Carbon tariffs

Free-trader though I generally am, I’m forced to agree with the Toronto Star‘s editorial board that some kind of carbon tariff is in order. Once we have a carbon-taxing regime of our own in place, anyway. Here’s the Star:

With the growing realization in the West that the economy and the environment are but two sides of the same coin, a consensus is emerging that the only sure way to halt climate change is to put a realistic price on carbon that captures the environmental damage it is doing. This view, however, is being fiercely resisted on the other side of the planet, where carbon emissions are surpassing those of the West.

But putting a carbon price on goods produced in the West, through either a carbon tax or a cap-and-trade system, will raise the price of those goods and thus lead to the export of even more jobs to countries that refuse to impose a price on the carbon that goes into the goods they produce. The net effect would be an economic loss in the West without any gain on the global climate change front.

When the link between trade and climate change are viewed from that perspective, the solutions become obvious. If developing countries are not willing to incorporate the price of carbon into the prices of the goods they produce, the industrialized world will have no choice but to impose a carbon tariff on imports from those countries.

The Edmonton Journal has some more technical details.

It’s become pretty clear by now that treating the atmosphere like a dump with infinite capacity isn’t going to work — that it amounts to a subsidy for wasteful industrial production. Now, often the thing to do with subsidies is to not permit them yourself, but take advantage of the other guy’s, so that you get cheap goods at the expense of your trading partner’s taxpayers.

Unfortunately, it’s everybody’s atmosphere. So if you put a carbon tax on your own economy, but allow free imports of goods from countries that don’t follow suit, you just end up transferring production elsewhere while doing nothing constructive at all for the environment, precisely as Canada’s Conservative government has warned:

“Our position internationally has been clear — while Canada is doing its part at home, we still need action on the world stage from countries like China, India, and the U.S., rowing together in the same direction,” said [Environment Minister John Baird’s spokesman Eric] Richer.

“Otherwise we won’t reduce greenhouse gases at all.”

So Canadians would get to pay some of the subsidy, by supporting damage to our own atmosphere with our own trade dollars. That’s a bad deal.

From one perspective, this is an argument for doing nothing, or very little, until everybody’s on board. From another, it’s an argument for playing rough with the competition, slapping a carbon tax on imports as well as your own domestic production. Given the amount we import from places like China, this could prove damned expensive, all the more so since the import tariff would have to apply to fuel used to transport things across an ocean, too.

Is it ideal? No. But if you think climate change is an urgent problem, it’s better than the alternative.

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One response to “Carbon tariffs

  1. Hmm… I was all ready to sign up for carbon tariffs.

    But on these matters, I’m tossed back and forth by the waves. Today, I read this Star article: http://www.thestar.com/article/408878

    He argues that carbon tariffs are not fair. I know you have argued previously that China has to be an active participant in environmental concern, and not just cry poor. But I think here it makes sense to keep your free-trading spirit about you.

    There are still gross inequalities between the wealth of North America and the developing world, even the large, succeeding, carbon spewing nations of China and India. Different measures paint different pictures.

    For example, the article looks at per capita emissions – a good thing. It also looks at per capita incomes and argues semantically about issues on poverty.

    His position, which makes more sense to me, then Rubin’s, is to:

    “Find a path forward that accommodates developing countries’ growth while meeting the challenge of moving global carbon emissions toward the safe level by mid-century.”

    The next half of his article are the more complicated (as these things often are) way of approaching it. I don’t understand most of it, but I get the point: “…a global CO2 reduction program [ought to be] both efficient and fair.”

    Thoughts?

    (p.s. Comment boxes suck for writing cohesive thought – I can barely see one sentence at a time!)

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