Going it alone

If the United States continues to thumb its nose at the rest of the world in the climate change arena, this article from the EU Observer discusses what the appropriate response should be.

The article indicates that the European Union is considering taxing goods that are imported from CO2 polluting countries. In other words, the US would not be allowed the economic benefits it would gain by being a rogue nation and not controling its CO2 emissions.

Of course, there are many devils hiding in the yet to be established details, but this is clearly the right principle and may actually have a chance of working.

3 thoughts on “Going it alone

  1. Placing an environment tax on imports from non-complying countries is an idea that has been a floating around for a number of years, but my guess is it will be very hard to implement. Plus there will be retaliation.

    What the WTO will do is a big question – historically they have not ruled in favor of many environment-driven tariffs/bans. That is not to say they will definitely rule out a CO2 import tax, but it will likely depend on how it is implemented – which brings the difficulty.

    A uniform tax on all imports from a non-compliant country won’t be a true environmental tax. It won’t give firms incentives to reduce emissions, which is real weakness and may lead to trouble with the WTO.

    A CO2-weighted tax for each import is of course economically and environmentally more attractive, but incredibly difficult to manage and audit for each firm. The WTO is more likely to warm to something like this, however.

    Something in between – like a uniform tax with the option for exemptions from particular sources is probably feasible. But then doing anything like that with China? Probably a completely different ball game.

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  2. World trade taxes are notoriously unfair and imbalanced, so adding to an already feeble system doesn’t sound like such a good idea on the surface.

    A general sales tax which includes the carbon cost of goods wherever they are from will make consumers more aware of the impact of what they are buying, and give an advantage to energy efficient manufacturers. This would provide an incentive for all nations to start developing clean technologies.

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  3. I agree that an accross the board punitive tax would be much less effective than a product by product approach. The later would allow companies to improve on their own without local gov’t mandates to improve their market position.

    World trade taxes are indeed a mess, and the WTO seems to always rule in favor of polluters. But perhaps this issue will prove serious enough to force a rethinking of the “fair trade” policies of the last couple of decades.

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