Assessing China's discriminative tax on Clean Development Mechanism projects. Does China's tax have so many functions?

In the practice of the Kyoto Protocol's Clean Development Mechanism (CDM), many CDM host countries heavily rely on high Global Warming Potential (GWP) Greenhouse Gas (GHG) projects. Among them, China might be unique in that it imposes a discriminative tax on projects dealing with high GWP GHGs. The Chinese government takes 65% of the carbon credits from HFC-23 (trifluoromethane) projects, 30% from N₂O (nitrous oxide) projects, but only 2% from other types of projects. Previous studies have expected that this tax has multiple effects: rent-seeking effect, a deterrent effect on the HFC-23 and N₂O projects, a channelling effect that switches the investment from HFC-23 and N₂O projects to other types of projects, and a market distortion effect. However, with the positive analysis and empirical evidence, the present study shows that this tax only has rent-seeking effect, thus China's discriminative tax has been over read.