An
opportunity to introduce a rational and positive element to retaliatory
measures.
Trump’s USA seems to be
hell-bent on destroying every element of the pre-Trump international order, the
WTO, presumptions in favour of free trade, and US participation in the Paris
accord on climate. But a recent piece in
Nature magazine proposes a neat way of turning some of this to a climate
policy advantage.
The recent tit-for-tat on punitive
tariffs has been based first and foremost either on targeting industries that are
the source of the grievance, notably steel in the case of Trump, or products where
the retaliatory tariff will cause pain in the USA, famously Harley Davidson.
The novel suggestion however
is that the prospect of a global trade war provides an opportunity for the
introduction of tariffs that, unlike many forms of trade barrier, can be
considered to be almost unequivocally beneficial in their effect on human
welfare. The suggestion is a simple one. Place the retaliatory tax on the
products with the highest carbon footprint, relative to the alternatives of
domestic production. Indirectly this will also counter at least to a small
degree the environmentally reckless policies Trump and the Republican party are
promoting at home.
Ideally of course this should be
part of a wider set of agreements on effective carbon pricing, but “border carbon
adjustments”, or BCA, clearly have a lot going for them. Nor is the idea new or
without political support. “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” according
to the Nature article. The US House of Representatives backed a similar
approach in the Waxman–Markey Bill in 2009, but the bill failed to reach a vote
in the Senate.[1]
Wholesale implementation, by
the EU for example, of such an approach on a global basis would have a number
of technical difficulties, but its examination in the context of retaliatory tariffs
could provide some interesting outcomes. It would of course tend to hit those
states in the USA that are most keen to protect their coal industries. As it
happens that includes a number with a strong Republican base.
The other advantage is that what
starts as a rather crude device, and as part of a trade war, could also evolve
over time to become a significant component of mainstream decarbonisation
policy.
[1] California,
it is claimed, has introduced a version of BCAs but this is confined to its energy
market.
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