Could Trade War Be Climate Tool?

July 18, 2018


Suggestion to US trading partners still in the Paris Agreement – If you’re going to have a trade war, well, could it be targeted on carbon emitters?

Inside Climate News:

As the Trump administration’s trade war heats up, a group of experts is proposing a new way to counter protectionism—and prod the United States back into climate action at the same time.

In a commentary in the journal Nature, the team of trade and climate policy experts called for a global punitive tax on imports based on their carbon footprint.

It’s an idea that was invented to address the problem of “free riders”—nations that refuse to join the global practice of putting a price on carbon, such as a tax or a cap-and-trade market mechanism. To avoid giving the free riders a competitive advantage in world trade, the carbon price would be collected on their products as an import tariff at the border.

The border tax would “level the emissions playing field by imposing the same economic burden on domestic and external manufacturers,” the team writes in the article, published online Monday.


More and more countries are shielding domestic producers from foreign competition — a process known as protectionism. Since January, US President Donald Trump has slapped tariffs of up to 50% on many imports, including washing machines, solar cells, soya beans, steel and aluminium. Hopes that allied countries would be exempt were dashed after a tumultuous G7 meeting in June.

Economies affected have begun to respond in kind. China hit back with levies on US$34 billion worth of US goods. The European Union increased tariffs on jeans, motorbikes and bourbon imported from the United States. And Trump has since threatened to add tariffs on another $200 billion worth of Chinese goods. A trade war is unfolding.

Meanwhile, nations are reviewing the pledges they made to cut emissions as part of the 2015 Paris Agreement. Everyone knows that current pledges will not keep global warming below the ‘safe’ limit of 2 °C above preindustrial levels — even if all nations deliver on their promises. The question is how to strengthen actions so that emissions drop sharply once the Paris framework takes effect in 2020.

The Paris process has two main problems. First, the pledges are uneven. Countries that do little will benefit from hefty cuts made by others. In the ultimate free ride, the United States will withdraw from the Paris Agreement in 2020, leaving others to do more. Second, carbon emissions ‘leak’ across borders. A country can keep its budget low by buying carbon-intensive goods made elsewhere. Some regions, such as Western and Northern Europe, import a considerable share of high-emission goods, allowing them to emit less themselves (see ‘Carbon balance’).

Over the next two years, there will be a flurry of activities relating to trade and climate change. This is a perfect opportunity to tie together the two agendas.

Governments should levy a carbon charge on imports. These ‘border carbon adjustments’ (BCAs) would level the emissions playing field by imposing the same economic burden on domestic and external manufacturers. Producers would lose the incentive to manufacture goods in places with weaker carbon regulations. Trade partners would then prefer to manufacture and export low-carbon products to avoid penalties.

Political interest in BCAs is growing. In 2017, French President Emmanuel Macron called them ‘indispensable’ for European climate leadership, and Canadian environment minister Catherine McKenna recommended closer scrutiny. Mexico included them in its Paris pledge. But there are fears of retaliation and some confusion over the legality of BCAs. Here’s how nations could proceed.

Climate-smart trade

BCAs should be applied to imported goods in line with their carbon footprint (the total of all the emissions released during their manufacture). A country might impose a fee on imported steel if its carbon footprint is higher than that of domestic steel, for example. Alternatively, governments might require importers to purchase emission allowances in carbon markets. The US House of Representatives backed such an approach when it passed the Waxman–Markey Bill in 2009; however, the bill failed to reach a vote in the Senate.

California is the only jurisdiction to have introduced BCAs, in its energy market. Since 2013, electricity delivered into California from neighbouring states has been subject to the same carbon constraints as that generated domestically. This has stopped electricity suppliers from shifting power generation to states with lax climate policies.

So far, efforts to limit emissions leakage have been less efficient. Some countries, including Germany, offer regulatory relief or compensation payments to domestic emitters to persuade them not to relocate. But such measures have undermined their other climate policies. For example, when the EU handed out emissions-trading permits for free, it weakened incentives to curb emissions and produced windfall profits for some energy-hungry companies.

BCAs, by contrast, bolster climate policies. By restricting trade in carbon-intensive goods, they accelerate decarbonization even in countries with weak regulation. They also appeal to policymakers, manufacturers, trade associations and labour unions who are concerned about a nation’s economy and jobs. Imposing BCAs on imports from the United States would prove politically popular with these groups. It would also strengthen the hand of progressive US states and cities that produce low-carbon goods. And it would get attention from targeted countries: US leadership has already shown that it is sensitive to trade measures, as evidenced by its quick reaction to retaliatory tariffs. Critics argue that BCAs are difficult to implement. They point to legal risks and the complexity of measuring carbon footprints.

5 Responses to “Could Trade War Be Climate Tool?”

  1. Sir Charles Says:

    The new Japan-EU trade agreement (JEFTA) includes the commitment of both sides to the Paris declaration.

  2. rabiddoomsayer Says:

    Carbon Tariff, simple. Way past due.

  3. It is easy to start a war. You can do this all on your self. To end a war is a different matter. Those who start wars are seldom able to end them. No more war!

  4. Trump Steel Tariffs? Good or Bad for Climate? Great Depression? Darth Trump

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