1.4	1.4
Ningxia	1.4	1.4
Xinjiang	1.4	1.5

.

5. Results

5.1. Comparison of Pollutant Emission Distribution Based on Production and Consumption

As depicted in Figure 1, using Formulas (1) to (2) and (5) to (6), this paper calculated the regional pollutant emissions from pig production and consumption separately for the year 2020. Following the approach of Xue et al. [25], we determined the net emissions transfer by subtracting the production-based emissions from the consumption-based emissions. If the result is greater than zero, it indicates the presence of hidden net pollution transfer in that region. In Figure 5, among the analyzed regions, Guangdong, Beijing, Tianjin, Shanghai, and Zhejiang remained unaffected by pollution transfer, while other regions received water pollution in amounts of 2.842 × 10⁴ t, 4.301 × 10³ t, 7.015 × 10³ t, 3.813 × 10³ t, and 3.748 × 10³ t, respectively. The remaining 25 regions experienced varying degrees of hidden pollution net transfer. Among them, Hunan had the highest level of hidden pollution net transfer. As a major pig production province, Hunan contributed the highest production-based pollutant emissions of 3.23 × 10⁵ t, accounting for 15.81% of the national total. Henan and Hubei followed closely, bearing 13.21% and 12.54% of the hidden net emission transfer, respectively. Therefore, it is evident that the developed coastal regions reap the greatest benefits from cross-provincial pig production and marketing, while the developing inland regions suffer from the loss of ecological benefits. This indicates that cross-provincial pig production and marketing exhibit a certain level of inequality. Consequently, the design of an environmental tax must take into account the equitable sharing of environmental governance responsibilities between the production and marketing regions.

5.2. Estimation of Environmental Tax Revenue Based on Pig Consumption under the Current Tax Rates

Figure 6 illustrates the regional environmental tax revenue generated from pig consumption in 2020, considering the current tax rates. Among all regions, Guangdong exhibited the highest tax revenue from live pig consumption, reaching CNY 747 million, which accounted for 18.2% of the total tax revenue. Jiangsu followed with 10.4% of the tax revenue. In contrast, regions with a smaller population of the Hui ethnic group, such as Ningxia, had the lowest tax revenue from live pig consumption. Qinghai also demonstrated relatively low tax revenue, amounting to only CNY 1.1 million. The highest estimated tax revenue based on consumption was approximately 600 times higher than the lowest tax revenue.

Regarding urban and rural areas, with the exception of Liaoning, Jilin, Anhui, Chongqing, Sichuan, Gansu, Yunnan, Qinghai, and Zhejiang, two-thirds of the provinces exhibited higher pig consumption in urban areas than in rural areas. Notably, pollutant emissions caused by urban consumption were significantly higher than those in rural areas. Tax revenue generated from urban consumption constituted approximately 60.9% of the total tax revenue. This trend was particularly evident in Beijing, Tianjin, Shanghai, and Xinjiang, where tax revenue from urban consumption reached as high as 80%. These findings indicated that, under the current tax mechanism, the consumption-based tax system aligned better with the pig consumption patterns in urban and rural areas.

In addition, we employed the method proposed by Wang et al. [17] to measure the tax intensity using the ratio of consumption-based tax revenue to pig consumption expenditures. As depicted in Figure 7, the national average tax intensity was merely 0.39% under the current tax rate, which was higher than the tax intensity observed in the majority of regions. Tianjin exhibited the highest tax intensity at 1.33%, followed by Beijing at 1.24%. With the exception of regions characterized by low live pig consumption expenditures and environmental tax rates, such as Shaanxi, Qinghai, Ningxia, and Xinjiang, developed and coastal regions such as Zhejiang, Fujian, and Anhui exhibited significantly higher pig consumption expenditures than the national average. However, their tax rates and tax intensities were considerably lower than the national average, particularly Zhejiang, with a tax intensity of only 0.02%. Furthermore, Figure 7 illustrates a linear simulation relationship between the consumption-based environmental tax intensity and pig consumption expenditure under the current tax rate in 2020. The graph displays a slight positive correlation, suggesting that the current rate did not align well with the regional level of pig consumption. This indicated the need for further adjustments to the environmental tax mechanism under the replacement scheme, considering the regional pig consumption capacity. The tax rate mechanism based on consumption also required further improvement.

