China Takes Aim at a Booming $7 Billion Market for Dirty Oil (1)

One of the fastest-growing corners of China’s energy market is facing a potentially devastating blow as Xi Jinping’s government increases scrutiny of high-emission fuels.

Chinese regulators are considering a new tax on imports of so-called light-cycle oil, a low-quality petroleum product that’s blended into diesel and fuel oil, and have asked energy companies and government agencies to provide feedback on a draft plan, people with knowledge of the matter said. The levy could take effect as soon as the first half of 2021 if approved, the people said.

Taxing LCO imports would upend the economics of a market that ...