Common Tragedies

Thoughts on Environmental Economics

A stick to go along with all those carrots?

Posted by Rich Sweeney on October 4, 2007

One of the main difficulties with addressing global warming is the problem of collective action. The benefits to any one country of reducing its carbon emissions can only be reaped if other countries reduce theirs as well. Many lobbies in the US have used this as justification for basically doing nothing about climate change in the absence of some international accord.

However, recently a new potential enforcement mechanism has emerged which, at the very least, might induce countries to expedite global climate policy negatiations. Unfortunately, that mechanism is the most blunt and banal of economic policy tools: the trade tariff. As various US cap-and-trade schemes make their way through Congress, Greenwire reports trade tariffs based on emissions have become a must have issue from labor’s perspective. American Electric Power Corp., the nation’s largest coal-fired electric utility, and the International Brotherhood of Electrical Workers, first proposed the trade penalty idea earlier this year.

While at least in theory this would address one of the main holdups in global climate negotiations, I’m pretty skeptical of using tariffs to affect climate policy, especially unilaterally. First of all, tariffs are particularly susceptible to special interest lobbying and political manipulation. Digging them back up after all the progress we’ve made in the past few decades seems like a significant step backwards. Second, and more practically, it seems like applying such an approach in practice would be difficult. At what point in the production process would the carbon footprint be assessed? In the global economy, is the onus of carbon consumption on consumers or producers? We got to where we are today in the developed world by outsorcing dirty industries to developing nations. To turn around and punish them for that seems unfair, as the initial opposition voiced by China, Brazil and Mexico on this issue seems confirms.

Thoughts anyone? Should all options be on the table in the climate policy debate?

One Response to “A stick to go along with all those carrots?”

  1. Evan Herrnstadt said

    I like the concept of border adjustments to affect carbon mitigation in other nations, while also mollifying the competitiveness impacts associated with unilateral climate policy.

    However, I do recall reading about some of the ridiculous NTB’s that arose before such behavior was somewhat regulated under GATT/WTO, such as Swiss restrictions on the altitude at which certain agricultural products must be raised (thus restricting imports from all but a few regions). But that wouldn’t happen with carbon restrictions, right?

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