5.3. Estimation of Environmental Tax Revenue Based on Pig Consumption under the New Tax Rate

Currently, there exists a reversed interest between pig-producing and marketing areas in China. This is primarily influenced by distribution costs and regional advantages. Pig farming is predominantly concentrated in East China, Central China, Southwest China, and South China, while the Yangtze River Delta, Pearl River Delta, and Bohai Rim economic circle serve as the main markets for pigs. Pigs often flow from the main producing areas to the main consuming areas at lower prices. This situation poses challenges for the safety and stability of the pig supply chain. The producing areas face high pressures from swine diseases, environmental pollution, and input costs, leading to financial losses. On the other hand, the main consuming areas directly benefit from the deep processing and distribution of pigs. In order to address this imbalance, we investigated the impact of each region adjusting its environmental tax rate based on its pork consumption level on the economic burden among regions. Our focus was to examine the overall changes in regional environmental tax and assess the economic burden on both the pig-producing and marketing areas. To do so, we designed a new consumption-based tax rate based on the pig consumption levels (pig consumption expenditure) in each region (refer to Table A4). Figure 8 illustrates the tax revenue generated from pig consumption under the new tax rate, providing a comparison of three different tax mechanisms.

Under the new environmental tax rate, regions with higher pig consumption expenditures, such as Anhui, Guangdong, Jiangsu, and Zhejiang, witnessed significant increases in their consumption-based environmental taxes. Specifically, compared to the previous tax rate, the consumption-based environmental taxes rose by 131%, 125%, 613%, and 131% in these regions, respectively. Nationally, the average environmental tax revenue for pigs increased by 285%. In Figure 8, the green bar represents the environmental tax intensity based on consumption under the new tax rate, the red bar depicts the environmental tax intensity based on consumption under the original tax rate, and the yellow bars illustrate the environmental tax intensity based on production under the original tax rate. The national average intensity under the three different tax mechanisms is 0.61, 0.39, and 0.74, respectively, with corresponding national environmental tax revenues for pigs of CNY 1.012 × 10⁴, 0.842 × 10⁴, and 0.409 × 10⁴ million, respectively. Compared to the current tax mechanism, the consumption-based environmental tax mechanism gradually reduces the tax burden on pig-producing areas such as Hebei, Henan, and Hainan, while increasing the tax burden on regions with higher pig consumption expenditures. Under the new tax mechanism, the national average environmental burden for pig farming was dispersed and reduced, leading to a 147% increase in overall environmental tax revenue for pig farming.

In addition, Figure 9 illustrates the linear simulation relationship between the environmental tax intensity based on consumption and pig consumption expenditure under the new tax rate. The figure clearly demonstrates a significant positive correlation between the environmental tax intensity and pig consumption expenditure, indicating that the new environmental tax mechanism effectively aligns with the pig consumption level in each region and helps balance the economic burden between pig-producing and pig-marketing areas.

5.4. Comparison of Three Environmental Tax Mechanisms on Pig Farming

To compare the disparities between the existing tax mechanism and the alternative tax system, we adopted the methodology outlined by Wang et al. [17]. In line with their approach, we referred to the underpaid environmental taxes resulting from the new alternative tax system as “environmental tax savings”, while any additional environmental taxes paid were labeled as “tax losses”. Initially, we calculated the discrepancy between the environmental taxes based on pig consumption and those based on pig production by subtracting the former from the latter. This enabled comparison of the tax mechanisms based on production and consumption using the original tax rate. The findings of this analysis are presented in Figure 10.

Contrasting the environmental tax mechanism based on pig consumption, only five pig-production and economically developed regions, namely Beijing, Tianjin, Shanghai, Zhejiang, and Guangdong, achieved tax savings under the original tax rate, while other regions experienced varying degrees of tax losses. Among them, Beijing had the highest proportion of pig tax savings, at 739%, followed by Zhejiang with a savings rate of 104%. Guangdong, as the province with the highest pig consumption expenditure, saved a tax revenue of up to CNY 83.8 million, with a savings rate of 12.63%. Conversely, Henan, Yunnan, and Hunan, as major pig supply regions in China, experienced tax losses of 78.6%, 70.3%, and 64.4% respectively. The current tax mechanism exacerbated the unequal economic burden between pig-producing and marketing regions.

Next, we compared the new tax mechanism with the original tax mechanism and the results are presented in Figure 11. When the alternative tax mechanism under the new tax rate was used as the standard, nine regions, including Zhejiang, Shanghai, Anhui, and Guangdong, achieved tax savings. The national average tax savings rate was 37.3%. However, 70% of the regions experienced tax losses, indicating that the national environmental tax level under the original system was relatively low compared to the alternative tax system. Moreover, the proportion of regions experiencing tax savings and losses differed significantly, potentially leading to an unequal regional economic burden under a lower environmental tax intensity.

6. Discussion

The implementation of the environmental protection tax law in China has elevated the level of green taxation and expedited the process of green tax reform. While the environmental tax primarily targeted the industrial sector, agricultural pollution originating from non-point sources posed a more discreet and diffuse challenge. Pollution generated by large-scale livestock farming has emerged as a significant environmental issue and the introduction of an environmental tax specifically targeting this sector could serve as a crucial measure for controlling agricultural pollution in China.

