To deal with worsening smog, Tianjin will raise pollution discharge fees drastically starting July 1.

Under a new policy, discharge fees for four major water and air pollutants -- sulfur dioxide (SO2), nitrogen oxide, chemical oxygen demand (COD) and ammonia nitrogen -- will be increased on a seven-level sliding scale based on the amount of pollution discharged. The more a company pollutes, the more it has to pay, up to a maximum ceiling, officials said.

For example, fees for SO2 emissions will rise from 1.26 yuan (20 US cents) to a maximum of 6.3 yuan per kilogram, while fees for COD discharge will rise from 0.7 yuan to a maximum of 7.5 yuan per kg.

Yu Hongbing, a professor of environmental science and engineering at Nankai University, said that when fees are too low, they tend to encourage enterprises to pay to pollute rather than to invest in pollution reduction.

"An appropriate fee level should give enterprises an incentive to reduce pollution, but also not so high that they have to shut down their business," Yu said.

Last year, 5,935 local companies in the fertilizer, power generation and iron and steel industries paid 138 million yuan for their discharges of major water and air pollutants, which were estimated at 168,400 metric tons, according to Li Jun, deputy director of Tianjin Municipal Development and Reform Commission.

"But after the new policy takes effect, they are expected to pay almost 600 million yuan for that level of pollution discharge," Li said.

The money collected will be used by the Ministry of Finance and local financial bureaus to fund environmental protection work, Li said.

Under a three-year action plan worked out by the Tianjin municipal government, 12,000 polluting companies will have to upgrade their facilities or shut down heavily polluting sectors.

"Instead of paying increasing pollution discharge fees, a more efficient way to develop a green economy is to upgrade production facilities and use more clean energy," Yu said.

To encourage companies to reduce pollution, the government will subsidize those that upgrade or install environmentally friendly equipment, the new policy says.

Tianjin Iron & Steel Group will receive 24 million yuan in subsidies after it installs sulfur-removal equipment costing more than 40 million yuan.

Wen Wurui, head of the Tianjin Environmental Protection Bureau, called for the joint efforts of the Beijing, Tianjin and Hebei governments in the building of environmentally friendly cities.

"We need to set up unified pollution discharge standards to meet our green objectives for cleaner skies and sustainable development," Wen was quoted recently as saying by Beijing Morning Post.