"The country will gradually levy environment tax when conditions are ripe," Mao Rubai, chairman of the Environment and Resources Committee of the National People's Congress or parliament, was quoted as saying at a workshop in this south China city.

The government only takes into account production cost and sometimes the scarcity of resources when setting prices, but often neglects environmental costs, he said adding those who pollute will pay the tax.

Experts warn that an environmental crisis may threaten to wipe out China's gains made during three decades of rapid economic growth. China's sulphur dioxide emission in 2005 amounted to more than 25.5 million tons, 27 percent more than in 2000.

Air quality in nearly half of China's cities was moderately or seriously polluted and 10 million hectares, or a tenth of the country's arable land, is polluted.

A preliminary draft law on establishing an economy based on recycling was discussed by about 300 delegates from governments, legislatures, enterprises, non-governmental organizations and academic circles last month.

Designed to offer a legal framework for sustainable development, the law includes provisions on resource exploitation and conservation, waste recovering and recycling and sustainable consumption.

More than 10 provinces and municipalities in China have already promulgated local regulations promoting recycling.

Mao said that formulating an effective economic policy such as collecting an environment tax is critical.