Border adjustments in cap-and-trade by mattsteinglass
July 1, 2009, 2:17 pm
Filed under: Development, Environment, Uncategorized

Like Paul Krugman and Ezra Klein, I think the border adjustment amendment to the Waxman-Markey bill, which would impose tariffs on countries that have no carbon emissions limits beginning about a decade from now, makes perfect sense. It seems particularly logical with regard to China and Southeast Asia. The whole anxiety over imposing cap-and-trade carbon emissions limits has been that China will refuse to go along. What better incentive to encourage them to join the rest of the world and impose some limits? The potential tariffs appear to be legal under WTO rules, and economic theory argues they make perfect sense — they simply equalize the playing field by preventing countries from exploiting a lower environmental standard to gain an unfair advantage.

If there’s any reason for the US to fear the idea of border adjustments for carbon reductions, one would think the fear should be directed towards Europe and Japan, rather than China. If Europe and Japan get they idea that they could impose tariffs on US goods based on their much lower carbon emissions per dollar of GDP and the US’s vastly lower gas taxes, that might hurt US exports. But it would also be good for the planet.


3 Comments so far
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Pick “good for the planet!” shouts the peanut gallery.

Comment by Forrester McLeod

Right, but wouldn’t the WTO have to determine if each tariff is appropriate under international trade law? Doesn’t that empower a body of non-experts to assess the cost of carbon emissions? That sounds like a pretty bad way to go about limiting other countries’ carbon footprints.

Comment by Will

Simple question: Who spews out more carbon per capita – the average Chinese or the average American? End of conversation.

Comment by Frank

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