The Case Against a Carbon Tariff

It's a punitive measure.  And it would be a huge mistake.

 

First of all, imposing a border adjustment tax to single out "polluting" countries would probably be overturned by the World Trade Organization (WTO).  The legality of imposing such a tariff is in question--it plays well domestically, but would only anger countries that are critical partners in solving this issue.

Furthermore, it would discourage countries singled out by this tax from working on mitigating their own carbon footprint.  According to Arvind Panagariya, a professor at Columbia University, countries like India just would just not focus on climate change.  At a UCLA symposium on Friday, Panagariya noted that if India had to reduce its annual growth rate 1% to combat climate change between 2020 and 2030, that would be at a US$2.1 trillion cost to their economy.  Paying the collective cost of a tariff would be cheaper.  So the only thing such a carbon tariff would fuel would be . . . resentment.

The US and EU are also in no position to lecture nations in the developing world about their carbon footprint.  It is true that if the Chinese and Indians started consuming at the rate of their American and European cousins, the world would tip towards environmental catastrophe.  Of course, that's assuming people abroad want a "Western" lifestyle.  But a question of fairness keeps festering:  the US and EU built their economies on cheap (and free, or slave) labor.  Who are we to tell others that they cannot work to pull their people out of poverty?

Finally, while history does not repeat itself, we should learn that slapping tariffs on countries only complicates international trade, making it more difficult for American companies to sell their products and services abroad.  Considering that India and China's carbon footprint is in part from manufacturing products and developing services for the US market, should we turn that logic on its head . . . and tax ourselves?

What I find interesting is that generally, the less affluent a country is, the higher percentage of the population is concerned with global warming.  Polls indicate that 80% to 90% of Indians worry about the effect of climate change; in the US, 40% to 50%.

Realistically, if we are so worried about other nations' contribution to greenhouse gases and carbon emissions, than we should pay for the shift.  Clearly that will not happen in this political climate.  If anything, a transfer of technology would probably be the best way to engage countries.  Jonathan Zasloff, a UCLA law professor, suggested a system incorporating compulsory licensing, in which a government requires the owner of a patent to grant its use to the state or others. The patent owner would receive some royalties, either set by law or determined through some form of arbitration.  Such a licensing scheme is not a perfect system, but absent massive investment, countries that have "clean" or "green" technology could at least make it easier for others to benefit from it.

What is lost in this climate change debate is the understanding that many in the developing world are deeply affected by the earth's changing climate and want to see something done.

The trick is to engage, not enrage.  Threats of a tariff sound good to local labor unions and environmentalists.  But for a global problem that requires cooperation on a massive scale, imposing a carbon tariff is myopic and destructive.