According to the current distribution of pig production in China, the producers and polluters are mainly concentrated in the central and western regions, while the consumers are predominantly located in the eastern regions. Considering the existing development disparities in China, where the east was economically prosperous compared to the west, levying taxes on pig producers in the central and western regions would lead to increased production costs for the producers and additional environmental governance burdens for the local governments. Consequently, this would further exacerbate the developmental inequality between swine production and consumption regions. Our research findings indicated that, under the prevailing environmental tax system, the major beneficiaries of cross-provincial pig production and consumption were the regions of consumption, while the regions of production experienced varying degrees of profit loss. Wang et al. [17] quantified the potential impact of environmental taxes on air pollutant emissions in different provinces of mainland China. They discovered that developed provinces had relatively low tax intensities, while less developed provinces had relatively high tax intensities. However, our research results slightly differ. We found that some developed provinces, such as Jiangsu, had significantly higher tax intensities than the average, while some less developed provinces, such as Shaanxi, Qinghai, and Ningxia, had considerably lower tax intensities than the average. This discrepancy could be attributed to the different research scopes selected. Wang et al. [17] based their study on data from a Multi-Regional Input–Output tabel, reflecting the general patterns of environmental taxes in various industries. In contrast, our research primarily focused on the large-scale pig farming industry, which exhibited distinct production distribution characteristics. The tax intensity was not only correlated with the level of economic development but also with the regional pig production capacity. Consequently, our study better illustrates the features of environmental taxes in the large-scale pig farming industry and is more suitable for analyzing the perspective of compensating interests between pig production and consumption regions.

Meanwhile, despite the suggestions put forth by scholars such as Wang et al. [23], Wang et al. [17], and Xue et al. [25] regarding the design of environmental taxes based on different criteria, including tax rates, taxable objects, and taxation principles, there is a lack of further discussion on the specific taxation procedures and operational mechanisms. In this study, taking the large-scale pig farming industry as an example, we comprehensively examined the entire process of environmental tax collection and distribution, thereby enhancing the feasibility of environmental tax reform.

7. Conclusions

Pig farming is a traditional industry in China and plays a crucial role in ensuring the well-being of the population. In this study, we examined large-scale pig farming as a case study and proposed two alternative environmental taxation mechanisms within the existing tax framework. By comparing the current taxation system with the alternative approaches, we observed that, under the current tax regime, 83% of regions bore varying degrees of potential implicit emission transfers, leading to an increased burden on environmental governance in pig farming areas. Furthermore, the environmental tax burden borne by pig production and consumption areas did not align appropriately with their respective pig consumption expenditures.

Based on our research findings, we proposed two main adjustments during the transition from the existing tax system to an alternative tax mechanism. Firstly, there should be a shift in the tax collection focus from production-based pollutant emissions to consumption-based pollutant emissions. Secondly, it is essential to adjust the environmental tax rates to align with the consumption expenditure of pork in different regions. The current environmental tax system, though straightforward, may exacerbate inequalities between production and sales regions due to its inefficiency. In contrast, the alternative tax mechanism took into account the conflicting interests between pig production and sales regions, promoting fairness and enhancing the effectiveness of environmental tax collection through information transparency and public oversight. This ensured the revenue generated from environmental governance and held the relevant entities responsible for environmental pollution control. Therefore, the environmental tax system for pig farming needs to gradually guide the tax structure towards efficiency and fairness.

Currently, our research has only conducted technical calculations on the economic impact of environmental taxes on the large-scale farming industry. We did not delve deeper into the subject using econometric models, which represents a limitation of this study and an area that can be further explored in the future. Nevertheless, despite this limitation, our study provided some novel insights into the reform and development of environmental protection taxes in the agricultural sector. Additionally, we offered theoretical support for adjusting environmental governance responsibilities and economic burdens between the production and sales regions of the pig industry through the modification of tax policies.

The objective of our study was to effectively alleviate agricultural production pollution through the reform of environmental taxation. In future policy implementation, policymakers can increase environmental tax rates to raise the cost of pollution and thereby discourage polluting behaviors. In addition, based on the research findings by Işık et al. [36], renewable energy can contribute to reducing environmental cleanup costs and minimizing pollution emissions. Therefore, in future practices, it is also worth considering the recycling of fecal waste generated by the agricultural farming sector, for example, by implementing agricultural-farming integration. By employing external constraints through environmental taxes and internal conversion of agricultural pollutants, more favorable outcomes in addressing pollution in the agricultural sector may be achieved. In future research, further investigations can be conducted based on different types of agricultural pollution (such as soil pollution and air pollution) and variations in livestock farm scales (livestock quantities) among different regions. This approach will help to better delineate the applicability of environmental tax reforms in the agricultural sector. Simultaneously, expansions of this work could consider the specific allocation of environmental tax burdens between producers and consumers in the context of large-scale pig farming. Given the unique position of agricultural products such as pork in the national economy, a deeper investigation into the distributional effects of environmental tax policies on producers and consumers in the agricultural sector using welfare analysis and other methods is warranted.